Asia Telecom M&A

I while back I wrote about the M&A market in telecom and I didn’t factor in the Asian players into my analysis. So in order to be balanced, I decided to get a perspective from someone who is intimately involved in the telecom market and who works for UT Starcom, a major Chinese telecom equipment provider. Farshid Mohammadi is a VoIP and IMS industry icon and couldn’t be better positioned to tell us where the Chinese/Asian telecom players fit into the overall mix.

Here are his comments:

An interesting phenomena is happening. The Asian vendors who have been the beneficiary of more cost effective labor and manufacturing are finding that to succeed in international markets in any significant way, they would have to staff up in their beachhead markets. On the other hand, the traditional NA/European vendors have started manufacturing and R&D in countries that provide them advantageous cost base.

The net result is that in a few years, time the market will arrive at a level "cost" playing field. Add to this the fact that technology differentiation and gaps are quickly closed and compensated for given most players have the same level of R&D investment and direction.

Bottom line will be customer support and being able to build one’s organization in the vertical value chain of service providers. To do this, one needs scale and scope.

Thus there is no choice but to see additional consolidation whereby one either strengthens its scale via the acquired R&D or scope by acquiring a strong local incumbency presence. No one will be immune to this phenomena regardless of geography.

Given this opinion which I agree with, one wonders if the Chinese players will be the acquirers or the acquired. Either way, it seems that major telecom players have to become more international like Lucent/Avaya with a strong presence in many markets simultaneously.

There is no question there will be more layoffs as these acquisitions take place. The good news is that for the people that can adapt they will b able to compete in the telecom market with new ideas based on software and services. VoIP, SIP and IMS will allow this trend to continue.

So the net result will be more large players and a new breed up upstarts. This will hold true as long as the market keeps growing and as long as developers come up with ideas that fill a market need. Remember that when Skype was being created the telecom market was in a state of depression. The Internet allowed Skype to be distributed rapidly and I expect IMS networks to also allow applications to be instantly accessible to legions of potential users.

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