The Customer Perspective On Consolidation

With the frenzy of M&A activity in telecom, consolidation is a hot topic — especially if you’re a customer of one of the providers involved in a transaction. A lot has happened recently, and more changes are coming.  Level (3) has already said they are on the hunt for additional consolidation opportunities. Zayo recently announced the purchase of American Fiber Systems. Speakeasy has entered into an agreement with Covad Communications and MegaPath Inc. Who knows what next week will bring?

When it comes to consolidation, it’s not the size of the deals that matter. Instead, it’s the ramifications of each deal that could prove much more interesting and worth noting if you’re a bandwidth intensive enterprise. Consolidation results in many consequences within the industry, not the least of which is fewer options, especially for clients. Fewer options usually means price and service may not be as “customer friendly” as before. In addition, combined companies are forced to determine a direction on issues such as which company’s philosophy to embrace about each aspect of the business, and the acquirer’s way typically wins out.

Here are the key areas to take note of as an end user when there’s news of consolidation:

Product Mix – Each company will have a different product mix and place emphasis on different services. One may sell products that the other has never offered. Will the new entity sell everything or will some products go away? For example, it’s not atypical for a new provider to eliminate an offering such as dark fiber when they acquire a carrier or new asset. Will each product still be supported to the same extent as it was prior to the consolidation, or will the priorities change significantly?

Account Team – As networks consolidate, staff will always be affected. As companies combine, issues such as compensation, territories and division of accounts can become significant issues, and it is possible for clients to get caught in the middle. Will the person you’ve trusted for years still be there after the merger? Will your account still be as important to the new, larger company?

Contract – Each company requires different terms & conditions. Will your agreement change based on the new company’s contractual priorities? Will your service rates be affected?

Be Proactive

The best strategy during this uncertain time is to be proactive. You don’t have to wait for a sale to be announced to take action. Start your planning now.

1. Determine and prioritize your top service requirements so that it will be easy to clearly identify your needs with a new company. Being prepared rather than scrambling when a change is announced puts you in a position of strength.

2. Review your existing contract to understand all contractual obligations. What protections can you count on during the transition and with the new company? If you are unhappy with the new service, what are the requirements to end the agreement?

3. Be watchful of industry rumors, announcements and ownership status to see if your present provider may be at risk of acquisition. The involvement of private equity is a significant clue. For example, if your provider is currently owned by a private equity firm, it could mean that it is only a matter of time until the company is sold as part of the firm’s exit strategy. This doesn’t mean that you shouldn’t work with such a provider, but rather that you should ensure that all of your agreements will guarantee your survival when they undergo significant change in the future.

4. Establish a strong relationship with your sales rep so that when something happens, you may get the inside scoop or be on a “protected” list.

After The Announcement

Once an announcement of a pending merger has been made, you will have a short period of time to secure your position before the ink dries on the final papers. This is your opportunity to take several critical actions.

1. Speak with your rep about the impact of the merger & acquisition activity. Try to ascertain what the plans may be and how they will affect your business with the company. While your contact may be limited in what they can share, their tone may speak volumes about the future.

2. Schedule an appointment with the new account team, including management, as quickly as possible. Being proactive at this critical time reinforces your position, conveying that you have definite service expectations and will not just sit idly by while they make decisions affecting your account. Make sure to review any new support or customer care processes to confirm that they meet your expectations.

3. This is your chance to re-contract for more favorable terms. Remember, your account is one of the reasons the consolidation took place – they paid good money to have you as a client, so they won’t want to lose you. Take advantage of this leverage, within reason of course.

4. Confirm the new billing process. Will it remain the same as your previous arrangements, or will things be handled differently now? Since a significant amount of money is involved, this is not something to be taken lightly.

5. Test their customer care service prior to having an outage to ensure that you are comfortable with the process and satisfied with the support you receive. You don’t want to discover any problems during a crisis situation.

Consolidation definitely has its pro’s and con’s, and not every consolidation leads to a negative situation. Your willingness to prepare yourself, understand your options and maintain strong relationships with your current (and new) vendor will help you get the most from your service arrangements no matter how the landscape changes.