Proximus Group's vision to dominate the global digital communications market.
In a bold move that underscores its commitment to becoming a global leader in digital communications, Proximus Group recently acquired a majority stake in Route Mobile. This strategic acquisition, closed on May 8, 2024, positions Proximus at the forefront of the rapidly growing Communications Platform as a Service (CPaaS) market, significantly enhancing its international footprint and capabilities.
By building on its end-to-end presence, Proximus Group is perfectly positioned to take advantage of the healthy growth trends in most of these markets, especially for CPaaS and digital identity. Market growth over the next three years is estimated at 10 to 15 percent CAGR (compound annual growth rate) for CPaaS and around 15 percent CAGR for digital identity, while mobility services are expected to grow at 5 percent CAGR. This growth will be primarily driven by the hyper-personalization of digital interactions and the increasing demand for seamless and secure multichannel experiences.
To delve deeper into the vision and strategy behind this acquisition, we spoke with Mark Reid and Marc Formisani from Proximus, along with Lieven Adams and Nancy De Beule from PwC, who played a crucial role in facilitating this landmark deal.
A bold strategic vision: bold2025
Proximus Group has been on an ambitious journey since the inception of their bold2025 strategy in 2023. As Finance Lead Mark Reid elaborates, this strategic cycle was a turning point for the Group to redefine its mission and expand its horizons both domestically and internationally. "Our new mission, ‘boldly building a connected world that people trust, so society blooms’, captures the DNA of our company", Reid states. “We aim to build a digital eco system , to ensure its reliability and security, and contribute to societal growth by promoting digital accessibility and combating global warming."
Reid highlights that Proximus is now in the second year of bold2025, focusing not just on domestic growth but also on capturing international markets. Reid: “Our domestic strategy is going very well. We ended last year as the fastest growing Telco in Europe. The acquisition of Route Mobile accelerates our entry into the CPaaS and digital identity markets, diversifying our portfolio and driving growth globally.”
Mark Reid, Finance Lead at Proximus
Route Mobile acquisition: A game-changer
The acquisition of Route Mobile is a testament to Proximus's commitment to scale and innovation. Route Mobile's leading CPaaS platform, known for its scalability and flexibility, processes over 10.5 billion monthly transactions. This acquisition strengthens Proximus' ability to offer omnichannel communication solutions to enterprises worldwide.
According to Reid, the acquisition allows Proximus to tap into Route Mobile's technological strengths and geographical reach, particularly in fast-growing Asian markets. "Route Mobile offers a scalable platform capable of delivering not only SMS messages but also WhatsApp, Viber, RCS, and Telegram, making it an excellent choice for enterprises operating at scale", the Finance Lead explains. “The introduction of Gen-AI presents even more opportunities for enterprises to enhance customer interactions, such as through conversational AI on platforms like WhatsApp. This versatility is essential as enterprises increasingly seek to engage customers through their preferred communication methods.”
This acquisition is set to enhance Proximus’s international segment, which already demonstrated substantial financial performance with approximately 1.9 billion euros in revenues and 480 million euros in direct margin on a 12 month pro forma basis for 2023.
Navigating cultural and regulatory challenges
Acquiring a majority stake in an Indian publicly listed company like Route Mobile posed unique challenges. Marc Formisani, Group Head of M&A, outlines the regulatory nuances, including the mandatory tender offer (MTO) process as required by Indian regulations, which resulted in Proximus acquiring an additional 25 percent of Route Mobile’s shares, bringing their total ownership to 83 percent. To comply with the requirement that at least 25 percent of the company's shares remain publicly owned, Proximus will need to sell down 8 percent of its stake.
Mark Reid emphasizes the importance of understanding and navigating cultural differences in such transactions. “We have extensive international experience, particularly with India, which aids in understanding and managing cultural nuances. The management team at Proximus is well-versed in dealing with diverse cultures, a skill reinforced by Belgium’s multicultural environment. This cultural awareness is crucial in our daily operations and is supported by a robust governance structure.”
Marc Formisani adds that, during the integration preparation phase, they involved Indian colleagues extensively, allowing Proximus staff to meet and collaborate with them. This included physical meetings in India and discussions to understand each other's working methods. By the closing of the acquisition, the teams were familiar with one another, which was vital for a smooth transition. “We also implemented a cultural integration program with workshops for Proximus employees to manage cultural differences effectively. Facilities were provided to support employees interacting with Indian colleagues, aiding their adaptation to the new international working relationships.”
