 "Telecom companies sharpen their focus on M&A: EY")
According to EY's 15th biannual Telecommunications Global Capital Confidence Barometer (CCB), sector convergence and advances in technology and digitalisation are altering the telecommunications landscape globally.
Some of the major factors that are driving the M&A in the telecom sector include — sector convergence, impact of digital technology on their business model and acquiring talent among others.
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"While in-market convergence and consolidation remain key drivers of sector M&A - yet operators are turning their attention to smaller deals that can fill gaps in portfolios or provide innovative assets or people. In this light, a number of carriers are pursuing 'bolt-on' acquisitions in areas such as Internet of Things (IoT) and over-the-top video services," Prashant Singhal, Global Telecommunications leader, EY said.
According to the report, almost half (49 per cent) of executives cite sector convergence and increases in competition as the biggest disruptor to their core business, while 43 per cent say the impact of digital technology on their business model is the most prominent issue on the boardroom agenda.
"Around 48 per cent of telecommunications executives indicate that they are actively pursuing a merger or acquisition in the next 12 months, up from 43 per cent six months ago," the report said.
The report further said that acquiring talent has become a strategic priority, with 53 per cent of telecommunications executives saying that they need to hire more talent in the months ahead.
Talent is also the most significant strategic driver for pursuing acquisitions outside of the sector, according to 71 per cent of respondents.
While the US and Canada remain top destinations for acquisitions in the coming months, the UK has fallen out of favour as Brexit concerns make investors cautious.
In emerging markets, the vibrancy of the startup market makes China and South Korea attractive options for M&A activity, EY said.