In telecoms, the glass may seem half full…

Written by on October 19, 2015 in Opinion with 0 Comments

glass of waterThere were some positive noises about the outlook for the telecoms industry in Europe last week. Credit rating agency Moody’s announced that telecoms was now ‘stable’ predicting a return to revenue growth over the next months and years. The agency used Telefonica as an example of a telecoms company that has seen a recent increase in ARPU. They are also optimistic about Deutsche Telekom.

This outlook was mirrored in a keynote session in Copenhagen last week. At the ETIS Gathering, Proximus CIO Wim de Meyer said that their own forecasts would see stability prevail for the next five years or so.

This is, indeed, optimistic.

Certainly broadband usage will only increase over the next period, which is the premise for Moody’s optimism. But telecoms companies are going to have to be clever to pull off any real uplift in their fortunes. They certainly cannot adopt a ‘more of the same’ attitude, even though this is a tempting approach.

They will have to partner intelligently, against a culture that is isolationist and favours the status quo. They are going to have to partner with the very companies that are eating their messaging businesses. They are going to have to do this on a playing field, which is by no means level. They are tied by regulation, which, if anything is getter stricter (unless you are a digital service provider and launching cool balloons). When Vice President for the Digital Single Market, Andrus Ansip, commented on regulation recently, he made his position clear, that “relaxing competition rules is not the answer and industry consolidation is not necessarily the answer either.” No help there then.

With roaming revenues likely to disappear next year, the pressures on telecoms companies gets worse not better. Even though most people agree that artificially inflated roaming fees are bad, and that getting rid of them will trigger a wave of new services, innovation and service take up, the status quo hates the idea.

A question during a panel at the ETIS Gathering went to the heart of this problem. How on earth, the question went, do large companies continue to innovate? This was addressed to Google as well as the telecoms companies. And even Google said that it is not easy. Once you are in a dominant position, the temptation is to ‘keep doing what you are doing’ and hope for the best. Kodak did that.

It is easy to point out the dangers that face telecoms companies if they do nothing, or more of the same. But entire empires have followed similar patterns down the centuries. It is not just companies that suffer from this.

To begin with future empires naturally take (sometimes unbelievable) risks. Like taking elephants across the Alps. They are hungry and move fast, conquering neighbouring countries before they even see a danger.

This changes. The expansion becomes more ordered, more structured. Rules get introduced. Forts are built, to protect outlying areas. The emphasis changes from expansion to protection.

Once that is achieved, trade flourishes across a now safe region.

Which, while good, is also the moment when things start going wrong. The focus on arts rises, heroes go from being military leaders to singers, the morals of society become more liberal. Risks of being invaded ebb and a false sense of security prevails. Everyone is happy and imprisoned in a credit friendly false economy. And no-one even wonders whether someone somewhere is training elephants to climb mountains.

We are probably now in the only period in history which does not fit that pattern, which without fail and with the possible exception of the Roman Empire lasts 250 years.

At the empire’s peak, every effort and every initiative is defensive.

So, too, is every large company’s. Boats should not be rocked, no-one should argue with Board members.

So, actually, when Moody’s says the outlook is positive (only just at one to two percent), the normal reaction will be ‘keep protecting the business’ and the appetite for risk will be zero.

Except that the barbarians are at the gates and have already conquered companies. We live in interesting times. Telecoms, like every arena that is digital, is in a huge state of flux, with regulators trying to keep stable and ordered things that are not stable or ordered.

Frankly, given this huge challenge, it would have been more helpful if Moody’s had said that the danger is vast and imminent and if telecoms companies do not ‘think like Google’ they may not last the decade.

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About the Author

About the Author: Alex was Founder and CEO of the Global Billing Association (GBA), a trade body focused on the communications sector. He is a sought after speaker and chairman at leading industry conferences, and is widely published in communications magazines around the world. Until it closed, he was Contributing Editor, OSS/BSS for Connected Planet. He is publisher of DisruptiveViews and previously BillingViews. .

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