Marc Formisani, Group Head of M&A at Proximus
Three buckets of synergies
The expected synergies from this acquisition are substantial. Reid elaborates, "We anticipate over 100 million euros in annualized synergies by 2026. These synergies will come from three categories. Firstly, there are significant cross-selling opportunities. We have a strong customer base in the US through our asset, Telesign, and now a leading asset in India with Route Mobile. This allows us to sell the CPaaS platform to US customers and introduce our digital identity platform to markets in India, Asia, and Africa. The geographic and technological complementarity between these assets creates excellent cross-selling and up-selling opportunities.”
“Secondly, there are cost synergies”, Reid continues, “which can be divided into two main areas. When we send messages, we pay termination fees to major telecom companies. By optimizing our message delivery routes, we can enhance the quality of service for our customers and reduce costs. Combining the companies allows us to buy termination fees at better rates and route messages through the most cost-effective paths. This optimization helps lower the cost of goods sold and increase our margins.”
Finally, there are traditional M&A synergies related to operating costs, Reid explains “We now have access to 800 colleagues in India for research and development, marketing, and market entry. This gives us a competitive advantage in growing our business. Additionally, there are administrative synergies from consolidating platforms and reducing redundant administrative costs.”
To realize these synergies, Proximus established an integration office. “This office is responsible for identifying, quantifying, and supporting the synergies that Mark mentioned”, says Formisani. “We have set specific, detailed targets, which are closely followed and monitored to ensure we stay on track to deliver the synergies. Our organization includes regular meetings and a roadmap to track progress, aligned with our plan to achieve over 100 million percent in synergies by 2026. Part of this effort also involves managing cultural differences.”
PwC's crucial role
PwC played an instrumental role in facilitating this complex transaction. Lieven Adams, Senior Deals Partner at PwC Belgium, details their involvement, "We started with due diligence, focusing on finance and tax aspects. Given that Route Mobile is a publicly traded company in India, we had limited access but aimed to identify deal-breaking factors, as well as potential opportunities."
Lieven Adams, Partner, PwC Belgium
Adams highlights the importance of aligning reporting standards and timing in the period between signing and closing the transaction, "We had to ensure that Route Mobile’s reporting aligned with Proximus’ requirements, speeding up the process from 20-25 days to within five days, and bringing it in accordance with IFRS. This was crucial for integration readiness, next to tax and treasury expert support."
Nancy De Beule, Tax Lead Partner of the Mergers and Acquisitions team at PwC, looks back at the main challenges of the deal. “The combination of the regulatory framework combined with all the different tax regimes of the different countries involved in continents from east to west was quite a challenge and could only be achieved due to the collaboration with the Proximus team and with the PwC network we have around the globe.”
Nancy De Beule, Partner, PwC Belgium
Future outlook and conclusion
Proximus Group's international segment, including the three brands BICS, Telesign and Route Mobile, is projected to generate between 2 billion euros and 2.5 billion euros in annual turnover by 2026. The direct margin is expected to increase to between 600 million euros and 650 million euros, with an EBITDA margin rising to approximately 14 percent.
This acquisition not only propels Proximus into a leadership position in the global digital communications market but also sets the stage for substantial value creation and growth. With a clear strategic vision, robust synergies, the right management team and the support of experts among which PwC, Proximus is well on its way to achieving its bold ambitions.
Reid encapsulates the sentiment: "This acquisition is the biggest in Proximus' history. It marks a significant growth story for Proximus and a positive story for Belgium. If we can execute what we’ve planned, hopefully, someone will write a story about it one day that will be taught in business schools. It wasn’t easy. It was multi-geographic, multicultural, and multifaceted in many ways. I'm very proud of it. We are now number three in CPaaS worldwide, a major achievement that showcases our international capabilities and strategic foresight."
As Proximus continues to execute its bold2025 strategy, the acquisition of Route Mobile stands as a testament to its determination to lead in the digital communications arena, driving innovation and growth on a global scale.
PwC Belgium is partner of the M&A Community
