The ability to create and sustain partnerships will emerge as a strategic differentiator.
Across the global telecoms sector, the rationale for consolidation remains strong, and partnership structures are gaining ground by offering new routes to growth.
At the same time, the role and dynamics of M&A are changing, and operators are adapting their strategies to reflect these shifts. These developments have seen this risk rise two places from ninth in 2010.
Joining forces in an uncertain world
Quarterly global telecoms M&A 2008–108
There was actually a pickup in M&A deal activity in 2010–11 compared to 2008–09.
However, plenty of risks remain, including high levels of political risk in the Middle East/ North Africa, acute macroeconomic risks in Southern Europe and uncertainty over shifting regulatory attitudes toward competition.
With operators eager to tap into the growth potential in emerging Asia, competition and ownership issues have emerged as hot topics in the region, notably Vietnam and Indonesia.
The changing risk landscape creates increasing uncertainty over deal valuations and prompts greater board scrutiny and stakeholder caution. Meanwhile, the changing nature of M&A deals reflects the fact that footprint control is now more important than footprint growth for some players.
Also, shifts in the value chain are heralding new M&A trends, such as the creation of joint tower management entities.
Under these circumstances, acquisitions and partnerships in emerging market segments remain important.
In the cloud space, 2011 saw the launch of a raft of new services supported and enabled by a diverse range of acquisitions, partnerships and investments.
Partnering abilities come to the fore
To capitalize on such opportunities, operators need to discriminate clearly between situations that call for acquisitions and those more suited to partnering.
Going forward, the ability to create and sustain partnerships will emerge as a strategic differentiator, as their scope and usage widen due to a number of factors.
These factors include a continued focus on realizing cost efficiencies through approaches such as network and procurement joint ventures, and a growing reliance on cross-sector collaboration for new product development.
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8Ovum, 14 November 2011.