The Unified Communications as a Service (UCaaS) industry was rocked late last month by Mitel acquiring the Sunnyvale, California-based ShoreTel. The Ontario-based communications company agreed to pay a 28% premium over ShoreTel’s closing share price the day before.

This isn’t Mitel’s first attempt at snatching up ShoreTel. Mitel made an unsolicited bid to buy out its American rival in 2014, which was met by a unanimous ‘no’ by ShoreTel’s board members.

“This is a very natural combination that enables us to continue to consolidate the industry and take advantage of cost synergy opportunities while adding new technologies and significant cloud growth to our business,” said Mitel CEO, Rich McBee in a press release. “Together, Mitel and ShoreTel will be able to take customers to the cloud faster with full-featured, cloud-based communications and applications.”

It’s interesting that McBee would touch upon the “consolidation of the industry,” because this is indeed the trend the Telecommunications industry has been following for years. Quite literally every week, you can read about a new acquisition or merger, either between companies, technologies, or hardware. McBee makes consolidation as a trend sound like a fantastic opportunity for both ShoreTel and Mitel clients. However, historically, mergers and acquisitions can lead to uncomfortable realities, not only for the clients of the involved companies, but also for the industry as a whole.

Effects on the Customers

• Personal Touches Lost: Very often in acquisitions, personnel get shuffled around and laid off. With that, the account manager who you have been working with for years could all-of-a-sudden be replaced by someone who does not know you, your business, or your needs. Beyond that, the new company could have a new model for customer representation, meaning the customer service that you are used to could be changed to something much less desirable.
• Changes in Billing: In this industry, there is no such thing as a standard nomenclature, when it comes to expenses on a bill. With no standardized naming conventions, problems do tend to occur.
• Changes to Services and Rates: With the bigger company, it’s very likely that the rates for your service will change. It could also mean new tiered pricing, limiting features you once had unless you pay a premium for an upgraded package.
• Quality Issues: Mergers and acquisitions can absolutely affect network maintenance. With a new, larger company, service providers will focus their attention on strategic areas. This can be especially bad for those who do not operate in the biggest metropolitan areas. If your company happens to be in an area where the newly formed company does not prioritize, you should expect lapses in quality.

Effects on the Industry

• Mergers and Acquisitions Kill Innovation: The major argument for consolidation is that it can be good for the consumer, because bigger companies have more resources to create services and products that might otherwise never materialize. However, decreased competition in the market can affect innovation. If a company doesn’t have to work as hard to differentiate itself from its competitors, then why would they expend the resources to innovate? Take for example the attempted acquisition of Time Warner by Telecom giant Comcast in 2014. The deal was stopped in its tracks by the Justice Department, citing a severe reduction of competition in the broadband industry which would allow Comcast to enter new markets without innovating or building new infrastructure (Of course, Time Warner would eventually be acquired by Charter Communications in 2016 for a cool $71.4 billion).
• The Problems with Monopolies: Beyond innovation, when communications companies merge, they bring with them the problems of monopolies. For the consumer, the lack of competition in a market usually means higher prices. With no one to directly compete with, massive companies will charge what they want, rather than responding to market forces. If I’m the only guy in town selling water, and you need water to survive, you better believe I’m going to try to get every cent I can.
• Effects on the UCaaS Labor Market: When companies merge, many positions within the company become redundant or obsolete. As stated earlier, mergers and acquisitions happening weekly, creating a large pool of skilled workers constantly searching for a new company to call home. While stamping out obsolescence might be seen as a good thing, one side effect of a constantly consolidating industry is a rapidly-eroding labor market.

This latest acquisition of ShoreTel isn’t Mitel’s first bid to become a massive Telecom. They’ve seen some success with their acquisitions of both Toshiba’s UC techology, as well as its 2014 purchase of Aastra. However, their 2015 acquisition of Mavenir was a glaring failure. After spending over $500 million to acquire the Massachusetts-based mobile carrier, Mitel sold the company again a year later.

Ultimately, mergers fail all the time, and the people who pay the price are the consumers. Companies may consolidate and split apart, but it’s the consumer who is along for the ride. A bigger company does not always mean a better company, no matter how much spin a CEO gives it.