M&A in telecommunications is a valuable but often difficult process. In this blog, we explore the challenges surrounding M&A and how CSPs can use the power of BSS to overcome them.
As competition increases and the battle for profitability continues, many CSPs are exploring how they partner with other organizations to pursue an opportunity that is more viable than fighting the battle alone.
One way that CSPs have responded is by embarking on mergers and acquisitions. But, while it is true that two businesses combined have a stronger ability to pool resources and invest in network performance or new value propositions, there are obvious question marks, from the evolving regulatory landscape to the disparities in the CSPs’ infrastructure.
In this blog, we paint a picture of telco consolidation trends in 2024 so far. Read below to explore the key ways in which modular BSS solutions can contribute to a successful merger and acquisition in the communications space, serving as a foundation for business growth.
Understanding telco consolidation in 2024
As all industry leaders know, recent years have brought about drastic changes in the structure of telecommunications, from the entrance of OTT providers into the market to the continued decline of B2C revenues for CSPs.
There is increasing pressure to innovate in order to remain relevant. On top of this, customers expect more than ever before, but capital investment into company infrastructure and other-next-generation technologies is expensive, CSPs are at a crossroads.
M&A is one viable way to supplant trailing levels of organic growth resulting from squeezed customer budgets and lost opportunities to grow through upselling. For telecom companies, M&A also allows them to expand their network reach, often more cost-effectively than they could through building new infrastructure. Finally, it also allows them to reduce competition and serve customers better while also acquiring new customers, all without offering discounts or new benefits.
Considering the advantages, it’s no surprise that M&A in telecommunications has been on the rise for a long time. 2018 and 2021 were knockout years, with $212 billion and $192 billion in total strategic deal value, according to a Bain & Company report.
More recently, however, there’s been a significant drop in deal volume: the number of transactions plunged from 1831 in 2022 to 1456 in 2023. CSPs are becoming more selective in the deals they consider and weighing the risks more heavily against the value of M&A. Let’s explore the reasons behind this shift in attitude and what options are available for CSPs still looking to reap the benefits of M&A despite the challenging landscape.
Telco M&A: A challenging route to growth
There is an element of jeopardy in every major M&A transaction. Bringing together two disparate businesses requires a significant amount of planning and consideration, and businesses embarking on the process need to prepare for disruption. In fact, a survey by Deloitte France shows that productivity can drop by up to 50% in the first four to eight months following M&A activity.
However, there are further considerations specific to the communications industry.
M&A in telecommunications: a story of ups and downs
Maintaining business continuity
Some disruption to businesses is almost inevitable during a major M&A transaction. For telco end-customers, this can take the form of network downtime, which can further impact customer loyalty. Minimizing network issues and maintaining a constant level of service quality throughout a merger is important to ensure continued customer trust.
Network integration
A merger allows CSPs to unlock higher levels of connectivity by acquiring existing network infrastructure. However, different CSPs often have different network infrastructures and management software tools. Integrating these without negatively impacting service quality is critical but challenging, especially if telcos are also bringing together different network assets (fiber, satellite, 4/5G).
Data consolidation
CSPs have vast quantities of data at their disposal, from customer information to billing data, service agreements, and partner records. Migrating and centralizing all of it without compromising security or losing data can be a lengthy and challenging process. At the same time, this can serve as a great opportunity for CSPs to rethink their data management and make it more efficient.
Regulatory challenges and opportunities
M&A can be heavily scrutinized in the highly regulated industry that is telecommunications. Proposed mergers need to live up to the standards of regulatory bodies in order to keep the playing level for CSPs and prices fair for customers. At the same time, regulatory oversight can be a blocker in mergers looking to accelerate innovation in the sector. The European Commission has even been blamed for halting the rollout of 5G with continued blocks to major industry mergers. There have been signs that this might be about to change, but even if rules are relaxed, that will not remove all regulatory and compliance requirements that merging businesses must fulfil.
Smoothing the bumps on the way to M&A with BSS
One of the most important sources of help during an M&A is a BSS transformation between existing systems. During this process, it is important to maintain transparency, introduce new efficiencies, and limit the possible negative impacts on the end-customer.
A flexible, modular system like ZIRA’s offers a phased approach, allowing CSPs to build a new solution for the future company while gradually decommissioning legacy processes.
For instance, in the context of mobile-mobile consolidation, a modular BSS system facilitates the seamless integration of billing, customer management, and other operational processes from both entities. By gradually decommissioning legacy systems and implementing new functionalities in a phased fashion, CSPs can ensure smooth operations and maximize the benefits of a merger.
This approach enables digital service providers to adapt to the evolving regulatory landscape, address network integration issues, and optimize data consolidation processes, ultimately paving the way to sustainable business growth in the telecommunications sector.
Other aspects that ZIRA BSS can support M&A with are:
- Software integration: Modern and modular BSS solutions like ZIRA integrate seamlessly with any existing infrastructure, making it easier for mobile companies or other CSPs merging to integrate their disparate software solutions.
- Scalable infrastructure: Flexible BSS can help CSPs adapt to merged infrastructures and take on new customer bases quickly, minimizing disruptions.
- Flexible billing solutions: BSS can support mergers and acquisitions by allowing CSPs to move billable data in recurring orders until the details of easier delivery options are available.
ZIRA BSS for M&A in practice: Digital innovation for Sunrise
At ZIRA, we have a proven track record of helping companies undergoing a merger. We collaborated with Switzerland-based CSP Sunrise after it was acquired by UPC in 2020, helping the new business integrate its portfolios into a new proposition and quickly launch new services.
Read ZIRA and Sunrise’s success story now.
Conclusion
It’s becoming increasingly clear that the way to innovation in the telco industry must be a shared effort. That means M&A processes are here to stay – Analysys Mason predicts higher deal volume in the rest of this year than in 2023, especially in Q3. Considering the disruptive effects M&A can have, CSPs should consider investing in a modern and flexible BSS solution that can grow with their business. That way, they can tackle mergers head-on and lessen the negative impact on their partners and customers.
