Telcos in cross-sector deals and M&As to address digitalisation
By Digital News Asia August 8, 2016
- 27% of telco execs believe digitalisation is the greatest disruptor
- 49% are focused on strategic transactions and alliances to drive growth
CUSTOMER behaviour and digital disruption are driving deal-making in the global telecommunications sector, according to EY’s 14th biannual Telecommunications Global Capital Confidence Barometer (CCB).
The report surveyed 110 telco industry leaders around the world – 59% of them were CEOs (chief executive officers), CFOs (chief financial officers) and other C-level executives.
For 27% of executives, advances in technology and digitalisation present the greatest disruption to their core business, EY said in a statement.
As a result, 49% of sector leaders are looking for strategic acquisitions and alliances that would allow them to address changing consumer preferences, while 45% seek to make better use of emerging digital and analytics technologies to compete more effectively with nimble and disruptive industry players.
“Some telecommunications companies have seized on alliance opportunities with automakers to provide end-to-end solutions that connect the Internet of Things (IoT) to the connected car for premium buyers,” said Gaeron McClure (pic), EY Global Telecommunications leader, Transaction Advisory Services.
“Others have worked with banks to deliver mobile banking and micropayment options to their customers, while some are teaming with media or technology companies to bring new products and services to market.
“We expect to see many more alliances of this nature as emerging technologies become ubiquitous,” he added.
Following a wave of industry consolidation in 2015, overall deal intentions have stabilised, but the M&A market remains robust – 43% of global telecommunications executives plan to actively pursue acquisitions in the next 12 months and 62% have three or more deals in the pipeline, EY said.
According to the report, digital disruption and changing consumer preferences have telecommunications executives considering deals outside of the telco sector.
More than a third (34%) of respondents are pursuing cross-sector deals to gain access to new materials or digital technologies, while 30% are pursuing adjacent market deals that address changes in customer behaviour.
Also, 73% of telco sector executives are looking outside of their home markets for deal opportunities, with the United States, the United Kingdom and Canada topping executives’ list of top destinations to pursue an acquisition in the next 12 months.
In terms of emerging markets, Brazil and India represent the top choices.
“In a mature industry and facing a host of opportunities and risks from digital disruption, telecommunications companies are shrewdly considering deals – domestically and abroad – that will help them create new experiences in an effort to retain existing customers and entice new ones in an increasingly crowded business landscape,” said McClure.
For a full copy of Telecommunications Global Capital Confidence Barometer, go here.
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