Telco Consolidation Recorded 514 Mergers in the Past Five Years

Communications service providers (CSPs) have experienced substantial consolidation in recent years with 514 mobile and wireline M&A deals worldwide over the 2019-2023 period, Omdia’s research shows. There have been more wireline M&A deals than mobile, with 392 wireline and 122 mobile M&A deals over the 2019-23 period.

The mobile M&A includes prominent deals such as the planned merger of Vodafone and Three operations in the UK, which will create the UK’s second-largest mobile operator by subscriptions if it is approved by the Competition and Markets Authority. There were 214 M&A deals across all communications provider sectors in 2023, down from a high within the past five years of 316 in 2021, a decline that reflects factors such as high interest rates and a cyclical downturn in the technology industry. However, the dynamics of the telecom market mean there will continue to be a strong drive for further M&A among CSPs.

“With revenues in the telecom sector growing at a low rate while markets are competitive and increasingly mature, many more CSPs will seek consolidation, so that they can cut costs by eliminating duplication and invest in network technologies such as fiber and 5G to propel growth in their connectivity business,” said Matthew Reed, Chief Analyst, Service Providers & Markets, at Omdia. “Merging also allows operators to benefit from other economies of scale including increased competitiveness against other big players, opportunities for cross-selling, and more clout in procurement.”

In addition to consolidation, telecom operators are undertaking M&A as part of delayering and diversification strategies. With delayering, CSPs typically sell infrastructure assets such as telecom towers to raise funds to reduce debt or to invest in other business areas. In July, Telecom Italia (TIM) completed the sale of its fixed-line business in Italy to investment group KKR, which TIM said will allow it to focus on growth through the launch of new beyond-connectivity consumer services and enterprise ICT services.

Also, CSPs are making acquisitions in high-growth technology sectors for diversification, with both Orange and Telefónica having built up significant cybersecurity businesses in this way. “For telecom operators that want to become technology services providers, one way to make that transition is to buy companies that already have the capabilities and customer base in the target sectors,” said Reed.