Insight: Focus on Telecom M&A

Posted by Mae Kowalke on Friday, June 19, 2015 with No comments

You know what they say: the more things change, the more things stay the same. That certainly seems true when it comes to mergers and acquisitions (M&A) in the telecom space. Charter's recently sealed deal (pending regulatory approval) to purchase Time Warner Cable for $56 billion in cash and stocks is just the latest big M&A to generate a lot of telecom industry discussion and speculation.

Charter is confident that it will get regulatory approval for the acquisition, Light Reading reported, noting that its a very different company from Comcast which made a failed bid for TWC earlier this year. The combined Charter/TWC would create a new No. 2 MSO in the U.S., almost as large as Comcast. 

Having also recently secured a deal to acquire Bright House Networks, Charter plans to focus heavily on expanding its business services and wireless reach, Light Reading said. That means extending its fiber networks into new areas, pursuing commercial customers, and stepping up Wi-FI and other wireless efforts. 

In particular, Light Reading reported, Charter is interested in building out its optical networks to reach unserved areas, expanding beyond the 48-million home footprint it'll have after completing the Bright House and TWC deals. Serving midsized businesses and enterprises is very much a part of this strategy; it's not just about residential anymore. 

Indeed, financial and industry analysts have pointed out that Charter's acquisitions extend beyond the pay-TV and home-broadband market, FierceWireless said. It's also an indication that Charter is making an assertive push into the wireless market. The Wi-Fi hotspot portfolio it's gaining from TWC and Bright House gives Charter an opportunity to explore Wi-Fi only services. The company is also likely to add mobile voice and data components to its product portfolio, even though doing so carries significant risk. 

It's worth noting that although the U.S. wireless industry is now dominated by four national Tier 1 carriers, that hasn't always been true, FierceWireless pointed out. A great deal of consolidation occurred over the past decade, wrapping many small, regional carriers (Alltel, Leap Wireless, MetroPCS, etc.) into the fold of major carriers. 

M&A activity has shaped the wireless industry into what it is today, and it's likely future consolidation will have a similar effect--although exactly what the outcome will be is unknown. 

Taking a broader look at what sustainable competition looks like in today's telecom market, Light Reading noted that many communications service providers (CSPs) are interested in offering digital services. Doing so successfully requires several key strategic steps:

Replace bad revenue (think overages and other unexpected costs) with good revenue by creating business models based on income from consumers' consented spend.
Empower consumers with convenience and choice. 
Unleash and roll out creative propositions (think personalized data packages) in real time. 

These are important things for all telecom players--not just CSPs--to keep in mind as they adapt their business models, pursue strategic M&A opportunities, and adopt new technologies. 
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