Jörn Krieger ©RapidTVNews | 28-07-2011

Solon Management Consulting recommends for mobile network operators and cable companies to merge.The step would be beneficial for both sides, the consulting company writes in its white paper "Bundling Wins: The Case for Cable + Mobile Integration".

Following integration, cable TV operators could assemble more attractive product bundles for their customers while mobile network operators would be able to handle the costly upgrade of their network infrastructure more easily. Both sides would also benefit from a larger customer base and reduced churn rates.

A merger would result in considerable synergies, argues Solon. "In order to defy the incumbents going quadruple play, both cable and mobile operators are forced to expand their range of products. By joining forces, they can offer attractive product bundles and create a larger customer base for cross-selling", said Martin Weiss, partner at Solon and author of the study.

As broadband markets reach saturation across Europe, reducing churn rate and subscriber acquisition costs are key variables for increasing profitability. Mobile operators are facing high levels of investment in order to set up next generation networks (4G networks). Cable operators create stable and high level of cash flows which can help smaller mobile players to meet their financing needs.

For a merger to succeed, three points should be considered, says Solon. First, it is necessary to look at the consolidation of the respective cable market. Most cable players are operating regionally while mobile operators have a national footprint. In a consolidated cable market, it is easier to integrate a cable operator into a national business model.

Secondly, the cable operator should have demonstrated its ability of bundling and selling triple play products. It is more difficult to push quadruple play into a market in which consumers have not yet been developed into triple play customers. Quadruple play comprises cable TV, broadband internet, fixed-line and mobile telephony.

Thirdly, the mobile operator should be the driving force behind the integration process as they are usually bigger and part of large companies. Cable operators are often in the hands of private equity investors for which a merger could provide an attractive exit option.

The white paper "Bundling Wins: The Case for Cable + Mobile Integration" can be downloaded free-of-charge at http://www.solonstrategy.com.