IPTV driving telecom M&A

IPTV is the driver behind recent merger and acquisition activity among telecom infrastructure equipment vendors, according to a market research firm.

Telecom vendors are looking to restructure themselves into one-stop shops that can sell the telcos everything they need to compete in the booming IPTV market, according to iSuppli. At stake for these companies is a market for IPTV telco equipment that is expected to grow to $22.1 billion in 2011, up from $9 billion in 2007, iSuppli says.

The vendors are positioning themselves as one-stop IPTV shops because of the telcos’ lack of experience in video, iSuppli says. To make up for this inexperience, the telcos require equipment suppliers that can address all aspects of a video network.

Leading the merger and acquisition frenzy is Ericsson, according to iSuppli. Ericsson purchased Marconi in 2005, Redback Networks and Entrisphere in 2006, and is currently pursuing Tandberg TV in order to position itself to be a complete IPTV supplier, the firm says.

Motorola is also in on the deals. The company has purchased Netopia, Tut Systems and Vertasent LCC, a developer of video-on-demand and IPTV software, and has forged a strategic alliance with ECI Telecom, iSuppli notes.

Cisco has followed the same path with its purchase of Scientific-Atlanta, Linksys and Arroyo Video Solutions, a maker of video-networking software. Lucent’s merger with Alcatel makes the combined company “a leading player” in the IPTV equipment space, iSuppli claims, and the merger between Siemens and Nokia created another potentially powerful competitor.

Nortel, meanwhile, entered into an agreement to jointly develop middleware for the IPTV market with pay-TV software specialist NDS.

The research firm expects the merger and acquisition activity to sustain its fast pace in 2007 as equipment manufacturers continue to round out their IPTV product portfolios. The focus of merger and acquisition activity in 2007 will be on middleware, video on demand and possibly video encoding, iSuppli predicts.