What’s up with… Cellnex, Rakuten Mobile & Nokia, M&A in Europe

• Cellnex revenues hit €4bn
• Rakuten Mobile and Nokia boast 1Tbit/s milestone
• Expectations for Euro telco M&A grow

In today’s industry news roundup: Cellnex celebrates the end of its year of transformation with a 16% rise in revenues; Rakuten Mobile and Nokia highlight a 1Tbit/s data transmission over a single long-distance wavelength; the potential for consolidation in Europe’s telco sector is coming under increasing scrutiny; and much more! 

European neutral host giant Cellnex has ended its “year of transformation” on a high note, with the company booking a 16% year-on-year rise in revenue for 2023 to €4bn. Its adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) also made gains in the period, up 14% to €3bn. The company attributed its growing performance to the consolidation of its geographic footprint. “We have been able to meet our financial targets as well as industrial KPIs [key performance indicators], thanks to both a smart control” of capital expenditure (capex) and “a strict and disciplined control of our cost structure”, explained Marco Patuano, CEO of Cellnex. The company also noted improvement in debt reduction due to site disposal in France and its deal to sell a 49% stake in its subsidiaries in Sweden and Denmark (its Nordic operations) to infrastructure investment firm Stonepeak for €730m. Cellnex noted that it will keep evaluating possibilities of monetising other assets to “crystallise value and accelerate the process to achieve investment grade from S&P”.

Rakuten Mobile has completed a “pioneering trial” of 1Tbit/s (terabit per second) end-to-end single wavelength transmission. According to the Japanese telco the test was carried out on an 820km subsea and terrestrial hybrid optical line in Japan, in partnership with Nokia, and demonstrated capabilities to handle “ultra-high-speed data transmission over significant distances.” Claiming the step as “record” and the first trial of its kind in the Asia-Pacific region, the company added: “This technical milestone enables us to optimise the utilisation of fibre capacity and enhance power efficiency, and the increased capacity empowers Rakuten Mobile to meet the demands of bandwidth-intensive mobile services and high-capacity enterprise requirements. This accomplishment is in line with Rakuten Mobile’s network growth objectives,” noted Hiroshi Takeshita, deputy CTO of Rakuten Mobile. Find out more.

The share prices of Europe’s telecoms companies have been languishing in the slough of despond for so long now it has become the new normal. However, a silver lining is appearing on the horizon as investors perk up a bit in anticipation that long overdue consolidation, powered by emergent cross-border M&A activity, will lift the market and margins. However, such consolidation could well reduce competition and increase prices for end users, be that enterprise or domestic. There is pent-up need and demand for change, and private equity companies are sitting on sacks of money that need to be spent. Last year, the telecoms sector saw a marked second-half decline in M&A activity that has been attributed to an array of factors, including restrictive monetary policies, the effects of raging inflation on consumers, geopolitical conflicts, a changing regulatory environment and the huge costs of network upgrades. In the face of unprecedented industry transformation, the arrival of AI and intense competition, communications service providers (CSPs) and digital service providers (DSPs) now see M&A as just about the only way open to them to add new capabilities and gain the necessary scale that will allow them to evolve into the next comms era. Greater freedom to consolidate is one of the main demands of Europe’s main telcos, as we heard from the keynote stage at MWC24 in Barcelona. Simultaneously, in the biggest transformation in the global telecoms industry since deregulation back in the 1980s and 1990s, integrated telcos now face disaggregation as they strive to find new business models. Since early 2000, the market capitalisation of European telcos has fallen dramatically and now everything, despite being in a state of flux, is also more or less static and waiting for something to happen to free the logjam. Despite concerns that consolidation will inevitably result in reduced competition, industry analysts are generally of the opinion that it would bring to an end the price wars that are dominating the sector, while allowing both infrastructure and technologies to be shared. As Reuters points out, the European Commission has indicated that, under certain but as-yet-undisclosed circumstances, it might be sympathetic to relaxing the stringent rules surrounding mergers and acquisitions. Quite what effect that would have is not immediately apparent, but if the sector suddenly became a gold-rush style free-for-all, you can bet that the regulatory screws would be reapplied immediately.

Digital transformation is a double-edged sword. On one edge of the blade is increased access to unimaginably vast amounts of data from social media and mobile networks, and on the other, the immediate need to integrate and customise existing analytics solutions to extract genuinely meaningful insights from that data. It’s very complex but the benefits in terms of global economic growth and blockbuster balance sheets lies in harnessing the power of predictive models and analytics to drive strategic goals. However, to realise benefits and reach those goals, organisations have to deal with changing regional data regulations, whilst working to deconstruct data silos built and continually reinforced over decades and replacing them by centralising data into a cohesive ecosystem. It’s no easy task and requires skilled data scientists and analysts to develop predictive analytics solutions tailored to consumer behaviour and business performance metrics. Furthermore, and hugely importantly, data security will have to be the paramount concern in mitigating the enormous risks that are inevitably associated with data exchange and aggregation. A new report, “Global Predictive Analytics Market 2023-2027” from the market research company Technavio, headquartered in Elmhurst, Illinois in the US, calculates that the predictive analytics market is on course to grow to be worth US$21.60bn by 2027, and will enjoy a compound annual growth rate (CAGR) of 22.24% over those years, as the need to detect and prevent fraud increases with every passing day and businesses across a wide range of industries, led by telecoms and IT, embed predictive analytics into their business processes. In addition to telecoms and IT, the BFSI (banking, financial services and insurance) market sector will also be significant as will retail and e-commerce. The dynamism of the predictive analytics market is the result of the timely confluence of big data, cloud computing, the mass proliferation of internet of things (IoT) and global digital transformation where online services are changing customer relationships in sectors such as banking, and others, and where real-time insights and alert systems are now vital to enhancing the digital customer experience and maintaining good customer relationships.

