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Hudson & Yorke previously wrote on the subject of mobile companies call for consolidation. In 2011 we saw a number of telecoms deals taking place in order to overcome the economic downturn and avoid costly investment in new infrastructure through infrastructure sharing deals which have not seen great opposition from regulators. 2012 has already seen the trend continue which confirms our speculation of more such deals to happen.

France Telecom Orange sealed a deal with its rival Bouygues in France allowing Bouygues to use Orange’s last-mile and in building fibre to expand their reach to 8.9m homes. In doing so, France Telecom-Orange optimizes its deployment costs by sharing the available resources of its optical fibre networks.

A similar deal  between Telefonica  and Deutsche Telekom will see Telefonica avoid a costly expansion of its own fixed-line infrastructure and leverage Deutsche Telekom’s network to connect mobile-phone masts to its own backbone network via Deutsche Telekom’s fast fibre optics network. Telefonica’s deal will allow it to connect 2,000 concentration points which bundle traffic from its various mobile phone masts to its backbone network in order to provided the capacity required to support the continued strong growth in mobile data traffic.

However as suspected in markets such as Greece where conditions are driving telco operators to seek merger deals rather than sharing agreements, regulators are being seen to interfere. Vodafone and Wind Hellas merger talks which were alluded to in our previous blog have come to a halt as Vodafone withdraws their offer. The agreement would have seen Greek mobile market down to two players each with around 50% market share. Strong speculation was that regulators in the EU or in Greece planned on opposing and rejecting the deal therefore influencing Vodafone’s decision to withdraw. Would sharing agreement deals save telcos in such grim market conditions or will regulators have to overlook their otherwise strict regulations on mergers in order to help telcos in such markets?

A plethora of statistics can be found to support the argument in favour of telecommunications expense management (TEM) solutions. Gartner has estimated that up to 15-20% of telecoms bills contain errors, with the mistakes representing anything up to 14% of spend; they also state that 80% of businesses will overspend on their mobile by an average of 15% through to 2014. The Aberdeen Group has reported that Fortune 500 companies bills could be wrong by as much as 12%. And Forrester has long been an advocate of TEM solutions to mitigate uncontrolled procurement as well as prevent common mistakes such as wrong installation charges, inventory discrepancies, tax errors, inaccurate metering or simple human error.

The challenge of managing and controlling the telecommunications and network services estate of a large organisation is an ongoing never-ending challenge. It is definitely not a one-off project. For this reason, Hudson & Yorke believes that ‘TLM’ (telecommunications lifecycle management) is a more appropriate branding of the market than TEM. We have noted the trend whereby the telcos are acquiring traditional ‘TEM’ companies in order to provide lifecycle management services to their clients. But we believe this creates an inherent conflict of interest because the telcos’ primary motivation is to maximise the client’s spend with them, whereas one of the drivers behind the TLM concept is to identify the cost savings that can be generated (and sustained) for the client. Surely it makes more sense for TLM services to be provided by an independent third party?