Consolidation in the TEM space. Who is next?

Posted by Bram Cool

In the past weeks two TEM acquisitions took place. Vodafone announced the acquisition of two telecom expense management companies: TnT Expense Management and Quickcomm. Later that week TMT Ventures announced the acquisition of Ezwim.  

The specifics of the Vodafone deal were not announced. Combined, Gartner estimates that the two acquired TEM companies generate under US$25M in revenue. Based on the estimated 2009 revenue of the acquired companies, their trended growth over the past 36 months as well as considering comparable TEM acquisitions; Gartner estimates that the two companies were likely acquired by Vodafone for less than US$40 million. TnT has appx 85, and Quickcomm 35 staff.

TMT Ventures announced the acquisition of Ezwim this week. TMT Ventures is an investor consortium in Telecommunications, Media & Technology, that intends to expand Ezwim’s business globally. For more information about this acquisition check out the press release.

The acquisitions made by Vodafone pose the question if a strategic buyer like Vodafone, in particular an operator, is a likely exit route for TEM players. On the one hand, the answer is evident as an operator like Vodafone has substantial cross-sell opportunities and can leverage the typical TEM product suite well. The counter argument is equally evident; why would it be in the interest of an operator to help decrease customers’ ARPU, and why would customers appreciate having an operator as TEM provider.

My view as a recent entry into the TEM market, is that it is increasingly likely for an operator to offer TEM services as part of their core portfolio. If anything, it should increase customer loyalty and provide differentiation to the typical operator portfolio that is otherwise quite homogeneous.

From a customer perspective, the recent acquisitions demonstrate the importance of telecom expense management tools for large customers to control telecom costs across the enterprise footprint. Enterprises are facing increased telecom spend as mobile data and personal usage costs are growing and employees are becoming more mobile and are using advanced mobile devices and services. They require increased visibility into, and control over their mobile and fixed communication assets and costs. In addition, customers, in particular in the multi-national space, tend to favor the ‘one throat to choke’ argument.

The timing of the Vodafone acquisitions has surprised investors as the market for TEM services is rapidly developing with many new and exciting products, and customer adaptation seems to recently (as in this year) has progressed into a mainstream service, at least here in Europe.

If it is the right exit route for TEM players in the long run, time will tell.

This entry was posted on Monday, October 18th, 2010 at 4:39 am and is filed under Analysts, News, TEM companies, Telecom Expense Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.