In a further attempt to make a strong case for merging with domestic rival Three UK, Vodafone UK has suggested in a new report that if the plans are approved by regulators, it will enable the investment of £11bn towards delivering 5G standalone (SA) coverage. Otherwise, the study claimed, small and medium enterprises (SMEs) in the UK are missing out on up to £8.6bn a year in productivity savings “due to the slow rollout of standalone 5G”. Vodafone added that the UK risks being outpaced by European rivals that are “investing in reliable, superfast 5G connectivity at a faster rate”. Conveniently, Vodafone UK has pointed to what it sees as the solution of all this gloom and doom: Apparently, if it merges with Three UK, the duo will be able to invest in new network deployments, meaning 99% of the UK population would be covered with 5G SA by 2034. The telco’s research modelled the competitiveness of 17 countries in Europe in relation to the growth of small businesses using metrics such as 5G coverage, SME adoption of 5G-enabled technology and 5G speeds. “The UK is currently on course to be the fifth most attractive place in Europe for SMEs to use technology to grow, trailing only Denmark, Finland, Sweden and the Netherlands. However, the UK could leapfrog all its rivals into second place – behind only Denmark – if it can accelerate the rollout of 5G standalone networks, which have the potential to deliver vast economic savings to small businesses,” claimed the report. The proposed merger is under a formal investigation by the UK Competition and Markets Authority (CMA), and is reportedly being reviewed by the UK government under its National Security and Investment Act.

India remains the world’s fastest-growing economy, increasing in value by 8.4% in the final quarter of 2023 compared with the same period a year earlier. The International Monetary Fund (IMF) says overall economic growth in the sub-continent this year will be in excess of 6.5%. By comparison, and yet again reinforcing just how much things have changed, the IMF calculates that over the course of 2024, China’s economy will grow by 4.6%. The announcement comes in time to boost the fortunes of India’s ruling Hindu-nationalist party, Bharatiya Janata, and the government of Prime Minister, Narendra Modi. India, the world’s biggest democracy (and now most populous country), will hold a general election in spring this year. If the country’s current economic success continues in accordance with World Bank and IMF forecasts, India will overtake the economies of both Japan and Germany by 2028. Currently in fifth place in the international rankings, India is now well on course to become the world’s third-largest economy within the next four years. Manufacturing industries were instrumental in leading such a strong economic performance, accounting for 11.6% of growth in Q4 2023. In recent years the government has greatly increased spending on telecoms (and other) infrastructure and has provided cash incentives to increase the manufacture of handsets, semiconductors, electronics and an emergent but important drones sector. Government focus is also on making India a major force on international markets and the country is increasingly seen as a viable and stable alternative to China for the many nations and companies determined to diversify their supply chains as the trade wars and tension between the US and China intensify. India is now widely regarded as a safe and welcoming place in which multinational companies can set up manufacturing facilities as it spends massive sums on upgrading infrastructure including roads, ports, airports and railways. Only yesterday the government granted permission for the construction of three new semiconductor fabrication plants to the value of more than US$15bn. They will create upwards of 20,000 high-technology jobs within the fabs themselves, as well as some 60,000 support roles. The positive figures and outlook boosted the Indian stock markets to new heights on Friday. Over the last 12 months, the combined value of companies listed on India’s exchanges grew to $4tn. Interestingly, a few analysts, and the influential Indian broadsheet The Economic Times, took something of a jaundiced view of what are remarkable figures, cautioning that the underlying growth is weaker than the headline figures suggest, and pointing out that India’s huge agricultural sector – which contributes 16% to GDP and employs millions of people – is underperforming, not least because of climate change. On the other hand, in a note, HSBC economist opined that India is “growing at an incredible pace and remains an oasis of strong growth and macro stability in a volatile global backdrop.” And, let’s not forget the impact that the government’s huge drive to build infrastructure, a massive home-grown high-tech sector, is obviously having on India’s fortunes. Credit where credit is due.

HPE hit a bit of a sales speed bump in its fiscal first quarter, which ended 31 January, with group revenues dipping by 14% (at constant currency exchange rates) to $6.8bn. The vendor’s CFO, Marie Myers, blamed “the softening of the networking market and GPU deal timing,” for the sales decline. But the vendor’s CEO Antonio Neri was upbeat about the upcoming year: “HPE exceeded our profitability expectations and drove near-record year-over-year growth in our recurring revenue in the face of market headwinds, demonstrating the relevance of our strategy. Despite a mixed quarter, I remain very confident that our focus on customer-centric innovation and our track record of operational discipline will allow us to capitalise on the significant market opportunities in AI as well as across edge and hybrid cloud and to deliver value to our shareholders.” Read more. 

Neutral host networking specialist Boldyn Networks (formerly BAI Communications) has closed its acquisition of Edzcom, Cellnex’s private wireless networks unit. With the move, the company has expanded its portfolio of private network implementations for “world-class enterprises” in Finland, France, Germany, Spain, Sweden and the UK to more than 50. Boldyn Networks believes that private networks will unlock industry 4.0 innovation by interconnecting assets, people and equipment in “an agile, sustainable and safe way”. Read more.

– The staff, TelecomTV