Global telecommunications executives capitalize on digital convergence via cross-sector alliances and M&A

- 27% of executives believe digitalization is the greatest disruptor to their core business

- 49% of executives are focused on strategic transactions and alliances to drive growth

- More than half are pursuing deals in adjacent markets

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Jun 22, 2016, 08:02 ET

LONDON, June 22, 2016 /PRNewswire/ -- Customer behavior and digital disruption are driving dealmaking intentions in the global telecommunications sector, according to EY's 14th biannual Telecommunications Global Capital Confidence Barometer (CCB). The report surveyed 110 telco industry leaders around the world; 59% of them were CEOs, CFOs and other C-level executives.

For 27% of executives, advances in technology and digitalization present the greatest disruption to their core business. As a result, 49% of sector leaders are looking for strategic acquisitions and alliances that allow them to address changing consumer preferences, while 45% seek to make better use of emerging digital and analytics technologies to compete more effectively with nimble and disruptive industry players.

Gaeron McClure, EY Global Telecommunications Leader, Transaction Advisory Services, says:

"Some telecommunications companies have seized on alliance opportunities with auto makers to provide end-to-end solutions that connect the Internet of Things (IoT) to the connected car for premium buyers. Others have worked with banks to deliver mobile banking and micropayment options to their customers, while some are teaming with media or technology companies to bring new products and services to market. We expect to see many more alliances of this nature as emerging technologies become ubiquitous."

Following a wave of industry consolidation in 2015, overall deal intentions have stabilized, but the M&A market remains robust – 43% of global telecommunications executives plan to actively pursue acquisitions in the next 12 months and 62% have three or more deals in the pipeline.

According to the report, digital disruption and changing consumer preferences have telecommunications executives considering deals outside of the telco sector. More than a third (34%) of respondents are pursuing cross-sector deals to gain access to new materials or digital technologies, while 30% are pursuing adjacent market deals that address changes in customer behavior.

Seventy-three percent of telco sector executives are looking outside of their home markets for deal opportunities, with the US, the UK and Canada topping executives' list of top destinations to pursue an acquisition in the next 12 months. In terms of emerging markets, Brazil and India represent the top two choices, according to the report.

McClure says: "In a mature industry and facing a host of opportunities and risks from digital disruption, telecommunications companies are shrewdly considering deals – domestically and abroad – that will help them create new experiences in an effort to retain existing customers and entice new ones in an increasingly crowded business landscape."

For a full copy of Telecommunications Global Capital Confidence Barometer, visit ey.com/ccb/telecommunications.

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

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About EY's Global Telecommunications Sector

Telecommunications operators are facing a rapidly transforming business model. Competition from technology companies is creating challenges around customer ownership. Service innovation, pricing pressures and network capacity are intensifying scrutiny of the return on investments. In addition, regulatory pressures and shareholder expectations require agility and cost efficiency. If you are facing these challenges, we can provide a sector-based perspective on addressing your assurance, advisory, transaction and tax needs. Our Global Telecommunications Sector is a virtual hub that brings together people, cultures and leading ideas from across the world. Whatever your need, we can help you improve the performance of your business.Visit us at ey.com/telecommunications and follow us on Twitter @EY_Telecoms.

About EY's Global Capital Confidence Barometer

The Global Capital Confidence Barometer gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas — EY's framework for strategically managing capital. The Barometer is a regular survey of senior executives from large companies around the world, from many industries, conducted by the Economist Intelligence Unit (EIU). In February 2016 and March 2016, we surveyed more than 1,700 executives in 45 countries. In this survey, we had 110 respondents from telecommunications companies, of which 59% were CEOs, CFOs and other C-level executives. A full copy of the report is available at ey.com/ccb/telecommunications.

Virginia Milazzo
EY Global Media Relations
+1 212 360 9261
[email protected]

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