Two days at TMT Finance M&A Forum in London were an excellent forum to get the perspective of the business community on developments in telecom, media and technology space. For me, it was the perfect opportunity to hear the CFOs’ view points on many topics that occupy CTOs – anything from evolution of technologies in the telecom and data center space to emerging technologies such as virtual and augmented reality and artificial intelligence. After many candid discussions, I wanted to note a few observations:
- Consolidation. There is wide expectation that consolidation will increase along different tracks: in network infrastructure related to towers and physical passive assets; among service providers where it’s rational; between mobile and fiber operators; between telcos and enterprise Cloud service providers; and in acquisitions of new technologies.
- Content and digitalization. These are back as big topics as service providers attempt to turn around their sagging fortunes. It’s a tricky game with many failures in the past, but could this time prove to be different?
- IoT monetization. There’s much hope and expectation in the business community that the connected car market is the main road to monetizing IoT for the major service providers. This is a rich space with so many different applications that the pie will be shared among different players. So, it’s not a given that service providers can win, although they stand a good chance to leverage their infrastructure assets. On an interesting side note, there was concern that lack of investment in sensor hardware is stunting the growth of IoT. Investors, particularly Venture Capital, are clearly weary of any hardware plays and are shying away from sensor companies.
- Data monetization. Service providers possess much information derived from their subscribers, but they have been slow at monetizing this data. The simplest path is to anonymize and sell the information to third parties who typically do a good job at monetizing the data. Service providers are still lagging in data monetization and hampered by inefficiencies in organizational structures.
- Downplaying 5G. The CFOs have doubts the value of 5G. They are skeptical on the business case. There’s obviously much work ahead for the CxO suite to validate the tough decisions ahead. While the technology is advancing, the service providers will be hard pressed to monetize new uses cases and improve margins on existing services. All indications from the financing side is that 5G deployments will be delayed. Technology companies take notice!
- Partnering. There is much complexity and convergence in the marketplace that going it alone is getting risky. It raises the importance of partnerships and ecosystem development to reduce risk and improve agility.
- Return of the infra-co concept. Cost and complexity are raising voices in favor of the “infra-co” to provide a common infrastructure on which service providers can ride. The focus is on emerging markets. [Although it brings one to wonder whether European service providers struggling financially with revenue generation and capital efficiency, could use some help!]
- The demise of the Telco VC. A shared sentiment is that the VC community is under pressure. Telco corporate ventures have failed in their objectives and those that remain are in denial of the bitter facts. The small VCs are squeezed by seed investors and super angles. Holding time of technology assets is long and exits are more difficult than ever, especially for the smaller deals. [To address some of the challenges in the investment community, we proposed a foothold in Silicon Valley.]
Aside from chairing a session on IoT, I had the chance to chair an insightful discussion in virtual and augmented reality. These up-and-coming technologies have wide applications in many different sectors. However, one cannot help wonder on the stress it can add on networks. While technologies are racing to maturity, the market will need to optimize the delivery of these applications as there are many different options and trade-offs. Example: the argument for 16K video for good VR experience. Monetizing VR and AR will also be a challenge to service providers who to date have failed at monetizing video.
In brief, market overlap is increasing competitive risks among different players, even in seemingly unconnected industries. The speed of change is increasing as technology provides greater flexibility. This is stressing older processes. Companies have to adapt and be more nimble in seeking out new growth opportunities. While M&As and partnerships are two ways to address this, I think there one can pursue other ways to de-risk the future.