Signal is strong for telecoms M&A

Following President Donald Trump’s inauguration in January, he appointed the then-Commissioner of the Federal Communications Commission (FCC) Ajit Pai as the Commission’s Chairman. Pai has served as Commissioner since his appointment by President Obama in 2012, however industry experts predict that Pai’s new role as Chairman spells a positive outlook for M&A in the telecoms sector.

A number of these industry commentators have characterised the Obama administration as being a blocker to telecoms mega-mergers, however Pai’s appointment signals a shift in the attitude of the FCC. According to Variety, Pai has said that the FCC is now studying restrictions on media ownership and easing these restrictions is on the new administration’s agenda. In the same interview, Pai labelled a number of the current rules as antiquated. Currently, companies are not limited to how many TV stations they own, however they are restricted from reaching no more than 39 percent of US TV households.

This attitude has understandably inspired a deal of market optimism, particularly surrounding politically charged mergers such as AT&T and Time Warner. Over the last couple of weeks, the probability of the $108.7bn deal closing has dramatically risen to 70 percent. Pai has already stated that the FCC won’t be reviewing the deal. The transaction will still, however, face consideration from the US Department of Justice (DOJ).

Market positivity across the telecoms sector remains strong. This has certainly in part been inspired by the new Presidency and the newly-relaxed approach of the FCC, but in general, analysts have predicted a wave of consolidation to sweep over the telecoms industry as competition intensifies through the continued advancement of digital and technology.

This is particularly true in the case of Verizon and Yahoo. Despite significant setbacks due to Yahoo’s data breaches, the transaction has now reached a new agreement with a heavy $350m discount. The persistence to get the deal done is indicative of Verizon’s eagerness to break into digital media. Recently the company has also been linked to cable company Charter.

With rumours circulating around Sprint and T-Mobile’s appetite for deal making, 2017 looks set to be a positive year for telecoms M&A. We will wait with interest to see the impact of Pai’s and the FCC’s regulatory changes that could shape a great deal of transactions within the sector.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

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