Communications Service Provider M&A in AME: Key Trends and Insights

The CSPs (Communication Service Providers) are leveraging M&A to enhance their internal and external capabilities, products, and services. Such capabilities can extend to their enterprise services, as telcos invest in cybersecurity, system integration/professional B2B ICT services, and data centers (DCs). Such M&A help CSPs manage, deliver, and develop new technological capabilities and services.

The CSP M&As in AME has covered the cybersecurity, fintech, and healthtech segments, as these services can be bundled with existing services, which can provide a strong value add, as well as potentially function as stand-alone emergent revenue streams. Several CSPs are inorganically and organically building products and services in these developing spaces.

Following a COVID-19-related slowdown, the M&A Telecoms, Media, and Technology (TMT) deal accelerated in 2020 and 2021. The impact of the global pandemic was to suppress TMT deal global value and there was a sharp turnaround in 2020 as the global TMT M&A market recovered, with a deal value tripling year on year to $695 billion. Despite a 20% slowdown compared to the previous semester, global M&A TMT deals reached $555 billion in value in H1 2021. This represents an increase year-on-year.

The four key sectors are driving M&A TMT deals were software and services, Internet and media, hardware, and telecoms services.

Software and services include application software, security, gaming, IT services, and the cloud. Internet and media include e-commerce, social media, advertising, music, film & TV, and publishing. The hardware sector includes semiconductors, electrical components, consumer electronics, IT infrastructure, telecom infrastructure, and industrial automation. The telecom services include services provided by telcos, and other CSPs. The software and services sector topped the TMT deal activity in 2021. The Internet and media sector recorded the second-highest deal value and the hardware sector recorded 85 M&A deals and telecom services had 24 deals, generating $58 billion.

What are the major themes driving TMT M&A deals?

Connectivity, Digital Media, Cloud, Big Data & AI, IoT, Telecom Convergence, E-commerce, and Cybersecurity are among the key themes driving TMT M&A deals in 2021. The software and services sector’s deals were driven by themes including AI, IoT software & services, big data, fintech, cloud, and health tech. The Internet and media sector’s thematic deals drivers spanned digital media, Internet advertising, and marketplaces. The key themes motivating the hardware sector’s deals include IoT hardware, connectivity hardware, Industrial Internet hardware, electric vehicles, and data centers. The telecom services witnessed key deals in the themes of connectivity, telecom convergence, 5G, and emerging economies.

What is the communication service providers (CSP) M&A activity in Africa & Middle East (AME)?

AME has witnessed healthy CSP deals momentum in 2020-2021, driven by converged telcos, ISPs, towercos, fibercos, and national wealth funds. Horizontal M&A activity has been robust in the CSP space in the last two years in AME. There have been several converged telcos acquiring and investing in MNOs and other converged telcos. Similarly, converged telco Cellcom Israel acquired MNO Golan Telecom in 2020. A number of deals have also involved Internet Service Providers (ISPs). For instance, regional wholesaler and B2B telecom provider Telecel Global Services (part of Telecel group) acquired ISP K3 in Liberia in March 2021. ISP Afrihost South Africa also acquired local ISP/FTTH provider Cool Ideas this year. Moreover, a number of national wealth funds have invested in telcos and telecoms infrastructure – e.g., the Turkey Wealth Fund, the Algerian National Investment Fund, and the Saudi Sovereign Wealth Fund.

The non-horizontal M&A is when a CSP M&A targets another industry. The focus is on opening up opportunities for synergy with the core service offerings through value-added services. Cybersecurity, fintech, e-commerce, and healthtech are found to be popular options for CSP non-horizontal M&A, as they can be bundled with existing services, proving a strong value-add, as well as functioning as standalone technologically emergent revenue streams. The current trends for the rationale of non-CSP M&A in AME include expanding services into new technology areas, developing new revenue streams, and building new unit capabilities. Fintech, cybersecurity, smart city, and healthtech are notable new points of CSP interest as CSPs aim to develop their offerings beyond core telecom services.

Which are the companies mentioned?

The key companies mentioned in the report are Afrihost, Airtel, Algerian National Wealth Fund, Etix Everywhere Maroc, Omantel, Turkcell, American Tower, FGS, Orange, Turkey Wealth Fund, AXA, Golan Telecom, Paradigm Infrastructure, Vodacom, Boyut Grup Enerji, Helios Towers, Partner Telecom and Vodafone.

Market report scope

Scope

• Cybersecurity, datacenters, system integration & professional services, fintech, and healthtech are currently popular options for CSP non-horizontal M&A.
• M&A in the space of physical infrastructure and solutions is also occurring around towers and fiber assets.
• Horizontal M&A activity has been robust between CSPs in the last few years, with competition-induced mergers, state investment, and towerco asset-buying emerging as key trends.
• CSPs are leveraging M&A to drive service innovation, improve market segments reach, and empower digital services.

Reasons to Buy

• This Insider Report provides a comprehensive and detailed examination of CSP M&A activity and trends in AME in a concise analytical format to help executives build proactive and profitable growth strategies.
• The report describes a number of CSP M&A deals over the past 12-24 months, analyzes the driving rationale behind the M&A, CSPs related growth strategies and intended benefits.
• The report is designed for an executive-level audience, with charts and tables boasting presentation quality.
• The broad perspective of the report coupled with comprehensive actionable insights will help operators, communication service providers, and other telecom & technology industry players better position to seize growth opportunities in AME’s evolving M&A market.