Economies of Scale:  One of the fundamental reasons of company acquisition and mergers is the desire to gain higher scales of economy. As the economic structure of the sector requires, the increased traffic volume decreases the unit costs, and thus increases the competitive power of the companies.

Geographic Dominance: Another reason for company purchases and mergers in the sector is that the companies support their competitive powers by expanding the geographical area they operate currently by purchasing or merging with other companies to address a wider area in the telecommunication sector.

Service Range: The high investment costs of the sector cause specialization of companies in certain areas, and mostly failure to provide full service to their customers. Therefore, enterprises that can provide large-scale but only fundamental services are not able to respond to the demand of development by international big firms. At this point, companies producing small-scale but specific technological solutions play a key role in company purchases and mergers. Therefore, merger and takeovers toward expanding the service range are common.

Growth: Telecom operators rich in cash enter new telecom investments by purchasing companies promising a high growth potential to raise the value of their stocks.

Examining the company purchases and mergers in the last years, we saw that the shares of companies operating in the telecommunication sector passed into other hands in return for very high premiums. It was observed that the companies acquired the target company shares at prices much higher than the values of the firms to capture the potential of growth they expect in the future around their strategic plans and the four factors explained above, and that the new company formed after the merger reached a much higher price level compared to the sum of the separate values of the merged companies (synergy effect).

It is expected that purchases and mergers, which constituted one of the main tendencies in the telecommunication sector in 1990s are expected to continue in the new century too.

Source: www.tk.gov.tr