Telecom Competitors Merge Successfully

| Success story

Immense challenge of integrating HTCC with Invitel overcome via collaboration with Capgemini, delivering savings of approximately €17 million.

“ The joint post-merger project team of Invitel and Capgemini not only overachieved on the initial synergy estimates but also mastered the exciting merger integration process in record time. ”Martin Lea, President and CEO, HTCC

The Situation

To foster its growth strategy, Hungarian Telephone and Cable Corporation (HTCC) with its Hungarian subsidiaries Pantel and Hungarotel acquired competitor Invitel in April 2007.

HTCC selected an integrated approach to market its products and services under a single brand name—Invitel. With this acquisition, Invitel confirmed its position as the second largest fixed line telecommunications and broadband Internet service provider in Hungary with over half a million customers. As such, the acquisition led to the creation of a formidable challenger to the market leader. The combined businesses had annual revenues of approximately €350 million, with more than 1,450 employees affected by the acquisition.

The dimension of the merger required an experienced approach towards post-merger integration, especially given a management team goal of full integration within the same year.

The Solution

Based on the positive experience of previous engagements, Capgemini was invited by HTCC management to support the integration, with its structured Post-Merger Integration (PMI) approach in telecommunications with a specific objective to ensure an effective transfer of “best practice” into the merger.

Initially, a high-profile PMI project chaired at the CEO level ensured quick decision-making along the merger processes. Within the overall PMI team, multiple streams with more than 20 different initiatives were developed across the entire company to take appropriate actions and decisions, and a sophisticated PMO put in place.

Thus, a detailed integration master plan for the first 100 days was designed and the necessary PMO toolset, including reporting as well as issue and mitigation management, was introduced. In addition, an advanced tracking and reporting system for cost synergies was developed and utilized throughout the project. This tracking system also proved to be a key toolset for top management reporting, both internally as well as to external stakeholders.

The Result

The joint post-merger integration team chose a holistic transformation process that led to bottom-line synergies of approximately €17 million in recurring OPEX savings. This result proved to be 14% higher than initially committed by management and reported to key stakeholders.

Furthermore, the speed of the integration was impressive, which resulted in more than 90% of the annualized expected synergies being secured within the same calendar year of closing the deal.

Based on previous assignments, Capgemini provided a comprehensive set of industry cost and synergy benchmarks and best practices to foster the full exploitation of synergies in all focus areas throughout the integration. In addition to resource structure optimizations, major savings were realized in technical areas such as the network.

Complementing these major pillars, the post-merger integration team identified several further synergy areas, such as strategic sourcing. These areas represented a significant share of the non-headcount related cost synergies by exploiting the full purchasing power through increased volume, and implementing a best-in-class strategic sourcing process. In addition, call center optimization, revenue assurance, and IT improvement initiatives were launched by the PMI program.