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Summary

In the UK, 3’s mooted acquisition of O2 and BT’s acquisition of EE have generated plenty of headlines, focusing on the impact of such consolidation on the competitiveness of the UK telecoms market and whether customers will suffer as a result. However, it is yet to be discussed how these mergers will affect the operations of the resulting business entity, especially the integration of IT systems such as OSS, BSS, and CRM.

Telco mergers and acquisitions require well-developed roadmaps for systems integrations

While drivers of M&A include improved coverage and capacity, telcos also see it as a way to enhance their portfolio and improve customer loyalty. Thus integration of telco back-end systems, such as customer service, business and operating systems, and customer service, remains an important challenge for telcos involved in M&A activity. Telcos traditionally have highly complicated legacy back-end systems that exist in silos and are supported by a myriad of vendors, and combining two businesses that have these attributes simply compounds the problem. Customer experience is adversely affected as it becomes difficult to get a singular view of the customer across the organization. Robust and effective systems integration is therefore fundamental for the resulting merged business entity to sustain a good customer experience. Systems integration should not be overlooked or underestimated, otherwise the expectations of these telco tie-ups will be illusive.

Some telcos have faced challenges to consolidate their IT systems. For example, in the US, Sprint’s acquisition of Nextel in 2005 involved two operators with different technologies that could not be integrated, and issues such as poor customer service and poor call quality led to high customer churn rates. Another case is the integration between Orange UK and T-Mobile UK to form EE. Almost five years after the merger, customer service enquiries from customers acquired prior to the consolidation are still being routed to the different business entities. Many of the challenges boil down to both business entities having disparate systems that need to be consolidated to provide a uniform customer view of the business operations.

Given the fiercely competitive nature of the telecoms market, telcos should not get carried away by just the economic benefits of these mergers. Ovum fears that customers will be the victims of these consolidations, not just with respect to price rises, as seen in the 3 and O2 Austria merger, but also the quality of service and experience delivered to customers. Telcos need to integrate as quickly as possible to allow effective delivery of customer-centric operations and provide a sustained customer experience.

System integrators and IT service vendors with strong telecoms systems integration capabilities need to take advantage of this opportunity, launching new campaigns to support these mergers. The prompt achievement of such integration is critical.

Appendix

Further reading

UK Merger Scenarios and Implications: Consolidating for Scale and Convergence, TE0014-000293 (December 2014)

Telco M&A Surges in 1H14, TE0006-000887 (June 2014)

Author

Adaora Okeleke, Analyst, Telecoms Operations and IT

adaora.okeleke@ovum.com

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