M&A Fever: who's next?

Thomas Husson | September 13, 2005, 06:21 AM

No I am not referring directly to Internet or software companies but simply to wireless...

Looking back at announcements from first half 2005, it looks like mergers and acquisitions are back in Europe's wireless landscape. Big is beautiful. Again. And not only in Eastern Europe, where lower penetration rates explain the golden rush from big mobile operators: Vodafone bought Oskar and Mobifon, Telefonica bought Cesky Telecom, Telia Sonera bought Turkcell and Telsim is now for sale. This also concerns the mature Western European countries : Amena was taken over by France Telecom in Spain, Telfort by KPN in the Netherlands, Telering by Deutsche Telecom in Austria. So it mainly concerns smaller operators, number 3 or 4 in their national markets. 02 was also a target for T-mobile and KPN.

The reason for such a trend? Telcos revovered financially: with a lower debt, they can purchase again and try to generate synergies and savings in advertising costs (eg. Orange single brand for convergent services). Scale and scope is also important for cost reduction (handset procurement, roaming agreement...) as well as leveraging on best practices and sharing ressources. It is also a way to target new sub-segments with a different brand. To put it more simply, it is an interesting manner to lower competition. Some successful MVNOs have been taken over in this manner : after CBB Mobil and Telmore, it is now the turn of Saunalahti and Chess/Sense to be bought respectively by Elisa and TeliaSonera.

No doubt such a trend will affect the whole value chain. Content Providers have already been taken over by expanding Japanese firms (French 123 Mutlimedia by Index Corp; UK I-touch by For-side) and some industries need scale and scope due to high production costs (games) or advertsing costs (an off-portal ringtone company usually reinsvests up to 50-60% of its profit in ads !). Negotiating power with big telcos is not the only reason for consolidation, new entrants are coming in the competition landscape: media companies and Internet players. Ever heard of Electronic Arts, Sega, Vivendi Universal Games, Google, Yahoo, Time Warner...? Well, they all invest the mobile space. And let me tell you they have some money available to buy not only the technology but also a scarce ressource : mobile marketing know-how.

Also expect some more consolidation from other industry players such as aggregators and application & platform providers.

So, who's next ?