North America's Telecommunications Industry: A Frenetic Pace of Consolidation

Strategic Insights -

In an era of unprecedented technological development and deregulation, North America's telecommunications industry is experiencing a frenetic pace of consolidation. Regional carriers and long-distance network operators are forging partnerships to achieve economies of scale and address evolving customer demands. The critical shift to value-added services will continue to challenge the industry, leading to many more transactions. The integration of the North American economy has prompted US carriers to expand their presence in Canada and Mexico, where relatively small markets are significant conduits for international traffic.

Key Takeaways:

  • The North American telecommunications industry is experiencing a frenetic pace of consolidation, with regional carriers and long-distance network operators forging partnerships to achieve economies of scale and address evolving customer demands.
  • The critical shift to value-added services will continue to challenge the industry, leading to many more transactions.
  • US carriers are expanding their presence in Canada and Mexico, where relatively small markets are significant conduits for international traffic.
  • About 45% of long-distance traffic into the US originates in Canada or Mexico, while 30% of US long-distance calls are to Canada and Mexico.
  • US carriers have taken advantage of recent domestic consolidation in the C$16bn Canadian telecoms market, with AT&T bolstering its position through a reverse merger with MetroNet Communications.
  • Industry analysts expect the recent merger of long-distance and wireless provider AT&T and cable television group MediaOne to pay off once the competitive environment improves.
  • AT&T's acquisition of MediaOne would give it "last mile" access to about 60% of US homes and establish the foundation for a broadband network that could carry two-way voice, data and television traffic.
  • The baby Bells are attempting to meet AT&T's challenge to their local monopolies by upgrading their networks with DSL (digital subscriber line) technology.
  • Bell Atlantic's chief financial officer Frederic Salerno acknowledges that improving DSL deployment is "mission critical" to the regional Bell companies.
  • AT&T offers a bundled package of wireline and wireless services, and Bell Canada has already moved to integrate wireline and wireless services, allowing customers to access a single phone number and voice mailbox via either a wireline phone or a wireless handset.

Statistics:

  • 45% of long-distance traffic into the US originates in Canada or Mexico.
  • 30% of US long-distance calls are to Canada and Mexico.
  • C$16bn: the size of the Canadian telecoms market.
  • 27%: Telus's stake in BCE, held by GTE.
  • 20%: Ameritech's stake in Bell Canada.
  • $7bn: the size of the Mexican telecoms market.
  • 60%: the percentage of US homes with access to AT&T's broadband network via MediaOne.
  • $7bn: the size of the Mexican telecoms market.

Sources:

  • Financial Times Limited 1999.