Transformation unlocks the real value in mobile consolidation

Tom Rebbeck 

Hello and welcome to the Analysys Mason podcast. I'm Tom Rebbeck and I'm here with Paul Jevons. Today we're going to be talking about mergers, specifically mobile mergers and taking it from a transformation angle. Now Paul, I understand you're the right person to talk to. You've been involved in a few of these sort of deals.

Paul Jevons

Yeah, thanks. Thanks, Tom. Yeah, I've been involved in mobile mergers, both on the client side. So I have a background in industry. So I've been involved in some sort of telco mergers within the UK market.

You know, having been in those businesses and part of the management team actually responsible for delivering the integration. And I've also got experience from the consulting side, helping clients actually go through that transformation and that integration journey. I do have a perspective from both sides.

Tom Rebbeck

Okay, great. So we're going to take this sort of chronologically through a sort of hypothetical deal going through the different stages of a merger.

And we can be thinking not just about the parties directly involved, but obviously other companies, other competitors also get impacted when there's a merger. So we'll be thinking about those as well as we go through. But let's start pre-deal. What should the different parties be thinking about? What should they keep in mind?

Paul Jevons

Obviously, the focus of that pre-deal phase is very much around the value opportunity, where are the synergies, what can be delivered. But from a transformation and integration perspective, it's really important that there's sufficient energy and focus put into what needs to be true and what needs to be believed as achievable at an integration layer so that the benefits that appear on the Excel spreadsheet can actually be realised for the customers, for the internal business or for the shareholders. And, you know, there's a real focus needed on the actual integration strategy.

Yeah. You know, so actually what is the approach we're going to take to integration? How much of an integration are we going to do? And obviously there's usually multiple brands and different networks and that side of things. But then actually what are the transformation requirements in terms of the cost of delivery, the resource to delivery, how do we do the benefits and all of that actually can have a material impact on the value in a business case.

So you need to get quite a lot of detail resolved, even in the early concept stage, when you're thinking about actually what is the shape of this deal that we want, right the way through to, as you take it into negotiation, before you sign the deal, you kind of need to know actually how much of this theoretical synergy and value can we deliver? When can we deliver it? How long will it take to deliver? And what can we deliver early?

And then you get into some of the people side of organisation design and how you're going to communicate it, the processes that you're going to integrate, and then the more the digital and technical data side of integration.

Tom Rebbeck

And is there anything that's typically overlooked at that stage? Or is the whole, because you're saying that you should have a strategy even before you agree a deal, you agree a price, you should have a strategy for what the integration process should look like.

Paul Jevons

Yeah, I mean, I think the most common issue is the integration strategy is not detailed enough. And there are quite loose assumptions made about what it will take to deliver the integration and how long it will take the resources and the impact on the business. You make those loose assumptions upfront and then somebody later on has to live with them.

Yes, because you're often dealing with companies that have been under a lot of commercial pressure. They're doing synergies to release value into the market. They're quite often very lean organisations who may be capex or cash constrained. And all of a sudden you're asking them to do something else on top of running the business.

Tom Rebbeck

On top of the day job.

Paul Jevons

Yeah. And they're merging often for a reason and there's lots of commercial pressure. That's kind of why they're merging in the first place.

Tom Rebbeck

Let's go to the next stage then of our hypothetical deal. It's been agreed, valuation, all of that's been agreed, but the terms haven't, you haven't finalised, you haven't got the regulatory approval and so on. Now in this stage, there's sort of limitations to what the two parties, the two merging parties can talk about what they can discuss. So what should they be doing? What should they be focusing on?

Paul Jevons

You're absolutely right. There's usually going to be a period waiting for regulatory approval in that sort of sign to close. So they will have agreed the deal, but now you're waiting for regulatory approval.

During that phase, the most important thing to do is you can really only plan. You can't start executing obviously. But that planning can include how are you going to mobilise what we would refer to as your integration management office? How are you going to, when you get regulatory approval, how are you actually going to switch this on on day one?

You can definitely plan the communication. You can be thinking about some of your talent retention and talent issues because, you know, what you want to do is retain the best talent in the business and you need a strategy for doing that so that you can move quite quickly.

From a process perspective, again, it's planning to that next level of detail, which processes are we going to adopt for the new business? Are we going to have a new process? Are we going to go left or are we going to go right? And what is that detailed target operating model going to be?

You've done a high level operating model in terms of functions, headcount, et cetera, but then you need to get down to that next level of detail so that on day one, you're ready.

Quite often also, there will be open items in the contracting side of things around the transition service arrangement. So the relationships between shareholders and who's providing what services. Particularly when there's a parent company involved, it's a group organisation, because there are dependencies to group organisations.

And so, you know, there will be services that group organisations provide into the companies that are integrating. And there's a transition period after close where they'll still need some of that support and you need to bottom out the details of that.

Tom Rebbeck

Okay. We're mostly focusing there on the companies that are merging, but also this impacts the others. So what can the other, if we say it's a four to three merger, you've got two other mobile operators in a market. What should they be doing in this period before that merger goes ahead?

