MEA: Telecoms consolidation predicted for 2011

Industry experts predict further M&A activity and outsourcing in the coming 12 months


Consolidation and outsourcing are likely to emerge as key trends in the region's telecoms sector in 2011, as increased competition continues to force telcos to increase efficiency, according to analysts and operators.


Zoran Vasiljev, managing director at Value Partners, an IT and management consultancy, told CommsMEA that consolidation is "definitely on the cards" and predicted that operators will seek acquisitions that fill gaps in their assets or capabilities, putting them in a better position to compete with their rivals.
Ghassan Hasbani, CEO international at STC, said that the entry of Bharti Airtel into Africa in June 2010 was just one of the factors that would encourage further consolidation in the sector.
"The entry of Bharti is a game changer in Africa," Hasbani told CommsMEA. "It will encourage further consolidation and will bring new rules to the game in Africa. There will be a new type of competition.
"If Bharti's experience is translated into the African market it will bring lots of cost management expertise, innovation and further competition, which will trigger further competition."
Hasbani added that single-country operators are likely to find themselves under increasing pressure as they try to compete with larger pan-regional players that can benefit from economies of scale.
"If they [single country operators] do not invest in growing scope or in being part of a bigger operation, they will find difficulties in cost management. That is why I see a lot of consolidation happening in the next couple of years to reduce the number of single operators," he said.
But acquisition targets might not be limited to smaller operators and new licences. Hasbani added that some medium to large size operators could undertake a "repositioning" of their portfolios.
"There could be some operators interested in divesting specific assets that are non-strategic for them but could be strategic for others," he said.
Milan Sallaba, an independent telecoms adviser based in Dubai, said consolidation is "the natural consequence where the larger players are cementing their competitive positions by combining assets and resources" with a smaller player.
But he added that many telecom operators remain wary of M&A activity and are likely to look carefully at potential acquisitions on a "case by case" basis.