Consolidation and convergence are ongoing telecom deal drivers, as 70% of survey respondents report that portfolio transformation currently dominates the boardroom agenda. Thirty percent expect an increase in cross-border dealmaking, and 19% expect more cross-sector M&A. But portfolio reviews are also triggering divestments. Forty-seven percent of telecom execs see shareholder activists pressuring telecom boards to divest assets in the next 12 months, with data centers and cell phone towers as frequent targets.
Twenty-one percent say that portfolio reviews are accelerating, with divestments helping to focus on digital transformation and fund the response to digital competition. The momentum in both dealmaking and divestment have heated up the M&A market: 77% see competition for targets increasing, especially from private equity funds pursuing smaller fiber infrastructure companies and other high-growth assets.
Political factors in focus
Despite high confidence in the global economy, by 63% of respondents, and rising expectations in corporate earnings (59%), equity valuations (46%) and other financial indicators, execs cite regulation and government intervention (38%) and acute political uncertainty (47%) as the biggest potential risks to dealmaking and growth. On the other hand, 75% of telecom execs expect their governments to increase infrastructure spending, with 84% saying such public investments are important if not critical to their growth. In the US, tax reform has persuaded 22% of telecom execs to reconsider deals they had previously dismissed.
Fifty-seven percent indicate that the abiding mandate for digital transformation has propelled artificial intelligence and robotic process automation to the top of boards' technology agendas — even ahead of cloud computing and big data analytics (35%). Digital workforce issues are also evident in the survey, as 67% of respondents highlight difficulties in determining how to use contingent workers, while nearly the same number (63%) say they have trouble hiring people with the right skills.