what are the strategic solutions to create value?

A deeply competitive sector

The telecommunications sector is undergoing in the developed markets a level of competition never experienced before and at the same time the progressive liberalization of the closed telecom environments. Operating efficiency has become the motto of the sector as well as the search for growth opportunities, mainly on the emerging markets.

A search for growth in the emerging markets

The telecommunications sector in emerging markets has been under the spotlights for a few years and players have shown a deep interest in its growth perspectives, from Asia to the Middle East, Africa, Central Europe and Latin America.

Two trends can be highlighted in these markets:

the search by renowned operators for growth opportunities in these regions by the way of licenses acquisitions or acquisitions of existing operators;
the emergence of regional operators: national champions which are taking on acquisitions in other emerging regions.

What is the adequate behaviour to adopt in the telecommunication sector?

Within this environment, operators have to clearly define their strategy so as to grow by launching new innovative services and/or by acquiring licenses or telecommunication players.
There are two main roads at the heart of these needs for growth, for entering new businesses and creating value. Here are a few tips:

The choice for organic growth:

Strategic thinking: it is fundamental for an operator to define the growth strategy that fits its profile and the evolution of the telecommunication sector. It is also highly recommendable to adopt a pro-active strategic thinking to act as a market maker instead as of a defender.

Bids for licences: to maximize the value within a bid for licence, an operator will have to keep an eye on the bidding price and therefore focus on the business planning of the business, the analysis of past bid procedures and prices paid, the market intelligence on other bidders & likely bids.

New businesses: finally, the launch of new businesses will have to include an analysis of the evolution of the telecom sector, a market & financial analysis, the business plan of the new activity as well as the analysis of the impacts of the business on the company profile.

The search for value through external growth:

Strategic thinking: the first step consists in highlighting the operator’s external strategy within the sector trends and in analyzing how it matches with the targeted markets.

M&A: then, an acquisition project will imply to search & analyze potential targets that fit the strategy, analyze the potential synergies, prepare the documentation for the bid, modelize the business planning & evaluate the target.

Due diligence: this stage will have to focus on the results of the financial & technical due diligences, on the analysis of the impacts of the findings on the price to pay and on the elaboration of sensitivity scenarios.

Other stakeholders of the telecommunication sector also need to increase their know-how:

Banks, investment funds, financial institutions need to adopt a position on the risk profile of a project for which they are called to take part of the risk.

To do so, they will have to conduct an analysis of the risks of the projects in terms of markets, products, technology, robustness of the business plan and cash flows, capital structure.


download the pdf version