Mergers and Acquisitions in Telecom Sector - Telecommunications Industry mergers and acquisitions

By: EconomyWatch   Date: 16 July 2010

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The number of mergers and acquisitions in Telecom Sector has been increasing significantly. Telecommunications industry is one of the most profitable and rapidly developing industries in the world and it is regarded as an indispensable component of the worldwide utility and services sector. Telecommunication industry deals with various forms of communication mediums, for example mobile phones, fixed line phones, as well as Internet and broadband services.

Currently, a slew of mergers and acquisitions in Telecom Sector are going on throughout the world. The aim behind such mergers is to attain competitive benefits in the telecommunications industry.

The mergers and acquisitions in Telecom Sector are regarded as horizontal mergers simply because of the reason that the entities going for merger or acquisition are operating in the same industry, that is telecommunications industry.

In the majority of the developed and developing countries around the world, mergers and acquisitions in the telecommunications sector have become a necessity. This kind of mergers also assists in creation of jobs.

Both transnational and domestic telecommunications services providers are keen to try merger and acquisition options because this will help them in many ways. They can cut down on their expenses, achieve greater market share and accomplish market control.

Mergers and acquisitions in the telecommunications sector have been showing a prosperous trend in the recent past and the economists are advocating that they will continue to do so. The majority of telecommunication services providers have understood that in order to grow globally, strategic alliances and mergers and acquisitions are the principal devices.

Private sector investment and FDI (Foreign Direct Investment) have also boosted the growth of mergers and acquisitions in the telecommunications sector.

Over the last few years, a phenomenal growth has been witnessed in the number of mergers and acquisitions taking place in the telecommunications industry. The reasons behind this development include the following:

  • Deregulation
  • Introduction of sophisticated technologies (Wireless land phone services)
  • Innovative products and services (Internet, broadband and cable services)

    Economic reforms have spurred the growth in the mergers and acquisitions industry of the telecommunications sector to a satisfactory level.

    Mergers and acquisitions in Telecom Sector can also have some negative effects, which include monopolization of the telecommunication products and services, unemployment and others. However, the governments of various countries take appropriate steps to curb these problems.

    In countries like India, mergers and acquisitions have increased to a considerable level from the mid 1990s. In the United States, the mergers and acquisitions in the telecommunications sector are going on in a full-fledged manner.

    The mergers and acquisitions in the telecommunications sector are governed or supervised by the regulatory authority of the telecommunication industry of a particular country, for instance the Telecom Regulatory Authority of India or TRAI. The regulatory authorities always keep a tab on the telecommunications industry so that no monopoly is formed.

    Significant Mergers and Acquisitions in Telecom Sector

    Following are the important mergers and acquisitions that took place in the telecommunications sector:

    • The takeover of Mobilink Telecom by Broadcom. This can also be described as a suitable example of product extension merger
    • AT&T Inc. taking over BellSouth
    • The acquisition of eScription Inc. by Nuance Communications Inc.
    • The taking over of Hutchison Essar by the Vodafone Group. Now it has become Vodafone Essar Limited
    • China Communications Services Corporation Ltd. taking over China International Telecommunication Construction Corporation
    • The acquisition of Ameritech Corporation by SBC (Southwestern Bell Corporation) Communications
    • The merger of GTE (General Telephone and Electronics) with Bell Atlantic
    • The acquisition of US West by Qwest Communications
    • The merger of MCI Communications Corporation with Worldcom

    Benefits Provided by the Mergers and Acquisitions in the Telecommunications Sector

    Following are the benefits provided by the mergers and acquisitions in the telecommunications industry:

    • Building of infrastructure in a more convenient way
    • Licensing options for mergers and acquisitions are often found to be easier
    • Mergers and acquisitions offer extensive networking advantages
    • Brand value
    • Bigger client base
    • Wide array of products and services

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