Mergers & Acquisitions

M&A: With a telecom equipment market about 60% of what it was in the end of the 90s, and about the same number of vendors, it is not surprising that the trend is for consolidation. The trend today is for shopping for smaller niche players, either R&D focused companies or offering next-gen technology portfolio. Let me recall just some recent deals: Cisco is finding again its way to buy some 10-12 firms a year (recently Airespace, Riverhead,..), Tekelec bought Taqua, UTStarcom bought Telos Technology, while TuT agreed to acquire Copper Mountain. Alcatel purchased Spatial Wireless and Tellabs bought AFC and invested in Occam. Thomson acquired Inventel. Airspan bought ArelNet, Semotus Solutions Inc. announced the acquisition of Expand Beyond, and Diversinet bought DSS Software Technologies. Motorola invested in T3G Technology. Colubris acquired Kiwi. Siemens SBS purchased Forte. Juniper took control of Kagoor. Oracle completed acquisition of Oblix. This list is not exhaustive, but likely reflects a new buying trend.

On the service provider side the situation is not really different. After years of retrenchment and debt-reduction, SPs are again generating cash and can spend to increase their international operations. And here also companies, except in the USA (Cingular-ATT and Sprint-Nextel), are avoiding big acquisitions. MCI acquisition is still pending as Qwest has again increased its offer to $8.9bn and ask for a third turn. There are also MTC-Celtel, Optus-Reef, ONO-Auna, Vodafone in Romania and Czech Rep., Cesky Telecom to be likely bought by Telefonica, Tiscali France by TI, and Turkcell is disputed by Teliasonera and Alfa Group.

There were some 300 deals in 2004, for a value of about $32bn, up from $ 4.2bn in 2003. No doubt that M&A activity in 2005 will reach higher summits. But the main question remains: How long can heavyweights (vendors or SPs) avoid turbulence?