Consolidation versus expansion

There are different types of consolidation:

• horizontal: when opeators focus on certain geographies
• horizontal: for focus on certain services markets:
• fixed, mobile
• consumer, business, wholesale
• communication, entertainment, web services
• vertical: when exposure to the value chain is reduced by selling infrastructure assets (sale, sale & lease-back, sharing):
• real estate: cabinets, towers, PoPs, data centers
• passive layer: mainly fiber
• active layer, managed services: equipment

Focus and consolidation make sense for several reasons:

• capital/cash flow may be scarce (capex)
• maximise revenues by concentrating sales efforts (opex)
• the economics and business models may vary widely (network vs. services)
• not compete with ones own customers (retail vs. wholesale)

We have seen examples of geographic consolidation. Services consolidation happens for instance at T-Mobile NL, which is going mobile-only. However, we have also seen expansion rather than consolidation:

• Verizon acquiring upLynk and EdgeCast
• Deutsche Telekom acquiring GTS
• Vodafone acquiring CWW and Kabel Deutschland
• TeliaSonera acquiring FTTH assets in Sweden
• Telstra buying DCA Health

Expansion can be driven by:

• expand to new markets (geographies, services)
• control a larger part of the value chain (infrastructure)
• scale, synergies

Geographic consolidation can easily be understood from a capex point of view. Verizon and TeliaSonera (see above) are trying to get control over a larger part of the value chain by adding CDNs and FTTH assets. Telstra goes one step further by venturing into the services business.