Free market communications, up to a certain point

The latest acquisition news and pronouncements from the richest point to a wild west for the communications business, but governments have a different view. Business technology journalist Antony Savvas looks at where the line is drawn.

Broadcom

Broadcom is acquiring a company that is one of the most important in the communications service provider (CSP) ecosystem when it comes to marrying the cloud with the edge, where telcos mainly serve their customers.

Broadcom is planning to buy VMware in a cash and shares deal worth $69 billion (€64.00 billion), including debt, which would be the biggest ever capture of an IT supplier.

After initially making its name in server virtualisation, VMware’s technology now helps to drive data centres, hybrid clouds, secure networks, edge computing, open source software around containers and Kubernetes, and, of course, telecoms.

VMware is making a big play around 5G, and is key in developing Open RAN systems that will allow telcos to roll-out 5G networks that do not have to rely on single monolithic, proprietary systems from the likes of Nokia, Ericsson, Samsung, Huawei and others. It is getting behind the Open RAN mix-and-match approach that will hopefully benefit the businesses and consumers served by the telcos, in terms of improved services that are competitively priced.

Arm

Like Arm, with its key communications chip designs, VMware sells its software to everyone, just how it should be. Nvidia’s proposed acquisition of Arm was almost certainly going to be blocked by international regulators, on grounds that some governments thought it was against their national security and/or not good for the market to have Nvidia being in a potential position to turn off Arm’s chip technology to some companies.

Elon Musk

Nvidia bit the bullet and pulled out after continuous delays to the deal. VMware is not quite in the same powerful position as Arm when it comes to a lack of close competitors challenging in its markets, but it isn’t that far off.

US regulators previously stopped Broadcom from acquiring mobile chip maker Qualcomm on “national security grounds”, supposedly because it thought there would be a lack of continuing R&D investment in Qualcomm after a purchase, potentially impacting US firms that rely on Qualcomm connectivity technology.

That’s where Broadcom’s problem with VMware lies, can it convince regulators that it’s ownership of VMware will benefit the market? Over the last few years it has also acquired the enterprise business of security software firm Symantec and middlware software company CA Technologies, and it hasn’t done much with either of them, when it comes to improving the market for partners, business customers and consumers.

Broadcom is still seen as a chip firm looking for a bigger software business, but whether that will wash with regulators is anyone’s guess. It may get the deal over the line, but only after some close questioning from international regulators.

The smell of Musk

The role of government in making sure that communications work for all is important, including when it comes to giving a leg up to potential good technology bets.

It is irritating therefore when the world’s richest man, Elon Musk, seems to think that many other companies, which may also prove to be good bets, should instead be allowed to go to the wall.

He recently said on Twitter (where else?) that an impending recession would be a “good thing”. He said it had been “raining money on fools for too long” and that “some bankruptcies need to happen”.

He added, for good measure…“all the Covid stay-at-home stuff has tricked people into thinking that you don’t actually need to work hard. Rude awakening inbound!”

This from a man who took 17 years to make a single profit at his own company, and took many billions of dollars from other people’s private capital, and also billions of dollars in taxpayers money in the form of government handouts and big tax breaks, to do it.

That’s a lot of cash being “rained down on a fool”, in anybody’s book. And more fool for anyone buying one of his overpriced and low mileage/short range electric toy cars.

Musk is now showing his class further by giving off signs (or a smell?) he is about to scurry back to the Twitter board, after agreeing a price to buy the OTT firm, to ask for a cheaper price in acquiring it! If that’s the case, the Twitter board should tell the money-grabbing parasite to do one.

TIM Mark II?

The UK government is to “examine” French billionaire Patrick Drahi’s increased stake in BT over “national security concerns”.

Patrick Drahi

Drahi’s multinational telecoms group Altice increased its investment from 12% to 18% last December, driving speculation BT could face a takeover bid.

The UK government will use powers it gave itself under the new National Security and Investment Act to no doubt block any takeover attempt of BT. The company is seen as critical national infrastructure and an enabler of the government’s digital expansion and improvement plans.

The new legislation came into force earlier this year, giving the government powers to scrutinise, impose conditions on, or block acquisitions on national security grounds.

Drahi became the biggest shareholder in the company with his initial 12%. With 18%, he is 12% short of the 30% that would force him to make an offer for the whole of BT under takeover rules.

Antony Savvas

Drahi was born in Morocco and has French, Israeli and Portuguese citizenship, and spends most of his residence in Switzerland, apparently. He doesn’t seem to be the type of BT man the UK government would be able to tie down as a “yes man” to run a national asset.

Who knows whether Drahi actually wants full control of BT, but if he does, his plan is set to go the same way as US investment firm KKR’s plan to acquire Telecom Italia, thanks to government intervention: into a brick wall.

The author is Antony Savvas, a global freelance business technology journalist.

Comment on this article below or via Twitter: @VanillaPlus OR @jcvplus

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