overview

This page highlights major mergers and acquisitions in the connectivity sector (including fixed phone line, mobile phone and cable service operators).

It covers -

• introduction
• landmarks

The note supports the discussion of the 1990s telco sector bubble and the more detailed guide on Networks & the Global Information Infrastructure. It is complemented by a separate note on telco privatisation.

     Introduction

In discussing the telecommunications sector bubble - which featured both rational (although sometimes unfortunate) spending by network operators and infrastructure suppliers and "irrational excess" - we have noted eight drivers -

• a search for economies of scale in the operation of fixed line and wireless networks
• a complementary drive for critical mass, for example to have sufficient resources to acquire 3G wireless network licences from governments (with the winners of most licence auctions subsequently being perceived as the governments rather than bidders who overpaid and in some instances thereafter relinquished the licences
• expectations of a sustained and significant increase in corporate and residential voice and data traffic, encapsulated by the claim that "internet traffic doubles every 100 days"
• perceptions of a window of opportunity, with for example hype by some pundits and financiers regarding a 'once in a lifetime' chance to enter or dominate markets through establishment of new networks
• ready access to capital for takeovers and infrastructure deployment
• corporate opportunism and defensiveness, with for example acquisition of competitors to preempt their takeover by/of a network operator's peers
• privatisation of operators, introduction of competition and loosening of restrictions on foreign direct investment
• a deregulatory zeitgeist, with government agencies sitting on their hands or tacitly encouraging champions to build scale at the national, regional or global levels

It is unclear whether much of the merger and acquisition activity created substantial and lasting value. Deflation of the telco secto bubble saw major declines in the market value of some organisations, the demise of some peers, surrender of licences, departure from particular regions and acquisition of some infrastructure at huge discounts.

It is also important to consider relativities. The AT&T takeover of BellSouth in 2006 created the largest operator in the US by customers in each of that nation's landline, broadband and mobile phone markets. However, globally it would rank behind several others. In terms of revenue with US$69.4 billion in 2005 it would be smaller than Japanese group NTT (US$99.9 billion revenue). Among landline operators it would follow China Telecom and China Netcom. It would be the ninth largest mobile operator behind multinationals such as Vodafone and would have only a third of China Telecom's broadband subscriber base.

     North America

Telco merger and acquisition activity in the US since 1984 has come to be a case of AT&T's successors putting humpty dumpty back again as the regional operators and new entrants such as Qwest buy each other.

Globally, network development and telco M&A by US corporations is striking. Acquisition of non-US assets reflects the globalisation of markets and corporations, deregulation, search for economies of scale and scope and corporate tax laws highlighted in the discussion of M&A elsewhere on this site.

     landmarks

The following pages supply a chronology of major takeovers and mergers in the connectivity sector, particularly fixed and mobile phone line network operators.









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