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Photo:Ryan McGuire

While mergers in the telecommunication industry may lead to costs consolidation for the companies involved, their end users may be left battling monopoly and end of value-added services

As telecom companies scramble to survive competition, mergers have become the most viable option for many. Companies like Comcast, Xfinity, TWC, Charter, Greatlands, AT&T, U-Verse, Direct TV, Verizon, Vodafone, are all either in the middle of a deal process or towards closing one. The need for a wider customer base, to get spectrum and network capacity to expand reach and service offerings or even to just stay alive and competitive among the pile are pushing these companies to integrate their brands and company cultures, sometimes even as the cost of brand dilution and confused consumers.

Vimpelcom’s Wind Italy and Hutchison Whampoa’s 3 Italia have been trying to strike a deal. Both these companies need this as a positive conclusion to be able to keep their heads above choppy Italian waters. While 3 Italia is one of the smaller players in Italy’s mobile markets by way of subscribers, Wind Italy is struggling with a rising debt, which its parent company is trying to reduce by selling phone towers in Italy. Also, 3 Italia lacks scale in broadband while VimpelCom is losing home ground in Russia owing to economic strains from global sanctions.  It just makes sense then, for these companies to consolidate their survival tricks and get into the same boat.

A similar case in point is also playing out in the U.S. market, where in fact a smaller company, Charter Communications Inc. will be acquiring telecom bigwig Time Warner, combing the second (Time Warner) and third largest (Charter) U.S. cable operators. The deal is poised to create a rival to reckon with for Comcast Corp, which is the biggest cable operator on the U.S. shore. It also marks a as a winning move for Charter, which was in fact rejected by Time Warner Cable last year. While television service providers fight off web-based rivals who offer tailor-made services like a Netflix or Sony which offers channel packages, mergers like these help cut competition, integrate resources and sum up value-added services.

Meanwhile as consolidation of resources becomes an important aspect of these mergers, expansion into newer geographies also on the agenda for some like French billionaire Patrick Drahi’s telecom company Altice, which is looking to expand its empire on U.S. shores. Even as it bought out regional cable Suddenlink, it set its eyes on a bigger player Time Warner Cable Inc., whose recent merger plans with Comcast Corp were called off. Last year Altice also bought French wireless provider SFR and merged it with its own cable operator Numericable.

Photo:Adriano Gadini
Photo:Adriano Gadini

However, as telecom companies raise a toast to these unions, what remains to be seen is how it affects users of these unified service providers. While some market analysts have said that inter-dependencies on sharing infrastructure, may actually help cutting costs, which will percolate to the end user, others are pointing out that having a monopoly in the market will give no initiative to the company to expand its services, invest in new technology or infrastructure and address connectivity problems.  The long road ahead looks complex for the telecom industry which is evolving rapidly. It remains to be seen if regulators in U.S. and Europe will negotiate hard, so that the onslaught of these mergers are not remembered as a bad connection.