Get a room already...DTAG/FT and why M2M will drive more consolidation.

More news emerged over the weekend of closer and closer collaboration being planned between France Telecom/Orange and Deutsche Telekom. News article here. This is just the latest in an ongoing series of cosying-ups that have been occuring in the last few years. There have been acquisition/disposal deals over assets where they have had too little market share (Austria and Netherlands). There has been the merger of the UK assets to form Everything Everywhere. In February they also announced an agreement to collaborate on various things.

The latest agreement focuses on joint purchasing of network equipment, network sharing in Poland and collaboration on a number of M2M projects. In an increasingly mature industry it's natural that we get consolidation. Sometimes it takes the form of good ol' fashion M&A. For the mobile industry, though, there are lots of other ways to consolidate that fall short, such as network sharing.

For me, obviously, the most interesting thing in the announcement relates to M2M. FT and DT have the potential to dominate their home markets for those applications that are national or local in character. See my blog post about Orange. For instance smart metering. However, the multi-national agreement announced in February between T-Mobile and Orange should also bring them some benefit for cross-border applications such as transport and logistics, although the scale was somewhat limited.

M2M may be a contributing factor to an increasing amount of M&A. It's not the only factor, of course. Reducing costs and improving the bottom line are all encouraging MNOs to move in this direction. However, it seems increasingly apparent that MNOs need regional (and in some cases global) scale for some M2M applications. Those MNOs who have to pay national data roaming rates will struggle to compete with those multinational MNOs with a domestic network, rendering them uncompetitive. Therefore, pooling geographical resources will be essential. More alliances are inevitable, as is more M&A one suspects.

In fact there could be an M2M behemoth heading our way. If the AT&T acquisition of T-Mobile is successful it will give DTAG an equity stake in AT&T and thus a strategic partner in N America. AT&T is strong in M2M in the US. Partnered with a resurgent T-Mobile and Orange in Europe this will be a very strong global player.