Navigating Through Telco Mergers Amid the Rise of 5G

Commonly known as 5G, the fifth generation of mobile networks promises a lot of benefits over the current 4G LTE networks, but what exactly does it offer, and why is it being used to drive one of the biggest telco mergers the UK has ever seen? 

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How Did We Get Here? 

The first-generation mobile network (1G) was created in Japan in 1979 to offer basic voice calling capabilities and saw its rollout in other countries across the 80s. 2G emerged not long after in the early 90s and came with additional data services like SMS and MMS, alongside digital compression techniques that helped save storage capacity and speed up transfers. A decade later, 3G was introduced to offer higher data speeds and multimedia services which enabled internet browsing and streaming and saw the rise of smartphones. Then, 4G came along in the late 2000s as an improvement on 3G, allowing high-definition streaming, online gaming, and more. And with that, we’re now at the stage of 5G, which began its deployment in the US in 2018 and Europe in 2019.

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What 5G Promises 

5G comes with a lot of improvements compared to its predecessors, including higher data volume, faster data speed and more energy efficiency. For one, 5G can offer a much lower latency (the time delay between a transfer instruction and the information being transferred) of within 5 milliseconds, compared to 4G’s latency of 50 milliseconds, and the average human reaction time of 150 to 300 milliseconds. 

With these additional benefits, 5G not only poses to revolutionise the telecom industry but the data landscape as a whole. With its high capacity, low latency and enhanced connectivity, a lot more data can be processed within a shorter amount of time, meaning higher efficiency overall as well as further advancements in areas like streaming technologies, which all form parts of WeShape’s data service offerings. 

However, despite its many selling points, the general adoption rate of 5G remains low, with its projected market share to reach 25% in 2025, compared to 4G’s 55%, likely due to the many challenges the current 5G rollout is facing, in areas like availability, cost and device compatibility, just to name a few.

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Telco Mergers 

Just like how mobile networks evolved to address the increasing bandwidth demand, telcos also face similar challenges as data consumption spikes while they try to keep up with the latest advancements and stay competitive. Some companies might struggle to juggle everything everywhere all at once and look at mergers and acquisitions (M&A) as their way to expand offerings and transform their business.

Some noteworthy telco M&A in the last decade include BT Group’s acquisition of EE for £12.5 billion which saw BT’s broadband and fixed-line services combined with EE’s mobile network, and Verizon’s acquisition of 45% stake in Verizon Wireless for $130 billion (USD), which helped Verizon further establish their presence in the US wireless market. 

While M&A in the telecom industry saw a decline last year, we did see some big deals being put forth, including the proposed merger of Vodafone and Three in the UK. According to the briefing for the House of Commons General debate on the potential merger, the two telcos reasoned they’re struggling to recover their cost of capital to compete with the industry leaders O2 and EE, and pooling their resources together will enable them to effectively invest and remain a key player in the market. 

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How Telco Mergers Might Effect 5G Roll Out

A key argument put forward in favour of the merger is how it can help accelerate the deployment of 5G standalone networks, considering its hefty cost which is projected to surpass £9 billion by 2025. This is not a difficult argument to make as M&A usually means consolidated infrastructure and increased investment capacity, which coupled with the combined market reach and resources could result in fast-tracked innovation and deployment.

Vodafone’s own research shows a potential £7.4 billion economic value by 2030, including a £1 billion savings for the NHS and 25 million hours worth of travel time saved for rail passengers. That is if the merger were to go through so the two companies could combine their efforts to build ‘one of Europe’s leading 5G networks’. 

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Benefits of Engaging a Tech Consultancy During Telco Mergers

It’s never an easy task navigating through merging IT and network infrastructures, especially with its fair share of integration and compatibility concerns, which is why engaging with a technology consultancy could very well be a beneficial investment. Technology consultancies like WeShape often have an in-depth understanding of the changing landscape and the required technical expertise to help guide you through the transition. Whether it’s to deploy on-demand consultants to carry out due diligence assessments or offer advisory services to assist your in-house team on the migration, a bespoke solution based on your specific needs can ease your concerns and ensure a smooth transition. Check out our data service delivery offerings and find out how you can take advantage of partnering with a technology consultancy. 

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What to Expect Next

As one would expect, M&A can take a long time from start to finish, especially when they warrant governmental involvement. Within the UK, the Competition and Markets Authority (CMA) acts as the primary regulatory body for accessing M&A impacts, particularly in terms of competition and consumer welfare, to ensure M&A transactions won’t reduce market competition or negatively impact consumers. There is also the National Security and Investment Act 2021, which mandates M&A within specific industries (communications being one of them) to be reviewed by the Investment Security Unit (ISU) on national security grounds.

At the moment, the Vodafone and Three merger is still undergoing investigation, so it’s a little too early to tell if they will indeed come together to create one of the biggest telcos in the UK, or if it’ll follow in the footsteps of the 2016 proposed acquisition of O2 by Three which ultimately got blocked by the Commission. 

Regardless of the outcome of the merger, it is undeniable that 5G is here to stay and will be a game changer not just within the telecom industry but the world at large. Its ability to transform the data landscape will likely see an uptick in data-related projects as well as a more stringent approach when it comes to things like Data Security and Data Governance. 

As an award-winning technology consultancy, WeShape specialises in the advisory and implementation of Data, DevOps, Software Engineering and Cloud native solutions. With our expert consultant network, we can offer a wide range of Data-related solutions catered to your needs, from Data Science & Analytics to ML Engineering & AI Solutions, and everything in between. Learn more about our Data Service offerings and how we can help, and let us supercharge your Data capabilities today!