Pestle

External Analysis

In order to fully analyse this proposed acquisition we must consider the external factors affecting the sector and the likely position of Three and O2 within that sector.

Our external analysis reviews the Opportunities and Threats presented by the takeover and combines elements of Porter’s Five Forces model (see Appendix I) and PESTEL analysis as applicable to the proposed takeover.

The Irish telecommunications market is small but there is strong demand for mobile, smartphone (71pc penetration) and internet-based services in both personal and business markets. Moderate customer bargaining power and keen rivalry impact profoundly on both the company and the telecoms sector. In a PEST analysis on its external environment, Ireland’s telecommunications industry watchdog said that 29% of consumers aged 15-74 (ComReg, 2009) were spending less on communications since the downturn, with minutes spent on phone calls declining fastest. Growth areas are data-hungry internet communications and entertainment tools such as Twitter and YouTube, and a projected 50% global CAGR will present opportunities and threats to firms operating in the telecoms industry (Marketresearchreports.biz, 2013).

Businesses, too, are reducing communications expenses by tending towards VOIP and exploring opportunities in cloud communications (Fox, Gurney & van de Dam, 2012) while data volumes sent on mobile business devices have rocketed. This consumer shift towards data raises questions on the trend among mobile operators to offer cheap or free data rather than minutes in their value propositions.

EU competition law poses a significant threat to the viability of this proposed takeover. After an initial investigation, The European Commission has opened a further in-depth investigation to assess whether the planned acquisition of is in line with the EU Merger Regulation. In Austria, Three was forced to make concessions in its takeover of Orange. It is likely thus that...