Mergers are a dime a dozen in the telecom world these days; it seems as though another big acquisition occurs every few weeks. These transactions have significant effects on both the future of telecom and the individual relationships master agents and their partners have with service providers. As M&As shift the landscape of telecom, challenges arise for everyone in the channel as they navigate the new scene.
Your impulse might be to panic — especially if one of the companies involved is a service provider you have written significant business with. Fortunately, there is a solution to mitigate the stress induced by big mergers.
From a partner’s perspective, the scary part of M&As is the unknown: what happens to service provider contracts and my commission income? This question can get particularly troubling if one of the service providers involved is a company you’ve avoided working with for any reason. My answer: Be careful with the service providers you choose to do large amounts of business with.
At Innovative, we try to do business with companies that have high margins and are going to be around for the long haul. Service providers that are financially sound with higher margins have the resources to keep paying the channel and put cash into making the customer experience better. When a company has lower margins (like a typical CLEC), they are challenged to keep paying residual compensation to the channel and keep the top sales and operations talent employed.
If a service provider that you do business with does get acquired, patience is the best tactic to take, especially when it comes to commission. If I’m a master agent with two different contracts — one pays less and one pays more — and the acquiring company’s contract pays less, it’s easy to wonder what’s going to happen to my revenue.
Overall, I’ve found that, while mergers can be painful, things work out in the end and usually contracts are not terminated. The percentages on customers you’ve sold in the past are typically honored going forward by the acquiring service provider.
All the factors that go into dealing with mergers serve as an important reminder to be careful about the companies with which you work. It’s smart to select service providers that have high margins that you know are going to be around for years to come. By looking at the provider’s business before you partner, you stabilize your income stream down the line.
If you’re stressed about any recent or pending M&As, give us a call. We’ve been through enough to know how to handle the ever-evolving world of telecom.