Are Telecoms Shooting Down Skype And Viber With New LTE Technology? (Part Two)

By Jakob Sand, BDO

Slow moving train – at first

For telecoms, 2015 looks set to be a big year in regards to VoLTE. In countries from Australia to Venezuela, including markets in the US, UK and China, the technology is being rolled out or trialled.

In the long run, telecoms will be able to dismantle some of their current infrastructure as 4G in general and specifically VoLTE becomes standard for all voice and video calls, as well as freeing up valuable bandwidth to meet ever-increasing demands. 

“It helps them to reduce costs especially with regard to maintaining several separate networks. Until now, they needed to run a second network - either 2G or 3G - in order to be able to provide voice services. This requirement is not necessary anymore and they can focus on LTE as the ‘only’ technology for the entire range of services,” Christian Götz, Partner in Corporate Finance, BDO Germany, says.

The changes are still in their infancy, but will gather pace in the coming years, meaning that telecoms stand to save a lot of money on infrastructure.

In the shorter term, these services will augment the current offerings that telecoms have, and put them in a better position to fight back against apps like Skype and Viber. While the current drop in minutes that people are spending on voice calls via telecoms’ services is limited, there is a much more pronounced drop in relation to international calls.

Offering customers a higher quality alternative with new features might turn that tide, and prevent it happening to national calls.

M&As show calm approach

Although VoLTE has a number of advantages, there is not much cause for concern for VoIP applications. At least not if the exclusive BDO figures for mergers and acquisitions are anything to go by. 

These show a total of 39 VoIP-related deals being made since the end of 2010. The number of deals struck is evenly spread over the years, although there is a drop-off in recent years. However, the period’s biggest VoIP deal by far was completed in the beginning of 2014 when the Japanese online retailer, Rakuten announced that it had bought Viber for $900 million.

In relation to telecoms, there is nothing that indicates that VoLTE will lead to an M&A spree.

“In terms of M&A activity I do not see why this should have a major impact, since it is not a new technology/service, but rather a technological progress that wireless carriers can achieve without acquisitions,” Götz says.

What we might see is collaboration between telecoms and VoIP services that will be similar to the deal struck between Verizon and Netflix. This will mean that VoIP might be allowed to take advantage of the IMS network for a subscription fee and the service will perhaps only be available to premium subscribers.

This is, of course, speculative, and the coming years will serve to tell whether telecoms and VoIP services are heading for conflict or collaboration. 

 

Jakob is a Partner at BDO in Denmark and Leader of BDO’s global Technology M&A team. Jakob works with colleagues in over 150 markets around the world to provide advice on the strategy and tactics of acquisition.

 

Read part one here!