Telecoms Investment Research Note
The telecoms industry is currently involved in a massive transformation. Since the arrival of the internet, the focus of the industry has moved from providing defined end-products to becoming a facilitator in the development of a range of new products, companies, and indeed new industries.
Unfortunately ever since this change took place, the incumbents have fought tooth and nail against these developments. They wanted to maintain their traditional products for as long as possible and mainly for that reason most have continued to defend their monopolistic structures.
They lost the internet battle with the newly-emerging digital and social media companies; and they made a similar mistake in relation to mobile broadband, where they lost the battle to the smartphone companies.
The question now is whether they will be able to embrace the developments around the digital economy. Trans-sector services such as e-health, tele-education, e-government, smart grids, IoT (M2M), all require a utilities-based wholesale infrastructure that is separated from the retail services that will be carried over them.
The IoT is the next inflection point after connecting homes (fixed lines) and people (mobile). It will increase telecoms connections to billions of devices. The telcos have an opportunity to show leadership here as well, but this could equally become another internet-like development, driven by users and the internet industry.
While some of the telcos have made some incremental changes to their models there is not one anywhere in the world that has been able to transform itself to the point of being able to compete successfully in this new environment. It is often the case that the telcos are among the first to explore telecoms developments. However, it is equally often the case that they look at opportunities based on the existing business models, and these basically revolve around how much money they can make from selling new services to subscribers.