By Sarah Chamberlain, Contributing Writer, Data Center POST
The competitive landscapes that define and influence business operations across the world are unique to every industry vertical. Commercial ecosystems run the gamut, with some spheres displaying huge numbers of smaller competitors and other sectors containing only a few larger players. Each competitive atmosphere has its own drawbacks and advantages, but as these business landscapes shift and are rearranged by mergers, acquisitions or other unifying events, some industries may find that a little consolidation can do a lot of good.
For the technology and telecommunications realm, living life in the lane of constant evolution and innovation means a highly competitive market, which is only further intensified by growing end user demands. Although end results can rarely be guaranteed, industry consolidation in telecommunications may offer the industry at large a host of benefits, both macro and micro. Deloitte notes in their 2019 industry outlook that mergers and acquisitions can help level the competitive playing field and stabilize pricing. On the smaller scale, businesses that are currently dwarfed by telecom incumbents (the likes of AT&T, and Verizon) can have the opportunity to supplement their product portfolios, expand their global reach, augment customer bases and ultimately garner market share.
When it comes to actually taking steps toward critical convergence, GTT is no stranger to the process. In a recent interview with The Deal, Rick Calder, CEO of GTT, the leading cloud networking provider to multinational clients, explains, “Given that there wasn’t a natural consolidator out there, we chose to take that role.” It’s true, statistics reflect that the value of M&A activity is expected to remain on the decline, dropping from $468 billion in 2018 to $328 in 2020. However, GTT certainly has come to fit the bill as a force of disruption and consolidation, proving there is lots of room for opportunity and much to be gained. The company has acquired ten companies in the past two years alone and is still in the process of considering a staggering 80 other attractive entities (Calder dubs these “ankle biters”).
Most recently, GTT acquired Interoute, a European peer and operator of one of Europe’s largest independent fiber networks and cloud networking platforms, and Access Point, Inc., a domestic player. The result of these two years of successful consolidation is a business that has quadrupled in size and approached nearly $2 billion in revenues, garnering a growing roster of strategic clients, augmenting capabilities and fostering a growing reputation for market leadership.
This type of M&A activity certainly drives growth and creates long-term value, plus, it helps work toward closing the gap that exists in relation to the incumbents mentioned earlier. As Calder notes, this process of expanding market share in the face of huge players like Verizon and CenturyLink is aided by the fact that those businesses are displaying a less focused approach. Blurred lines between formerly segmented things like cable and content, a shift brought on by the growing fascination with streaming services, mean larger telecoms’ interests are more diffused, taking some pressure off smaller enterprises. This can be seen in AT&T’s foray into media with their purchase of Time Warner Inc. But that doesn’t mean the playing field is anywhere near even yet. Calder adds, “The biggest thing we fight against is brand recognition.”
So what moves make for the most success? In Calder’s mind, the best acquisitions are built on the back of three carefully-considered criteria, the first being business alignment. In GTT’s case, any company they brought on would have to fit their overall goal of provisioning large multinational clients with top-tier cloud networking services. Acquiring businesses that serve the consumer market or smaller businesses are a no-go, as they obscure the original objective.
Among the other considerations are the deal’s integration timeline (Calder says GTT should be able to amalgamate the business in one or two quarters) and accretion timeline, noting, “We’re not looking for accretion two years out.”
In the fast-paced telecom world, opportunities are around every corner and the competitive landscape is dynamic and ever-changing. For GTT, their reputation as a disruptor in the industry uniquely positions them as a powerful player, amping up their ability to connect people across organizations, around the world and to every application in the cloud.
To read the piece in its entirety, pick up the latest edition of The Deal. To learn more about how GTT’s growing comprehensive suite of services and top ranked Tier 1 IP backbone can empower your business with simplicity, speed and agility, please click here.
