Telecom Mergers and Acquisitions: What’s Next for Alternative Networks? - ETI
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October 14, 2024

Telecom Mergers and Acquisitions: What’s Next for Alternative Networks?

The following summary has been condensed for length and readability. To listen to the full discussion, click here. This episode is sponsored by ETI Software and VETRO FiberMap.

In a recent episode of The Broadband Bunch, Ian Ginn, founder of IFG Consulting Europe, discussed the state of telecommunications, focusing on the European market and what lessons U.S. operators can learn from Europe’s experience. This conversation covered everything from the challenges of scaling in a fragmented market to the future of alternative networks (altnets) and the critical importance of network documentation.

The Fragmented Nature of the European Telecom Market

One of the key themes of this episode was the significant differences between the U.S. and European telecom markets. Unlike in the U.S., where the telecommunications landscape is dominated by a handful of large operators such as AT&T, Verizon, and T-Mobile, the European market is far more fragmented. This fragmentation makes it difficult for telecom software vendors to scale quickly across multiple markets. In most European countries, several telecom operators compete for market share, and each has its own set of regulations, technical requirements, and market dynamics.

Ian Ginn highlighted how this creates unique challenges for software vendors that develop solutions for telecommunications companies. IFG Consulting specializes in helping these vendors navigate the complex European market by “joining the dots” between technology, people, and sales. Ian pointed out that while many companies have excellent products, they often struggle to sell them effectively in Europe due to this fragmentation. IFG’s role is to bridge this gap, using its network and expertise to help software vendors connect with the right operators and markets.

This contrasts sharply with the U.S., where fewer, larger players dominate, making scaling somewhat more straightforward once a company establishes relationships with the big players. Nevertheless, even in the U.S., market entry can be challenging due to regional differences in regulations, infrastructure, and technology adoption, particularly in the areas of fixed broadband and mobile networks.

The Rise and Challenges of Alternative Networks (Altnets)

The conversation shifted to the rise of alternative networks, or altnets, in the UK and broader European markets. These networks emerged over the past decade, fueled by a combination of government incentives, investor interest, and a need to provide high-speed broadband to underserved or unconnected areas. Altnets typically operate independently of the large, incumbent telecom operators and focus on providing fiber-based broadband services to areas where traditional operators may not have prioritized investment.

At the peak of their rise, altnets were seen as the future of broadband in Europe. Investors poured billions into these networks, and the expectation was that they would rapidly expand to cover large swaths of underserved areas, delivering high-speed internet and helping to bridge the digital divide. However, as Ian Ginn pointed out, many of these altnets are now running into significant challenges. The initial optimism has given way to a more sober reality.

In many cases, the expected returns on investment have not materialized, and altnets are finding it increasingly difficult to sustain their operations. Some are now running on financial fumes, struggling to secure additional funding or find buyers. Ian noted that a wave of consolidation is likely on the horizon as altnets look to merge with or be acquired by larger players. In some cases, operators may even be forced to shut down altogether if they cannot find a viable path forward.

This mirrors some of the issues seen in other markets, including the U.S., where the broadband landscape is rapidly evolving. The conversation emphasized the importance of sustainability in building out networks, especially in rural and underserved areas. While government funding can provide a much-needed boost, it’s crucial for altnets and other operators to have solid business models and long-term plans for growth and profitability.

Network Documentation: A Critical, Often Overlooked Element

One of the most critical points raised during the conversation was the importance of proper network documentation. In both Europe and the U.S., network operators often overlook this essential step, leading to significant problems down the line. Ian explained how there is frequently a disconnect between the planning phase, the actual build of the network, and the documentation of what has been built. This lack of documentation creates challenges not only for ongoing operations but also when it comes to valuation and potential investment.

Ian recounted how companies are often shocked when investors ask them to provide detailed information about their network assets, and they are unable to do so. This lack of clarity can significantly affect the valuation of a network, particularly in the case of alt nets that are looking to be acquired or merged. Accurate network documentation is critical for both day-to-day operations and long-term planning.

Several companies are addressing this challenge. These solutions help operators ensure that they have a real-time view of their network assets, from planning to build and beyond. Proper documentation is not only essential for valuation but also for efficient network management, enabling operators to optimize their infrastructure and ensure smooth operations.

Lessons for U.S. Operators from Europe’s Experience

One of the most compelling aspects of the conversation was the discussion of what U.S. broadband providers can learn from Europe’s experience, particularly in the altnet space. In the U.S., the broadband market is currently experiencing a Gold Rush, with significant amounts of both public and private money flowing into the sector. Government initiatives like the Rural Digital Opportunity Fund (RDOF) are driving massive investments in rural broadband infrastructure, while private equity firms are also keen to capitalize on the growing demand for high-speed internet.

However, as Ian pointed out, U.S. operators should be cautious about the long-term sustainability of their investments. In Europe, the initial rush to build altnets led to a period of rapid expansion, but many of these networks are now struggling due to unrealistic expectations and unsustainable business models. The same risks exist in the U.S., where operators need to think beyond the initial build phase and focus on long-term growth and profitability.

Ian emphasized the importance of differentiation in this context. It’s not enough to simply provide basic broadband services—operators need to think about how they can add value to their offerings through partnerships, service bundling, and other strategies. In both Europe and the U.S., differentiation will be key to standing out in an increasingly crowded market.

Mergers, Acquisitions, and the Future of Telecom

Looking ahead, Ian predicted a wave of mergers and acquisitions in both Europe and the U.S. as companies look to consolidate their positions in the market. As altnets and other operators run into financial difficulties, larger players with deeper pockets are likely to step in and acquire these networks. This consolidation will help streamline the market and make it more sustainable in the long run.

However, Ian also warned that the telecommunications industry needs to stay agile and innovative to remain competitive. With emerging threats from satellite-based broadband providers like Starlink, traditional telecom operators will need to adapt to changing market dynamics. The future of telecom will depend on the ability of operators to embrace new technologies, optimize their networks, and provide value-added services that go beyond basic connectivity.

Digital Talk: Ian Gin’s Podcast on Telecom Innovations

In addition to his consulting work, Ian also hosts a podcast called Digitel Talk, which highlights stories of innovation in the telecom space. The podcast focuses on how telecommunications companies are using technology to solve real-world problems, particularly in underserved and rural communities. Ian shared how his podcast aims to give a platform to the people and companies doing great work in the telecom sector, showcasing innovative use cases and inspiring others to think creatively about the future of connectivity.

One notable example Ian mentioned was an Internet of Things (IoT) project in Sri Lanka that uses sensors to help farmers improve crop yields by sending soil samples to university scientists for analysis. This project was able to achieve results at a fraction of the cost it would have taken in more developed countries, demonstrating the power of telecom and technology to drive meaningful change in rural areas.

The Future of Broadband and Telecommunications

This conversation was filled with valuable insights for telecom operators, investors, and anyone interested in the future of broadband. From the challenges of scaling in Europe’s fragmented market to the lessons U.S. operators can learn from alt nets, the discussion touched on many of the key issues facing the telecommunications industry today.

As the broadband market continues to evolve, both in Europe and the U.S., operators will need to stay ahead of the curve by focusing on sustainability, differentiation, and the importance of network documentation. Whether through mergers, partnerships, or new technologies, the future of telecom will be shaped by those who can adapt to the changing landscape and provide innovative solutions for the communities they serve.

© 2024 Enhanced Telecommunications.

About the Author

Priscilla Berarducci - Sales and Marketing Coordinator

Priscilla manages digital content and supports sales/marketing efforts for ETI. She also serves as brand manager for the Broadband Bunch podcast where she books industry professionals who want to share their broadband stories.