Global Telecom Market Sees Surge in Mergers and Acquisitions

The telecom industry witnessed a significant upturn in merger and acquisition (M&A) activities during the first half of 2024.

Bain & Company’s data reveals a substantial increase in M&A deals within the telecom and infrastructure sectors. The total value of these transactions reached $43 billion, marking a 162% rise compared to the same period in 2023.

The American continent played a crucial role in this expansion. M&A transactions in the Americas totaled $18 billion between January and June.

This figure represents more than triple the amount recorded in the first six months of the previous year. Brazil’s M&A landscape, however, tells a different story.

The country saw a sharp decline in transaction volume. It dropped from $6.6 billion in 2020 to approximately $100 million in 2023. The first half of 2024 saw no transactions meeting Bain’s inclusion criteria.

The second half of 2024 brought a notable development in the Brazilian telecom market. V.tal, a digital infrastructure provider, agreed to acquire Oi’s fiber optic broadband customer portfolio.

The deal, valued at R$5.68 billion, involves 4.3 million access points using this technology. V.tal’s creation in 2021, through the spin-off of Oi’s fiber optic assets, exemplifies a growing global trend.

Telecom Sector Shifts

Herbert Blum, Bain’s global leader for communications, media, and entertainment, describes this as a “tectonic” shift in market structure over the past five years.

This shift marks a departure from the traditional integrated business model that dominated the sector for nearly 140 years. In the old model, a single company offered services through its own network.

The new landscape favors more disaggregated, asset-light business models. Telecom companies are now divesting non-essential assets such as cell towers and fiber optic networks.

Fiber optic technology allows for a wide range of services, some of which didn’t exist when the networks were first implemented. The separation of infrastructure and services, coupled with business model diversification, expands M&A possibilities.

It facilitates the emergence of new players like neutral infrastructure providers and virtual mobile operators. In Brazil, however, the effects of this disaggregation seem to be waning.

KPMG’s data shows 29 M&A deals in the telecom and media segments from January to September 2024. This number is down from 48 in the same period of 2023.

Marcio Kanamaru, KPMG’s partner leader for technology, media, and telecom in Brazil and South America, offers insights. He attributes this slowdown to investor caution amid economic challenges and regulatory adjustments.

Changes in growth expectations and cost pressures related to return on invested capital also play a role. Despite the deceleration, the consolidation trend remains strong.

Telecom operators are driven by the need to gain scale, optimize infrastructure, and invest in new technologies. These include 5G, artificial intelligence, and fiber optic networks.

Kanamaru predicts that future M&A activity will be more selective and strategic. Companies will seek deals that ensure return on investment and expand market reach without compromising financial health.

In short, this approach reflects a maturing market adapting to new economic realities and technological demands.