M&A Is In The Air And As AT&T Looks To Close Time Warner; Sprint And Charter Rumors Abound

It seems lately that the fastest path of transformation to carrier “smart pipes” is merger and acquisition.  As AT&T shuffles its executive management team in anticipation of the Time Warner close, new rumors are circulating around a Softbank, Sprint and Charter combination.  Can these different corporate cultures blend?  Can these organizations come together smoothly and be financially accretive?

Who’s courting (and buying) who?

It’s clear that AT&T is in the driver seat with Time Warner.  However, it’s not quite as clear with Sprint’s direction in seeking alliances.  Prior rumors of a merger with T-Mobile never panned out and now the recent news of Charter has reignited speculation.  With a market cap of nearly three times that of Sprint, would Charter be the suitor?  Charter’s recent alliance with Comcast would seem to indicate their interest in exploring cellular telephone and data service offerings.  Could Sprint be the catalyst in enabling a fast track?  I certainly believe they could given recent improvements in both their financial health and network quality of service.  Sprint would also provide the capability for Charter’s continued push into OTT content delivery.

The devil is in the OTT details and it’s all about quality of experience

I recently spoke with an executive at AT&T and asked him directly about their long-term plans to scale its networks to support OTT.  Their approach to content delivery and video optimization over wireless networks will be a combination of internal development efforts resulting from ongoing trials and the use of third party OTT solution providers.  From my perspective, there are three solid players in the OTT enablement space worth further examination.

Akamai, a long-established CDP (cloud delivery platform) player claims that less than 10% of viewers will return to content if they experience playback issues.  With their assertion that video consumption will represent 80% of consumer Internet by 2018, their ability to scale OTT support by utilizing over 200,000 servers in 130 countries is impressive.

ZTE, a Chinese firm that also produces smart phones as well as infrastructure products announced their “Big Video Premium” initiative in March.  Focusing on technologies such as multicast adaptive bit rate (M-ABR), low latency protocols, and advanced digital rights management (DRM) encryption techniques, their aim is to improve video playback and lower operator CapEx.  Better quality and lower cost is a killer combination!

Genband is focused on enabling service providers and operators with a turnkey approach to offering OTT delivery.  Its Kandy platform offers a white-label, cloud based OTT solution that is fast to deploy and delivers a multitude of services around voice, SMS and chat in addition to video.  From my perspective, the speed of deployment can be a key competitive advantage for a network operator.  Future 5G network support for lower latency and faster speeds will create new monetization opportunities.  I liken it to the gold rush of the 1800s in the western United States.  The first to arrive will reap the benefits.

What’s the motivation beyond increased revenue?

Commissioned by Akamai in 2016, TechValidate conducted a survey of over 200 media companies.  Half of the respondents stated they had plans to roll out an OTT deployment within six months and nearly ¾ of respondents acknowledged they would distribute content directly long term.  Increased revenue, reaching a larger audience and brand protection were all cited as justifications for making the investment.  From my perspective, these are all cornerstones to maintaining and growing any business.

I’ve been around the technology industry for nearly 30 years and lived through some interesting consolidations including the Compaq acquisition of Digital as well as the Compaq and Hewlett-Packard merger.  For these mega-deals to work, cultures must find alignment, executives have to clearly define the portfolio and go-to-market and customers should be convinced of the value to buy in.  Can AT&T pull it off?  Does Sprint need to merge with a content provider to ensure a rosy future?  Time will tell but one thing is certain, change (and winter) is coming.