How is M&A activity shaping the telco sector?

John Armstrong talks about how vendors' mergers will shape the sector in the region
John Armstrong is the owner and general manager of JCA Associates, a UAE and South African based recruitment business specialising in ICT, Engineering and F+A recruitment servicing the MEA region.
John Armstrong is the owner and general manager of JCA Associates, a UAE and South African based recruitment business specialising in ICT, Engineering and F+A recruitment servicing the MEA region.

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John Armstrong, owner and general manaher of JCA Associates, talks about how the latest mergers announced by global vendors will shape the telecommunications sector in the MEA region.

It’s been predicted by many, including myself, that Nokia would buy Alcatel Lucent — the sale was confirmed earlier this year and the transition period is well under way, but there has been a lot other interesting developments in the industry that were much less expected.

The joining of ALU and Nokia will have a significant impact in this region and it will be interesting to see how the combined organisation will be positioned, especially as Nokia had previously stated it would be focused on mobile broadband only, whereas now they have a portfolio that includes core networks and optical technology.

One thing that is clear is the strength in Africa of both ALU and Nokia —traditionally Alcatel, later ALU, has been very well-positioned in French speaking Africa due to its political connections, which will be of great benefit to the new combined organisation.

Similarly, Siemens and later NSN and Nokia have had a very solid presence in Sub-Saharan Africa and especially South Africa. ALU’s fortunes have not been so high in South Africa so this is a merger that could work very well on the African continent. Both ALU and Nokia have a very strong presence in the GCC, particularly KSA, which is by far the most lucrative, so the new organisation will be fighting to become the leading vendor in this region.

There have been some other large acquisitions that will directly affect business in this part of the world. The ones that stand out in the telecom industry here are centred on software vendor Comverse, a company that has gone through a long period of strategic restructuring and reinventing itself.

Historically, the company was not seen as a big player in the Middle East, mainly due to its previous issues with leadership. Since becoming listed on NASDAQ, this has changed and the company has built on its customer base in the GCC —particularly in Oman and KSA with BSS projects— and has cemented itself in the region by building a team in the UAE covering Middle East and Africa.

Now, of course, the BSS business of Comverse has been sold to AMDOCS, who are clearly a leading global player in its market but have struggled to penetrate the Middle East. Will the acquisition of Comverse as well as network optimisation specialists Actix help them to grow its business in the Middle East? It will certainly be a big challenge for them but with a market cap of over $9 billion, they need to be taken seriously.

The selling off of Comverse’s billing business quickly led to its’ own acquisition of leading VAS vendor Acision, which have had a well-known presence in Middle East and Africa and have enjoyed the lion’s share of the SMSC for some years. Due to natural progression in the telco sector, including consumers now favouring messaging platforms such as WhatsApp and Facebook, Acision and its competitors are investing heavily in R+D in new products for the sector.

The combined offering will now give Comverse much better scope to grow in this region, particularly in Africa where both companies have achieved a number of successes in recent years. Concentrating on VAS only may also give them a better chance to grow rather than trying to compete with the leading BSS vendors such as CSG, Redknee, Ericsson and Huawei.

Other changes with some well-known names in the Middle East recently has seen both Jinny Sofware and Basset acquired by Enghouse Systems, and Redknee buying Orga systems. As a telecom recruiter operating in the Middle East and Africa, with all this M+A activity, I am seeing a slight slowdown in hiring but do predict this to change towards the end of the year.

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