To say the last couple of months have been busy for CLX Communications is maybe a bit of an understatement. The communications platform-as-a-service (CPaaS) provider has bought not one but two companies in the last couple of months.
In March, it announced a deal to buy Danish company Unwire Communication for around DKK148 million (£17.5 million), adding more than 300 enterprise customers in the Nordics to its base.
Just a few weeks later, CLX unveiled the acquisition of Vehicle Agency, a personalised mobile video and rich media technology company founded in 2010 in Seattle, Washington. Vehicle offers a dynamic video messaging platform for enterprises, adding a new string to CLX’s bow, according to VP marketing and online sales Rob Malcolm.
“One of the larger considerations that is happening across all messaging companies is whether we should attempt to add additional value beyond just having an API,” he explains. “It is something always in the back of our mind and in the back of the minds of our competitors. Fundamentally, SMS is largely commoditised so, the theory goes, the more value you can add, the better you can differentiate yourself from your competition.”
Vehicle gives CLX the “opportunity for us to add value to our customers without competing with them” Malcolm adds. It also has a strong presence in North America and has good relationships with a number of enterprises there, according to Malcolm. This is backed up by the company’s website, which cites campaigns for brands including the likes of AT&T, Macy’s, MillerCoors, and Cricket Wireless.
“North America is an interesting market because MMS in North America is very successful – A2P MMS is very successful,” he adds “It is true that OTTs have stolen market share from SMS and MMS but primarily on the P2P side of things. So the US engaged in MMS early on and it is used quite extensively, especially for marketing.”
This is especially key given the expected rise of RCS adoption, he adds. Rich Communication Services combined with the opportunities offered by personalised video services creates a powerful marketing tool. CLX sees “huge growth potential” with RCS once it comes fully online, he explains.
“Outside of North America MMS was always considered unreliable and too expensive but in the US they have managed to overcome those issues because they were fairly late to market compared with other countries,” Malcolm says.
“For us you could potentially leverage MMS to deliver personalised videos, send a link in SMS that delivers a personalised video, but RCS turbo charges that whole proposition because it becomes an in-line video tailored specifically for you. So we’re combining a much needed delivery mechanism for the enterprise in terms of RCS, but we also aim to capitalise on the macro trends because people want more personalised and targeted marketing and promotions.”
The acquisition of Unwire, however, was much more about regional opportunities and continues a trend CLX had seen in 2017 of buying local SMS firms with its acquisition of Xura Secure Communications – a German technology company.
At the time of the Xura acquisition, CLX said: “Since its launch, Xura Secure Communications GmbH has succeeded in building a strong market position and today has a market share of over 30 percent in Germany. Through the acquisition of Xura Secure Communications GmbH, the Enterprise Division of CLX Communications has strengthened its considerable presence in Germany.”
Malcolm says the thinking behind the Unwire purchase is similar as it offers the opportunity for CLX to strengthen its position in the Nordics, especially Denmark.
“Unwire is one of the largest A2P SMS companies in the Nordics and is particularly strong in Denmark. Most of the world of SMS has historically been fragmented.,” he explains.
“There have been local companies in local countries that have traditionally built up strong bases in their domestic markets. Unwire has built up a strong client base including most of the largest Scandanavian banks, they have a lot of local Danish government contracts. We see an opportunity to acquire these smaller domestic players with a strong propositions in a particular country. This follows on from our acquisition of Xura (Germany) last year. If we see a strong company in a local market, we think to add to our scale, wherever we see an opportunity in a country where we don’t have a particularly large presence, and it helps our growth.”
So is this consolidation a trend he expects to see continuing in the SMS market? “We see an opportunity to remove some of the fragmentation in the global SMS ecosystem. We continue to take advantage of that because we are one of the larger companies that is profitable.”
In a market where competition is extremely high, smaller companies often struggle to maintain profitability. This, according to Malcolm, presents an opportunity for the likes of CLX.
“I think it [consolidation] will be pretty rapid – I would expect from us and our competitors to see about 8-10 acquisitions a year of the larger domestic players. This suggest to me we should see the emergence of three to five major players operating on a global scale.”
Does that mean we will see more M&A activity from CLX? Malcolm uses the age-old trope that the company is always looking for the right opportunities, but said the key word in that is “right”.
He concludes: “Whether we make acquisitions or not is largely defined by what is out there. When it comes to M&A there is always the need to ensure you continue to provide world class quality service to your customers. You don’t want to overwhelm or distract your team from delivering that to customers. For us, not only are we looking for opportunities, but we are having to work hard to ensure we come up with a scalable way of integrating these potential acquisitions into our company. But that is fairly natural.”
