Chain reaction in telecoms

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The Vodafone takeover of Cable & Wireless Worldwide (all but confirmed by the backing of major stakeholder Orbis recently) is the latest in market-grabbing activities by network providers in the telecoms sector.

This week’s story that former Everything Everywhere (EE) chief executive Tom Alexander is involved in a consortium of private equity firms to attempt a multi-million pound buyout of EE was not a surprise to some. Although it has a large customer base, the EE brand has suffered somewhat of an identity crisis housing both Orange and T-Mobile brands and having both French and German owners to please. As such, the new group are reported as wanting to focus the company around the (better known in the UK) Orange brand and shore up market share.

Although this may be a good idea from a corporate perspective, is it just a reaction to the Vodafone/C&WW development? I would say, in a large part, no – it is simply the emerging trend in the industry now. If the buyout does go ahead with an Orange focus, it will be the latest in a line of developments that is showing how the sector is slowly becoming concentrated into the hands of a few global operators. Before the Vodafone agreement, back in 2005 there was Telfonica’s successful purchase of O2 – but what is behind these kinds of deals?

The critical strategy here is dominance and it is centred on customer ownership. Competing across different geographies with similar products is difficult enough, but when you have to factor in cost rationalisation and network/systems integration, while keeping an eye on what your customers and employees think too, it becomes a very challenging environment in which to emerge as the leader.

 Stuart Hinkley, TMT Practice at Alium Partners, a global provider of interim management solutions

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