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October 24, 2016updated 26 Oct 2016 4:50pm

As AT&T closes in on Time Warner, what are telcos buying?

Security, media, the IoT and others: read CBR's list of 5 types of company telcos are acquiring.

By Alexander Sword

AT&T officially confirmed that it will buy media group Time Warner for the hefty sum of $85.4bn (£70bn). The benefits of telcos owning media assets are clear, but this is not the only area that communications companies are looking into. CBR looks at some recent acquisitions and some of the areas that telcos are buying in.

 

1. Cyber security

Notable examples of cyber security acquisitions by telcos include Orange’s 2016 buy of Lexsi, a threat intelligence specialist, and 2014 buy of consultancy Atheos.

AT&T bought Verisign in 2009, while Asian provider Singtel bought US security firm Trustwave for $810 million in 2015.

Network provider Cisco recently agreed to pay $293 million in cash plus various adjustments for CloudLock, a cloud access broker provider.

bt-ycyber-securityCyber security is in many ways a natural fit for the telecoms industry, so the fact that they are acquiring here is no surprise.

Telcos are in a good position to offer security services. The integration of communications and IT is one trend shaping this.

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As they control the “pipes” through which electronic communications flow, the companies have oversight of this and can monitor it.

Some telcos have taken the acquisition route above, while others have focused on building internal capabilities: BT said at the beginning of 2016 that it would hire 900 new security staff in the year ahead.

2. Other telcos

The telecoms industry is as prone to consolidation as any other, although regulators are prone to exercising a firm hand here.

Notable recent examples include BT’s purchase of EE and Hutchinson Whampoa’s acquisition of Orange Austria for 1.3 billion euros.

three-o2Then there are the blocked or abandoned examples: the proposed merger of Orange and Bouygues Telecom or the blocked examples of Three and O2 in the UK and TeliaSonera and Telenor in Denmark.

Often the acquisitions target specific assets: CityFibre expanded its UK network by buying infrastructure from KCOM in 2015 and more recently from Redcentric.

These acquisitions happen for several reasons: perhaps the buyer is after new network or technological capabilities, as in the example of BT and EE.

However, it could be a simple desire for scale, as in the Three-O2 example.

3. Media

In a statement AT&T described the deal as a combination of “the world’s best premium content with the networks to deliver it to every screen, however customers want it”.

The marriage between media and communications is not unique to AT&T and the US market. For example, in the UK, BT has been expanding aggressively into the pay-TV market as pay-TV leader Sky encroaches on its home turf of broadband.

looney-tunesAT&T’s buy-out of Time Warner is the biggest example, but there are others. AT&T also bought DirecTV in 2015 for $48.5 billion.

In 2013, BT Group announced it would buy ESPN’s UK and Ireland TV channels business. These primarily comprised the ESPN and ESPN America channels and their live sports rights portfolio, including the FA Cup, Clydesdale Bank Scottish Premier League, UEFA Europa League, and the German Bundesliga.

 4. Internet assets

Again, the US market provides the most famous example: Verizon agreed to acquire Yahoo for $5bn (£3.8bn).

yahooVerizon also bought AOL AOL in May 2015 in a deal approximately worth $4.4 billion. The acquisition was intended to support the company’s LTE wireless video, OTT strategy and IoT platforms. AOL’s assets included its subscription business, global content brands, original video content and programmatic advertising platforms.

In the UK, BT acquired 50 percent of the US internet search engine and web portal company, Excite for £6 million.

The internet companies can provide the telcos with useful technology and platforms to serve their customers.

Additionally, they offer a large amount of customer data.

5. IoT

Notable examples include Verizon’s acquisition of Sensity in 2016 and Hughes Telematics in 2012.

vodafone-3In July, Japanese telecoms provider Softbank agreed to pay £24 billion to acquire UK chipmaker ARM, with the combined company also aiming to capitalise on the IoT market.

Vodafone acquired connected car service provider Cobra in 2015.

Telcos are well-placed to exploit the Internet of Things (IoT) market of connected devices, considering that they will be building and operating the infrastructure that these devices will use.

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