Transcript The Accenture Management Consulting Way: Release 2.0

Telecom M&A strikes back
Luca Ferro, Senior Advisor
17th May 2011
Copyright © 2011 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
In 2010 M&A Transactions in the telecommunications sector have reached
almost the pre crisis level...
Telecom * M&A Deal value
142
Bln US $
• 2010 has registered a strong
increase in M&A deal value
(+44% vs. ‘09) with a limited
increase in deal number (+6%
vs.’09)
114
99
• Emerging markets** account for
¼ of the total deal value and
10% in volumes
2008
2009
2010
Deal #
683
705
749
Average
deal value
0,17
0,14
0,19
(Bln US $)
Sources: Ovum, Accenture analysis
(*) Including Service Providers and Equipment Providers/Vendors
(**) Defined as different from North America, Europe and Asia Pacific
Copyright © 2011 Accenture
2
... and 2011 has started pretty well
Recent transactions in the telecom sector
Buyer
Target
(Seller)
Deal type
AT&T Inc
T-Mobile USA Inc
(Deutsche Telekom AG)
100% stake acquisition
39,0
March 2011
America Movil SAB de
CV
Carso Global Telecom SAB de CV Telmex
99,4% stake acquisition
25,6
January 2010
CenturyLink Inc
Qwest Communications International
Inc
100% stake acquisition
22,2
April 2010
VimpelCom Ltd
Weather Investments
100% stake acquisition
22,0
October 2010
Vivendi SA
SFR
(Vodafone Group PLC)
44% stake acquisition
11,3
April 2011
Bharti Airtel Ltd
Zain Africa BV
(Mobile Telecommunications Co
KSC)
100% stake acquisition
10,7
March 2010
Telefonica SA
Brasilcel NV
(Portugal Telecom SGPS SA)
50% stake acquisition
9,6
May 2010
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Sources: Bloomberg, Accenture analysis
Value
(Bln US $)
Announce date
3
Enter new markets together with the quest for economies of scale are often the
main reasons for acquisition in the telecom sector...
Achieve economies of
scale
Eliminate/reduce
competition
Strengthen the core
business
Enter new geographic
markets
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Acquire new
technology
4
... and Post Merge Integration is always key...
Integration Success Factors
Focus on Value Creation, not integration for its own sake
“Hard”
success
factors
Take most critical decisions as soon as possible
Run a tight process with strong governance and PMO
Follow the 80/20 rule
Don’t let the synergies escape on their way to the bottom line
Don’t close the window on the world
“Soft”
success
factors
Don’t underestimate the resource requirements
Realize that Culture matters
Over communicate
Make use of the unprecedented opportunity for change
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5
... to deliver synergies, but their achievement should not be taken for granted
Network







Roaming contracts
Network infrastructure
Interconnect/Facilities
Accelerated Network Retirement
Energy Management
Network Supply Chain
…
Customer Care
 Call centre / location rationalisation
 Increased expert (process,
technology, applications)
productivity
 Improved forecasting & scheduling
 Best practice transfer
 Self-Service and 1st Call Resolution
 3rd line support
Source: Accenture project experience
Sales & Marketing




Sales channels optimization
Best practice transfer
Vendor contract rationalization
Devices, accessories, product
rationalization
 Handset manufacturer marketing
subsidies
 …
IT
 Contract / spending optimization
 Rationalized supplier network
 Strategic Sourcing (Indirect,
Network, Terminals)
 Logistics Footprint rationalization
(Network Equipment, Terminals)
 Inventory optimization
 …
Other (Finance, HR, G&A)
 Reduction in application support /
maintenance costs, both in-house
and vendor costs
 Single IT infrastructure, lowering
technology TCO
 Improved Business Continuity
capabilities
 …
 Revenue synergies
− Frequently overestimated
− High risk of double counting
− Hard to manage and to achieve
− Benchmarks not applicable
Procurement
 Consolidation of insurance policies
decreases risk management fees
 HR Policies and Programs
 Recruitment function
 Personnel Administration function
 Benefits Management function
 Training function
 Shared service centres
 Opex & Capex synergies
− Benchmarks available
− Achievable through strict controlling of
measures
6
Based upon Accenture benchmarks, OPEX synergies could
vary between 8% to 32% of the target’s / subsidiary’s operating expenses
Percentage of Target Company / Subsidiary Opex
8-32%
Drivers of Synergies
0-3%
1-3%
1-4%
1-6%
5 -12%
CRM
0-3%
Billing
Network
IT
Supply
Chain
Corporate
Total
 Degree of geographical overlap
− Domestic / near shore
transactions
higher synergy potential
− Foreign / overseas transactions
lower synergy potential
 Operating model – degree and
areas of integration
 Network and IT standards –
degree of compatibility of
technology and vendors
 Customer demands and brand
positioning – degree of similarity of
sales and customer care approach
Source: Accenture project experience
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What’s next ? In our opinion M&A activity for the next couple of years will be
buoyant and driven mainly by market internal consolidation and cross border
acquisition
M&A Drivers
Mature
markets
Recent transaction
Possible future deals
• Consolidation of networks/
cost reduction
• Orange-TMobile in Uk
• Telefonica/Telecom Italia
• Divestment of
minorities/streamline of
operations
• Vodafone with SFR/China
Mobile minorities
• Vodafone Verizon minorities
• 3 in UK and Italy
• Market internal
consolidation of marginal
players
• Canada (IMECO Telecom
and Telephonie Bonne
Ligne)
• India (Idea, Aircel,etc)
• Tanzania (4 operators with only 10%
cumulated market share)
• Nigeria (11 players, only 3 with relevant
market shares)
Emerging
markets
• Regional/cross border
acquisition
• Airtel-Zain Africa
• Convergent services/Fixed –
Mobile offering
• American Movil-Telmex
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• Batelco/Zain Saudi
• MTN and MTS as buyers/Essar as a
target
• France Telecom Vietnam’s interest for
Mobifone
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