Paul Jevons

Well, I think the impact is at multiple levels and depending on the market and the merger, they may need to prepare for whatever remedies or constraints the regulator puts on.

But one of the other impacts that you can see is the broader impact on supply chain, because when you've got two large companies coming together and you're going to do an integration, they've each got a full stack of capabilities, possibly with different suppliers.

And so one of those suppliers might be looking to lose out. Somebody could be losing a large contract. And so within that whole supply chain, you can start to see knock on impact and different behaviours that are driving suppliers to behave in different ways.

That could be both a risk and an opportunity to everybody else in the market. Suppliers are looking to secure and safeguard their future revenue. Because they may know they're going to lose out on one of the merger deals. So they're going to be paying more attention to the other.

Where are they going to look for new business? Where are they going to make sure they don't lose on the other business? What's their pricing strategy going to be? What does it mean from a simple resourcing perspective?

There'd be an interesting one about talent acquisition, because it's always a leaky time. It can be a leaky time because there's a level of uncertainty. And so I think it's across all of that supply chain, that industry footprint, talent, thinking through what the impact might be, because there'll be risks and opportunities at those different levels.

Tom Rebbeck

Yeah, that's interesting. Because obviously, there's a thought about what this could do to the market and competition and pricing and so on. But there are all those other things that you don't necessarily think of straight away.

And if a company knows that they are likely to lose a bit of business because they're going to lose a client, that actually may drive a behaviour to – they might be more aggressive.

Paul Jevons

They might be more aggressive.

Tom Rebbeck

They might be more aggressive.

Paul Jevons

Or they might be looking to recover that margin with their other customer base. So again, it could go either way depending on whether it's a risk or an opportunity.

So depending on the other context in the market, there's an opportunity for the other players to go either I need to protect myself, I need to act quickly, or actually this is an opportunity for me.

And it could be an opportunity for the supplier as well in that relationship in terms of let's secure this business for a longer period of time with better terms.

Some of these mobile mergers also work on the basis that there's some sort of big structural change, network rollout, for example network consolidation, or network investment.

There you have a dedicated supply chain in the market. The people who build towers, concrete and steel, that's a limited workforce.

And so actually, if you suddenly put a disruptive element into that, is that workforce going to be available to everybody else? Or are they going to focus? So there's other supply chain type impacts.

Tom Rebbeck

Let's move to the final stage then. The deal has been closed. It's all moving ahead. What should be the focus? And equally, what can wait?

Paul Jevons

Absolute focus is business continuity.

It's always good in addition to that, to give some customer benefit on day one. Make it mean something for your customer base because if there's a negative change, then people will consider their contractual relationship.

So it's business continuity, then delivering some immediate value to make it make sense for the customers. An example of that could be giving them coverage across the two networks.

We've seen that in two instances in the UK. The first thing that gets offered is roaming and better coverage. It's an obvious benefit.

It's a good thing, not a bad thing. Customers stay calm.

So you've got your business continuity and your customer benefit.

That is about the quick wins. There are usually some quick wins that you can achieve without impacting continuity. But that requires focus, which you have planned for.

So in the pre-deal you've planned for quick wins. We know we can consolidate here, switch this off, make this change. That helps with realising some value early.

That has beneficial impacts on resource, cashflow, capex, keeps shareholders happy and gives them confidence.

Then there's the planning for the longer term, longer lead time items. Some of the big system changes, the data migrations, the system integrations, they take longer.

You want to give yourself time to plan those well. We've seen times where planning comes quite late and you end up doing things in the wrong order. That delays benefits by months.

That has a knock on effect on everything else.

You want to bank the quick wins, demonstrate internal capability, then be very careful with data migration, testing, stabilisation and cut over planning.

You also need to be really clear on what KPIs you're tracking, so you know whether you're being successful.

One topic that's often overlooked is the impact on the business. You've got two organisations still trading, launching products, doing enhancements.

When you lay an integration over the top, you don't have capacity to do everything. So some things need to come off the roadmap.

You're securing the integration because it's of more long term value than short term tactical initiatives. That's a difficult balance and requires governance at the executive level.

Tom Rebbeck

Just briefly as we wrap, one or two main messages from all of this?

Paul Jevons

Get your integration strategy lined up early and understand how you're going to govern and control the integration plan on top of the business.

Don't underestimate stakeholder management and leadership buy in.

Take an integrated approach, not just an Excel spreadsheet deal. Understand people, process, digital and data from planning through to delivery.

Tom Rebbeck

Finally, why Analysys Mason? Why are we well placed to help with these mobile mergers?

Paul Jevons

The real added value for Analysys Mason is that we understand the deal, with a long history of mergers and acquisitions and transaction financing.

We understand the mobile market from our research and strategy perspective, the value drivers, the value chain, where it's under stress and where there are growth opportunities.

And with our transformation experience, we understand how to deliver change. We've helped mobile operators with integrations, separations, operating models and IT transformation.

We understand the reality of getting things done and where the pitfalls are.

So we bring those three things together, which is a unique combination for how we help clients.

Tom Rebbeck

Very good. Thank you, Paul.

Paul Jevons

Thank you.

Tom Rebbeck

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