Big Acquisitions Have a Ripple Effect on Broadband Biz

Comcast's $31 billion takeover bid for Sky is only one of several mega-acquisitions sending ripples throughout the broadband industry. Every time two large providers combine, the effect undulates outward impacting vendors, competitors and customers.

Sky has at least one other suitor: Disney placed a bid for 21st Century Fox, a partial owner of Sky, and wants to acquire the entire company, said Elizabeth Lim, senior analyst at Mergermarket, an Acuris company, in an interview. Comcast's offer for Sky is actually worth $40.7 billion, according to Megamarket's database, she said.

"This makes it the largest media deal globally in year-to-date 2018 and the third largest ever globally on Mergermarket record, which dates back to 2001, after AT&T/Time Warner ($105 billion) and Disney/Fox ($68.4 billion)," she said.

To date this year, global media M&A has reached $67.8 billion -- or 7.6 times the total global media deal value announced during the same period one year ago, $8.9 billion, Lim said.

But other cable, telco and ISP businesses have been acquired and merged in multibillion-dollar deals, both in the United States and elsewhere. A few notable shopping sprees included: Zayo bought Electric Lightwave (formerly Integra Telecom) for $1.4 billion; Consolidated purchased Fairpoint for $1.5 billion; Windstream acquired CLEC MASS Communications for $37.5 million and unified communications service provider Broadview Networks in 2017 for $227.5 million, after snapping up EarthLink (completed February of last year) for $673 million, and CenturyLink spent $34 billion to acquire Level 3.

Executives at CenturyLink continue to refine the integrated company. With more megadeals predicted, what impact could a continued flurry of acquisitions have on the industry and broadband deployments? Click on the image to start the slideshow and find out.

Ripples and Swirls
Even vendors with strong sales and longtime relationships with operators involved in a merger will see sales slow down as executives review technology strategies, infrastructure and purchasing plans post-acquisition. When two providers have complementary tactics and little competition (like CenturyLink and Level 3), melding two disparate organizations -- especially during a time of digital transformation -- is not fast. Few C-levels will risk accelerating decision-making about technology purchases that will decide their company's direction for the next decade.

As a result, though, vendors' quarterly sales and profits may get hit in the short-term, Lim said. Small players or startups could be forced to close or exit the service provider market, she added, if decision-making takes too long.

"It's unprecedented, the scale and infrastructure and the post-deal integration, these are all quite complicated, even for smaller firms," she said. "The trickle-down effect is going to be quite intense for [vendors], too."

Already, the second ripple is showing signs of becoming a wave -- a tsunami, perhaps, of regulation in some parts of the world. Europe, in particular, has stringent anti-monopoly laws and the Trump administration appears adverse to the AT&T-Time Warner deal.

"It's going to be interesting to see how regulatory and government aspects of all this evolves with the tech," said Lim. "There's definitely backlash from the public due to all these new trends [like megamergers, Facebook, etc.]."

Finally, large providers' megadeals may force smaller operators and vendors into their own mergers, acquisitions and partnerships as a means of survival, Lim said.

Related posts:

• ADTRAN Upbeat as Q1 Results Reflect Stalled Spending
• CenturyLink CEO Switch Moves Up 7 Months
• M&As Consolidate India's Telco Market

— Alison Diana, Editor, Broadband World News. Follow us on Twitter @BroadbandWN or @alisoncdiana.