Telecoms bet on merger-growth strategy

Globally, telecoms are aspiring mergers as a way to expand their presence on the market. That is often one of the usual ways utility-structured companies gain market share as their high level of capacity is being reached. Telecommunication firms are preparing for what is believed to be the largest telecom merger spree since year 2006.

More than $80 billion of transactions have been reported or are waiting on the line of being completed this year. Companies are seeking more market exposure as sales of wireless and internet services are in a process of calming down.

“Growth prospects are scarce and money is cheap,” said Todd Lowenstein for Bloomberg. The portfolio manager working for Highmark Capital Management in Los Angeles added that acquirers are going after “valuable assets that are likely to be put to better use in a combined company.”

Companies such as Dish Network Corp., Softbank Corp., Vodafone Group Plc, Verizon Communications are going after acquisitions as trying to bring more value or simply more customers as the market is being squeezed. There also is a trend of small companies trying to compete with their rivals through merging with similar companies.

Such example are Vodafone and John Malone’s Liberty Global Plc, which both need Kabel Deutschland Holding AG to expand their operations in Europe. Phone companies across the continent are bulking up their networks and adding services. Combined offers of TV, Internet and phone services are seen as a tool to boost profits as making users more loyal to the company. A survey on the topic shows that users paying for more than one service to a telecom are significantly more easily retained.

Yesterday, telecommunication sector closed on green as largest companies recorded more than 1.2% to 1.6% increase in share price. Verizon jumped by 1.65% among the leaders, AT&T surged 1.14% and Vodafone gained 0.52%.