Rumors of an acquisition have been floating around for some time now. Now, Sunrise has finally confirmed that it is acquiring UPC Switzerland for 6.3 billion Swiss francs. What exactly that means to the Swiss telecom landscape and to consumers is somewhat unclear. Ralf Beyeler answers the most important questions based on currently available information.
What impact will the merger have on the Swiss telecom sector?
With a 20-percent market share, Sunrise is the country’s second largest mobile telecom services provider after Swisscom. However, the company is only third place in the fixed broadband and landline market, with around 10-percent market share.
The exact opposite is true of UPC: The company has barely made a dent in the mobile telecom service market, with a market share of just 1 percent, but it holds second place after Swisscom in the fixed telecom service market.
Through this acquisition, Sunrise will be better positioned to compete with Swisscom in the fixed telecom services market.
Will the UPC brand remain intact?
It is safe to assume that the UPC brand will be phased out.
Will existing customers be able to continue using their plans?
Both UPC and Sunrise customers will be able to continue to use their existing plans without interruption. No action is required on their part. However, Sunrise will introduce new offers. Consumers will most likely have to actively apply for these new offers in order to take advantage of them.
Will the acquisition result in any changes to broadband and landline services?
Up until now, Sunrise has not had its own telecom network, but has rented networks operated by Swisscom and by power companies. UPC, on the other hand, delivers services to its customers directly through its coaxial cable network.
In order to cut costs, Sunrise will try to service as many customers as possible via its newly-acquired coaxial cable network and reduce its rentals of Swisscom and power company networks. Sunrise will likely contact its existing customers and attempt to convince them to switch to a plan which uses the coaxial cable network.
Will telecom become cheaper or more expensive?
It is unlikely that the cost of plans will come down. Sunrise’ primary aim in acquiring UPC is to improve its cost structure and to optimize its profit margin. The services offered by Sunrise and UPC are already more expensive than similar services from smaller telecom service providers.
We at moneyland.ch will analyze all new offers as they are launched and add them to our interactive telecom comparisons.
How will the acquisition affect UPC and Sunrise offers?
Over the mid-term, we can expect to see a harmonization of the plans offered by both service providers. Most likely, each will only offer a single product line for fixed telecom services (landline, broadband, TV) and for mobile telecom services.
It is unlikely that any immediate changes will be made over the short-term. The acquisition must first be reviewed and approved by the relevant authorities. Currently, Sunrise and UPC use two different technologies for their fixed line services. Sunrise can migrate to cable technology and still offer the same services, but developing harmonized offers will take some time.
Will the acquisition affect the quality of customer services?
The decision of how much to invest in customer care ultimately rests with the management. When you consider Sunrise’ position as a direct competitor with market leader Swisscom, Sunrise would do well not to cut back on customer service. moneyland.ch conducts customer satisfaction surveys on a regular basis. Any impacts of the merger on customer service will be reflected in survey results.
Will the merger result in a loss of customers for either UPC or Sunrise?
As is the case with all mergers and acquisitions, there will be Sunrise and UPC customers who will migrate to other service providers. However, if communications with customers are managed well, it is unlikely that the acquisition will result in a mass migration of customers. It is also likely that Sunrise will not force reluctant customers to switch to the UPC network.
Does the merger pose a direct threat to Swisscom?
For Swisscom, the merger of its two major competitors is not an immediate cause for concern. Even after the acquisition, Swisscom will remain Switzerland’s largest telecom services provider by a wide gap. Swisscom has a very large base of customers who would not consider migrating to other service providers.
As long as that remains the case, there is little reason for Swisscom to become more competitive. As a result, the cost of telecom services in Switzerland will remain relatively high. Even as the market stands now, comparing mobile, broadband, landline and TV plans pays off. In many cases, offers from smaller telecom service providers are more attractive than those from Swisscom, Sunrise and UPC.