TMT investment trends

 

May 2016

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Significant tmt deals

2015 and 2016 Q1 saw numerous Mergers and Acquisitions in the Telecom, Media and Technology sector. Significant deals included:

Mobile consolidation

  • Three/O2 (blocked)

  • Orange / Bouygues (collapsed)

Fixed - mobile telecom mergers

  • BT / EE

  • Altice / SFR

Tower deals

  • Reliance Infratel / TPG

  • American Tower / Bharti Airtel

  • Cellnex / Wind

Cable mergers

  • Charter Comm/ Time Warner

  • Telecolumbus / Primacom

Media & Internet acquisitions

  • Vivendi / Mediaset

  • Verizon / AOL

Data Centre / Hosting and Cloud acquisitions

  • Equinix / Telecity

  • Interoute / Easynet

FinTech deals

  • FIS / Sungard

  • SS&C Technologies /Advent Software

IoT acquisitions

  • Cisco / Jasper Technologies

  • Qualcomm / CSR

Telecom equipment merger

  • Nokia / Alcatel-Lucent

 

investment Challenges

However, the upcoming Brexit referendum and US elections bring uncertainty and investment concerns start to appear.

Valuation concerns

There are valuation concerns:

  • Target multiples are on the rise

  • The market shows volatility

  • There is lower activity in M&As and IPOs in 2016 Q1, following a deal volume record in 2015

Deal synergy concerns

Debt funding is still available but private equity players will be more prudent. This will lead to a close monitoring of deal synergies.  

Post Merger Integration (PMI) concerns

As deals become more complex and expensive, acquirers will need to better prepare and to integrate faster in order to secure the deal value.

 

Digital regulation concerns

Digital regulation (SVOD window, Net neutrality, Digital Single Market) as well as M&A regulation have had an impact on European Telecoms. The US telco market is more advanced and innovative than the European market nowadays. There is a question mark on how online platforms can develop and thrive in Europe.

 

INvestment predictions: Technology

Despite the above uncertainty, a large deal volume is still expected in the technology sector.

 

Fintech

The Fintech market is booming, especially in the capital markets sector, with UK dominance.

The future will reveal who will lead the next wave of growth: start-ups seeking to dominate sub-sectors (e.g. P2P lending) or established financial institutions.

 

Datacentres and Cloud

Although the sector, and AWS in particular, has experienced fast growth and transaction prices are high, many deals are still to come.

Traditional companies should try and acquire digital boutiques.

 

M2M, IoT

The market is still fragmented and more transactions are expected. 2017 could be the inflection point.

Areas of interest are big technology connectivity, big data, and learning.

However, it will difficult for Telcos to find IT businesses available for sale at a reasonable deal price.

 

Investment predictions: telecom

Predictions for 2016 and 2017 telecom deals include:

  • Fixed-mobile telco consolidation

  • TMT convergence

  • Acquisition of tech/digital capabilities

  • Investments in broadband networks

  • Mobile infrastructure spin-offs

Mobile infrastructure spin-offs

Demand for data is straining networks, and does not provide equivalent revenues for telcos.

Therefore, it is likely that European operators will seek to spin off their mobile infrastructure in order to streamline their business and fund new investments.

Yet they face substantial transaction challenges, such as:

  • Large effort required

  • Long completion time (two to three years)

  • Legal and accounting risks

  • Reluctance from technical and technology staff

 

Investment predictions: Media

Changes in the TMT ecosystem and value chain will prompt traditional Pay TV and FTA broadcasters to invest in order to fend off the threat of OTT players.

Telecom operators will need to reconsider their business models:

  • Should they become pure pipes or differentiate with content or become content aggregator?

  • Should they enter new digital markets?

  • Should they acquire or enter partnerships?

 

All media players (FTA, DTH, Cable, OTT, MCN, Media giants, Telco) will compete in order to gain or retain control of the user interaction.

They will need to:

  • Engage with their younger audience

  • Solve the monetisation challenge in a multiscreen and multiplatform environment

  • Cross fertilise data and content

  • Offer different types of content: short vs. long form, local vs. global, linear vs. on demand

  • Invest in 4K & UHD technologies

 
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