Search for Growth Drives Global Carrier Acquisition

By Gary Kim August 11, 2014

New rumors that AT&T might buy Eircom, coupled by growing interest on the part of some European carriers in Brazil, plus America Movil’s acquisition moves in Austria and SoftBank’s purchase of Sprint, illustrate a developing global game of musical chairs for the largest telcos. 

A search for growth drives the moves, even if cases where carriers choose to divest earlier acquisitions. In most cases, such sales are driven by a need to shore up balance sheets, allowing capital to be redeployed in other growth initiatives.

Illiad’s bid to buy T-Mobile US is the latest example of out of region growth strategies.

The established pattern has been for leading European telcos to invest in emerging markets in Asia, Africa and Latin America.

More recently, a merger wave within Europe has begun to develop as well. The new twist is SoftBank entering the U.S market, and Illiad proposing to do so as well.

The Brazil market is the latest battleground for several European telcos, including Telefonica, Telecom Italia and Portugal Telecom.

Inevitably, one might argue, AT&T and Verizon are going to have to look offshore for significant growth, long term, as have many other large telcos whose home markets are saturated or even declining.

In the near term, it still appears Verizon is committed to building on its full ownership of Verizon Mobile assets, by concentrating on the domestic market.

AT&T, which has grown by acquisition, generally is considered the more likely of the two carriers to venture overseas in the medium term, even if the DirecTV acquisition is the most immediate way to boost revenues.  

But both inevitably will move offshore at some point. That will prove a bigger shift for Verizon than AT&T, which has had some exposure to international markets as a minority investor.

Historically, with the exception of the founding of the company, when Bell Atlantic bought NYNEX, Verizon has grown organically.

Most other tier one telcos have mostly growth through acquisition. But many carriers who had expanded significantly through minority investments also now are rationalizing their holdings, at least in part to pay down debt.

That is not to say the strategy was wrong, so much as to note that the debt acquired to grow in that way now is burdensome.

That is seen most clearly in the reshuffling of European telco assets, where minority stakes are sold to bulk up elsewhere, especially where telcos can gain control.

Still, out of region growth will continue. For most carriers, it is the fastest way to grow, when home markets are saturated. 

Edited by Adam Brandt

Contributing Editor

Related Articles

The World is His Oyster: Connected Solutions Enable Daniel Ward to See Food

By: Paula Bernier    3/16/2018

Fresh seafood can taste great, but if it is not handled properly, people can get sick, and that can lead to business closures and lost revenues. That'…

Read More

How to Get Ready for GDPR if You've Waited Until the Last Minute

By: Special Guest    3/14/2018

With less than two months until the General Data Protection Regulations (GDPR) deadline, many companies have already started making sure that their bu…

Read More

How Fintech is Helping Create Global Businesses

By: Special Guest    3/14/2018

The growth of Fintech probably has not escaped your attention. Whether you're a customer making contactless payments or an investor weighing up CFD tr…

Read More

Are We Prepared for Automation?

By: Special Guest    3/13/2018

We are barreling toward a future of automation. A great proportion of the six million US manufacturing jobs that have disappeared over the last few de…

Read More

The Dark Web - A Hot Bed for Cybercrime

By: Special Guest    3/12/2018

There is a corner of the internet that is cloaked from every day users. Beneath the typical search engines and web browsers, an illegal marketplace is…

Read More