Mobile consolidation is easy to model – but far harder to deliver

Charles Murray 

Hello and welcome to this podcast on 4-to-3 mergers. My name is Charles Murray. I’m a Partner at Analysys Mason, and I’m joined by my colleague Caroline Gabriel, also a Partner. Welcome, Caroline.

Caroline Gabriel

Thanks, Charles. Hello.

So in this podcast we’re talking about business integration and what to consider when it comes to 4-to-3 mergers. Caroline, when we talk about business integration, people often jump to the network first.

Why is that, and why do people focus on networks first?

Caroline Gabriel 

Well, Charles, I think part of the reason is simply that the network is the biggest single item in terms of money spent. So it’s often perceived to be the biggest risk, or the biggest success factor, in consolidation.

But also, in some ways, it’s actually the simplest thing to consider. It’s quantifiable. You can count how many base stations you’ve got, how much spectrum you’ve got, and you can model that. Of course, it’s success critical, but it’s something people can get their hands around.

Charles Murray 

Yes, and I think there are plenty of benchmarks out there about what the consolidation ratio can get down to. So you can start off with a very high-level model and produce some big figures from it quite quickly.

Caroline Gabriel 

Yes — well, that’s not to say it’s easy. It is massively challenging to integrate networks, particularly when you have two operators with different vendors, three or four generations of networks still running, and perhaps they’re already considering the next generation as well.

They may also have completely different roadmaps, different spectrum bands, and different approaches to how they use their spectrum. So while it may look simple, all of those things can be modelled, forecast and reasonably well understood.

There’s a huge number of experts in the industry — both on the economic side and the technical side — who can come up with work plans.

Charles Murray 

Yes, absolutely. Our experience in these mergers is that if you look at it on paper, you can come up with some sensible numbers. But in reality, the numbers always turn out somewhat different.

Caroline Gabriel 

Yes, and there’s always a learning in that. Often it’s about how far you push the business case on network consolidation versus the fact that the standalone cases may grow more than expected. That means the merged case is actually a bigger network than you planned for.

Or it simply takes much longer, because it’s really complicated. On paper you might say, “We can get rid of a third of our sites.” Logically, maybe — but when you go out into the field, you find many of those sites need to be kept for years because they support specific applications.

Typically, what happens is that you switch off a site, decommission it, and then you get support calls saying, “I haven’t got any coverage anymore.” You always hear from the people who lose service rather than those who gain it.

As a result, brakes are put on quite quickly when it comes to switching networks off. It’s always a challenge.

Charles Murray 

Yes, absolutely. And that feeds through into customer retention KPIs and marketing KPIs, which aren’t always heard as loudly when you’re planning network consolidation.

Network integrators might look at a couple of sites and say they should definitely go because the numbers don’t make sense. But if you cut off a community, that’s bad for the whole perception of the telco.

Caroline Gabriel 

Yes, particularly when the rationale for the merger is around network expansion and commitments made to government. We’ve seen this in the UK Three case — shutting network sites off is going to go down quite poorly.

We often jump straight into counting base stations and asking, “Is it a third? What’s the decommissioning ratio?” But in reality, the RAN is only part of the problem.

You also have backhaul, sites, towers, rooftops. And beyond that, the rest of the network and the IT stack is far more complicated.

Charles Murray

Yes, I completely agree. What’s much worse than the network sites is the whole set of IT systems.

Caroline Gabriel 

Absolutely. Legacy IT systems are far, far worse. In many cases, mobile operators have been less adept at modernising and rationalising IT than they have networks, even though IT is at the heart of the business.

Along with those IT systems come the business processes that they support — not always optimally. And when you try to converge two sets of business processes, culture becomes the most difficult thing.

We know this from any merger: bringing culture, processes and organisation together in a way that moves things forward, not backward, is incredibly hard.

Charles Murray 

Yes, particularly when operators have operated very differently across their customer bases. One might be value-oriented with a low-cost mentality, while another is more B2B-focused, running complicated ICT stacks and software services.

As soon as you put those two cultures together, it can be a real challenge.

Caroline Gabriel 

Yes. And when you think about IT systems, it’s tempting to say, “We have one system here and one system there — let’s build a new shiny system and migrate.”

But from experience, big shiny things are very dangerous. One system to do everything sounds great, but it’s very hard to think of a big-bang consolidation project that was truly successful.

Even when they are delivered, they’re often years later than expected. Meanwhile, the business has to keep running, often artificially kept separate because it’s relying on legacy systems.

Charles Murray

So is it more about getting very good at migrations — understanding when you can run systems down to a low level and eventually terminate them?

Caroline Gabriel 

Yes, I think operators need to think about IT systems more like they think about networks: bringing them together, decommissioning them gradually, and having a clear step-by-step plan.

Often on the IT side, that plan either doesn’t exist or is developed much later than the network plan — sometimes close to the deal, or even after it’s done. That creates huge delays.

If you want to complete integration in three years, but it takes four years just to migrate IT systems, that’s a major problem.

Charles Murray 

I want to pick up on something related to IT planning and culture. Often the management team isn’t in place until after the deal is approved by competition authorities.

Who owns the plan during that process?

Caroline Gabriel 

That’s a very significant factor. Plans may be drawn up, but nobody truly owns them. Teams don’t know who will lead.

In other industries, you see interim joint management teams put in place before deals are finalised. There’s a risk if the deal falls through, but you’re much better positioned for success.

In telecoms, it’s common to wait until day one and start from scratch. That makes cultural integration and organisational alignment much harder.

Charles Murray 

Yes, and telecoms is particularly cautious because of fear that competition authorities will block deals. Meanwhile, the people who might form the new management team still have day jobs running existing businesses.

It doesn’t seem to be something we’re very good at as an industry.

Caroline Gabriel 

Yes, and maybe that’s something the industry can learn from. In terms of recommendations, doing more preparatory work — even at the risk of wasted effort — can still be valuable.

Even if a deal fails, you’ve done a lot of thinking about what your organisation is, what you want to keep, and what you’re prepared to let go.

Another important point is moving away from very short-term expectations of success. Deals are often sold on dramatic results in two or three years, but the reality is very different.

Charles Murray 

Yes, markets should maybe reward companies that take a longer-term view.

Caroline Gabriel 

Exactly. We should be paying more attention to companies that say, “You won’t see big synergies for a few years, but in five years we’ll have a much stronger business.”

In Europe especially, we suffer from short-termism. Expectations become more ambitious and less realistic, leading to disillusionment with the industry.

Charles Murray

These are huge organisations. Even on the network side, it can take two years just to begin large-scale lift-and-shift exercises.

Caroline Gabriel 

Yes, and that needs to be properly factored in. New management teams shouldn’t be under pressure from day one to deliver unrealistic synergies.

This is especially difficult in mobile because of short technology cycles. Deals often coincide with major investments, like the start of 5G, and soon enough the industry will be talking about 6G.

Trying to invest heavily, grow quickly, and deliver cost-cutting synergies all within two or three years is unrealistic.

Charles Murray 

I completely agree. Setting the business up for success from day one is critical.

Charles Murray

Thank you for listening to this podcast. If you’d like to know more about 4-to-3 mergers, Caroline and I are available — please do reach out. Thank you very much for listening.

Caroline Gabriel

Thank you very much.

Note: This transcript was generated using AI and has been lightly edited for clarity. Minor errors may remain.