Private Networks Operator Edzcom Gets Acquired by Cellnex: The Beginning of New Era

The emergence of so-called specialized network operators, which devote their spectrum assets to provide private cellular connectivity exclusively to enterprises, continues to shake up the telco market and attract interest from large network operators as well as infrastructure vendors. The most recent example of this is the Finish start-up Edzcom (previously known as Ukkoverkot), which announced it was acquired by Cellnex (one of the leading operators of wireless telecommunications infrastructure in Europe) at the end of July 2020.

As part of this deal, Cellnex will acquire 100% of the shares of Ukkoverkot Oy (Edzcom’s parent company). Even under Cellnex’s roof, Edzcom will continue to operate under its own brand name to executive its own business strategy.

While ABI Research does not necessarily comment on every single acquisition, it is interesting to understand the implications and effects this recent takeover will have on the telco industry and the value chain for enterprise connectivity as a whole.

In analyzing the effects and implications of this acquisition, one has to distinguish between the implications for the parties involved and for the telco ecosystem as a whole. Looking at the involved parties as a first step, this acquisition is the perfect illustration of a classical win-win situation that carries positive effects fort both parties:

On the one hand, this acquisition allows Cellnex to extend its product portfolio to include private cellular network solutions for a range of different enterprise verticals. In doing so, Cellnex will benefit from an excellent pre-existing business relationship with the enterprises, which Edzcom will bring to the table and is explored in IN-5745: Edzcom, Tampnet, and Company: A New Generation of Network Operators Is Entering the Stage, given its System Integrator (SI) legacy.

For specialized network operator Edzcom, on the other hand, this acquisition provides access to Cellnex’s much larger and more sophisticated sales and business infrastructure, which will be an important catalyst for Edzcom’s ambition to extend the geographical reach of its operations and internationalize its business activities to France, the United Kingdom, and other countries.

In addition to the implications for the immediately involved parties, it is interesting to look at the implications this acqusition will have on the wider telco industry, as this shows an important shift in paradigms when it comes to acquisitions: while traditionally, acquisitions happened within the same domain (such as an infrastructure vendor acquiring another infrastructure vendor, as was the case with Nokia’s takeover of Alcatel-Lucent in 2016, or Ericsson’s acquisition of the Kathrein antenna business in 2019), this is one of the first cross-domain acquisitions—i.e., an infrastructure vendor acquiring a Mobile Network Operator (MNO). While other recent acquisitions have underlined the telco ambitions of Webscale companies like Amazon or Microsoft (through taking over Metaswitch as well as Affirmed Networks), the Edzcom acquisition elucidates another interesting development:

The traditionally clear-cut distinction between infrastructure vendors and network operators begins to blur in the enterprise verticals business, as telco actors slowly but surely realize that enterprise implementers are looking for solution providers and are therefore focusing on providing End-to-End Solutions (E2ES) rather than individual components (such as connectivity or network infrastructure hardware). Since owners of manufacturing plants, shipping ports, or warehouses (to name just a few examples here) have neither the technology expertise nor the resources to source components for cellular connectivity deployment individually and subsequently have to integrate the system on their own, the provision of E2ES will be one of the keys to success for enterprise cellular deployments.

With infrastructure vendors, network operators, SIs, and Webscale companies aiming toward becoming solution rather than component providers, there are two diffirent ways to achieve this:

While, theoretically, it would be possible for every player to decide to build up their missing capabilities in-house from scratch, this would duplicate know-how and business capabilities that are already on the market. Furthermore, building up these capabilities is resource intensive, from both financial and personnel points of view. Most critically, however, such a process is time-consuming, so it would increase the Time to Market (TTM) for each of these solutions to target enterprise verticals.

Therefore, ABI Research is convinced that joint effort programs will emerge as the most efficient way to combine existing know-how to be able to provide the complete E2ES that enterprises are looking for. The legal form of these joint effort programs will differ depending on the parties involved. While in the case of Webscale companies and network operators the most likely scenario to emerge is a joint like co-creation program—as discussed in Amazon and Microsoft’s Strategies in the Telco Domain (IN-5891)[DB1] — this model might be suitable for emerging specialist network operators, like Ambra, Citymesh, Edzcom, or Tampnet: co-creation programs require partners of equal size and strength, while these specialized network operators require a strong partner to enable their business growth. Furthermore, the business model of specialized network operators does not easily scale, which is why they would need access to a global consortium to internationalize their business operations.

Therefore, these specialized network operators and infrastructure vendors should explore other opportunities for combining Business Intelligence (BI), sales infrastructure, and commercial ties, including Mergers and Acquisitions (M&A). To ensure beneficial effects for both the acquired and the acquiring companies, these takeovers should be the result of very careful and thorough considerations. For infrastructure vendors or large network operators aiming to increase their portfolio for enterprise connectivity, these considerations should center around identifying gaps in BI that could be filled by an acquisition:

• What vertical markets do we want to target?
• Who offers the enterprise-specific intelligence and business relations in the respective vertical?
• Who offers a meaningful extension to our existing enterprise activities?

For specialized network operators looking to increase their reach, in contrast, their considerations should center around business infrastructure aspects:

• What national markets do we want to cover and who offers the best possible markets?
• What aspects are we missing in order to meaningfully scale our business models internationally?

An acquisition that is guided by these fundamental considerations would be beneficial for both involved parties and would provide an important alternative to co-creation programs and therefore contribute to successful cellular deployment in the enterprise verticals domain.   

 [DB1]Please wait until IN-5891 is published (waiting for mods) to add link and publish this Insight