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Telecom Records Major Buyouts in 2020: Does 2021 Hold Promise?

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The year 2020 witnessed intense market volatility within the telecom sector as the coronavirus pandemic disrupted normal business operations and supply-chain mechanisms of various firms. However, telecom firms relentlessly provided the vital lifeline to countless humans as virtual communication replaced in-person exchanges with social distancing and work-from-home option coming into vogue. The firms worked in unison to effectively handle the upsurge in data traffic as digital sustainability became the norm of the day.

The government also continued its relentless pursuit to keep China-backed firms out of its telecom network in order to lend support to domestic telecommunication companies. The stonewalling effort gained steam in other allied countries as diplomatic channels managed to convince some nations to reconsider granting access to China-based telecommunications equipment provider, Huawei, for 5G deployment. The political slugfest for 5G supremacy at the backdrop dovetailed with the administrative efforts to set guardrails and legislation to safeguard the interests of domestic firms and provide confidence to the industry.

Despite short-term headwinds from retail store closures and supply-chain disruptions, the industry appeared to be relatively better placed compared to other sectors, owing to a recurring subscription-based business model. The government funding also helped offset the decline in average revenue per user as telecom firms waived off late payment fees and data restrictions while offering various free services amid the coronavirus pandemic. The industry further aimed to ride out the storm through opportune acquisitions and buyout deals to consolidate the market position. Below is a list of such notable transactions in the outgoing year in a random order.

Leading Sector Buyouts

In a concerted effort to augment its virtualized solution portfolio, Viavi Solutions Inc. (VIAV - Free Report) has inked an agreement to acquire network monitoring solutions provider Expandium for an undisclosed amount. Based in Saint-Herblain, France, Expandium is a leading provider of core network monitoring and assurance solutions to public and private railway operators.   
The acquisition will enable Viavi to help carriers move away from proprietary hardware to software-defined services running on off-the-shelf servers, making it more dynamic and evolving according to the changing demand patterns. This, in turn, will help address the coronavirus-induced social-distancing norms by gradually replacing hardware-based solutions with containerized virtual machines. In addition, this Zacks Rank #2 (Buy) stock will gain cloud-native and 5G-ready mobile core assurance technologies of Expandium, which are likely to add value to its virtualized solution offerings. Moreover, the utilization of machine learning, stream processing and pattern detection techniques within a platform is expected to offer key analytical insights to Viavi for troubleshooting, fraud detection and network monitoring.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TELUS Corporation (TU - Free Report) has acquired Lionbridge AI for approximately $935 million (C$1.2 billion) to augment its AI capabilities as demand for high-quality, multilingual data annotation continues to rise. Lionbridge AI is reportedly one of only two global data annotation services providers that annotates data in text, images, videos, and audio in more than 300 languages and dialects.

The acquisition is a strategic fit for TELUS as it aims to harness the power of technology to accelerate its digital transformation policy. The buyout will enable this Zacks Rank #4 (Sell) stock to expand its global service offerings for higher market penetration in one of the fast-growing services in the world. The combined entity is likely to encourage the development of next-generation AI and ML systems to better address the evolving customer demands with the coronavirus pandemic stimulating enhanced digitization efforts across the board.

Bandwidth Inc. (BAND - Free Report) has inked a definitive agreement to acquire Voxbone for an enterprise value of €446 million ($527 million). Headquartered in Brussels, Belgium, Voxbone is a leading Europe-based communications platform and IP voice network provider, serving customers in more than 60 countries that represent about 93% of global GDP.

The transaction complements Bandwidth’s product portfolio and enables this Zacks Rank #4 stock to offer a unified software platform to better serve global customers. The integrated offering will facilitate various firms to combine voice, video and text communications as part of their digital transition and help transform enterprise cloud communications for superior customer experience.

Ericsson (ERIC - Free Report) made a significant headway in strengthening its market position in the 5G Enterprise market by acquiring Cradlepoint for an enterprise value of $1.1 billion. Since its inception in 2006, Cradlepoint has carved a niche in wireless WAN solutions with a subscription-based business model that combines cloud-delivered software with hardware endpoints, support and training.

The buyout of this leading U.S.-based player in the Wireless Edge WAN 4G and 5G Enterprise solutions segment will enable this Zacks Rank #4 stock to offer a full spectrum of 5G-enabled services to business enterprise customers and augment its revenues. Notably, the market for wireless WAN Edge solutions is primed for annual growth of 25-30% with faster deployments of 5G technology across the world.

Arista Networks, Inc. (ANET - Free Report) acquired Awake Security for an undisclosed amount to augment customers’ proactive visibility and threat detection capabilities across the cloud network traffic. Founded in 2014, Awake Security is a network detection and response platform provider that combines AI with human expertise to identify and respond to insider and external threats.

The buyout is likely to add significant value to this Zacks Rank #3 (Hold) stock and complement many of its Endpoint Detection Response offerings. The transaction brings together two leading technology firms with complete situational awareness of customers’ digital assets along with the ability to fully assess and respond to critical threats. In addition to distinct synergies in technology and market opportunity, the deal is based on commonalities in values, culture and philosophies, and is likely to deliver secure cloud networking experience for clients.

Moving Forward

With the immunization process having picked up steam, the world eagerly awaits a new year that would likely eliminate the coronavirus menace and mark a fresh beginning for mankind. The pandemic has highlighted the need for high-speed, high-bandwidth and low-latency connections — the hallmarks of the 5G network — for digital sustainability. As the 5G ecosystem evolves with increased deployment across the globe, it is likely to offer a plethora of opportunities for diverse industries to spearhead innovation and redefine our daily lives. Amid this backdrop, telecom firms are likely to pursue strategic merger and acquisition opportunities in 2021 for industry consolidation and strengthening of market position.  

Here’s hoping that 2021 brings with it some encouraging prospects for the overall market….Happy New Year!

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