Media and Telecommunications

The overall outlook for the Media & Telecom sector is optimistic. The increase indemand for wireless data services is anticipated to offset the decrease in demand for voice-only services as broadband-enabled mobile devices attain further understanding. Ongoing implementation of fifth-generation (5G) technology is expected to fuel growth within the industry as operators continue to offer enhanced plans with 5G service accessibility. Digital media consumption has experienced significant growth in the absence of live events as consumers have swiftly adjusted to the shelter in place orders that were implemented as a result of the COVID-19 pandemic. Despite the unprecedented challenges induced by the COVID-19 pandemic, M&A activity has remained consistentat the rate of the previous year and is expected to improve as businesses precisely restructure core strategies.

Emerging trends including the change of consumer behaviors, acceleration ofdisruption toward a digital future, and divestitures of non-core assets are anticipated to continue to shape M&A activity throughout the forecast period. Companies are expected to transform forefront technologies including data, cloud computing, and blockchain to develop a robust supply chain of management systems. COVID-19 has fast-tracked the shift to digital, which has driven companies to observe beyond artificial intelligence (AI) and machine learning (ML) applications and pursue practical solutions that fund long-term and sustainable competitive advantages. Exhibit 1 shows the performance of the Media & Telecom sector since 2016 relative to the overall economy, comparing sector revenue change to GDP growth from 2016-4Q2020.

Media & Telecom revenue totaled $281 billion in 2020. While industry revenue increased 0.4% from 2015-2020, the industry is expected to grow at an annualized rate of 3.7% from 2021-2026. Due to COVID-19, industry revenue noticed a decline of 0.2% in 2020. Industry growth is expected to be driven by the expansion in the number of mobile devices that are used for services and the rise in average procured revenue per consumer. As the adoption of fifth-generation (5G) networks increases the speed of wireless data centers, more consumers are anticipated to view on-the-go internet access as an essential function of mobile devices. As the pandemic continues to draw toward a close, the Media & Telcom industry is expected to be characterized by the heightened level of competition among carriers for wireless spectrum. Exhibit 2 shows the trends in investing activity from 2015-2020.

Since the beginning of COVID-19, the Media & Telecom industry has experienced strong revenue growth and increased profit due to infrastructure investments and advancements in technology. Operators are anticipated to assess overall performance, improve capabilities across data analytics, and launch performance recovery plans as COVID-19 draws toward the end. Businesses within this industry must concentrate on where to invest funds to achieve the ultimate balance of benefits across operations and consumers.

As of the end of FY2020, Media and Telecom M&A deals worth $99 billion had been announced globally, which include CityFibre and FibreNation, Truphone and Cellnetrix, Sinch and ACL Mobile, Cellcom and Golan Telecom, and Circet and ESAS. CityFibre acquired FibreNation for $200 million as part of their long-term strategic plan of investing in critical national infrastructure. Truphone purchased Cellnetrix for an undisclosed amount to power global expansion plans, build strategic partnerships, and develop new IoT services. Sinch’s acquisition of ACL Mobile for $70 million as part of their strategic plan to expand their end-to-end connectivity without working with a third-party firm. Cellcom purchased Golan Telecom for $171 million to make significant investments in the field of communications and strengthen their position as a competitive player in the market. Circet added a leader in the telecommunications network services market in ESAS to further expand their reach in European telecom services. In sum, the overall outlook for M&A activity in the Media and Telecom industry appears to be positive as companies are expected to renew focus on customers’ needs, converge entertainment experiences, and reposition to monetize advanced wireless networks.

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