Mobile world signals reinvention
Industry’s predictable, decades-old business model based on selling data packages by the millions is old-school.
frankfurt/london — Seeking to escape a cycle of falling prices and tight regulation, big telecom operators from Vimpelcom to Telefonica are set to reinvent themselves as Internet players to escape the industry’s straight-jacket of low growth.
This week’s Mobile World Congress in Barcelona will feature phone companies in various stages of acceptance that the industry’s predictable, decades-old business model based on selling data packages by the millions is running out of steam.
Beneath the facade of shiny new phones and dusty debates over network technical implementations, Europe’s largest annual technology fair will see top phone companies parading far-reaching business makeovers.
Spain’s Telefonica is set to introduce a broad plan it calls the “4th Platform” to help both consumer and business customers keep greater control over their data rather than giving it away to Web giants Google, Facebook and Amazon.
Russian and emerging markets operator Vimpelcom is tearing up many parts of the telecom rule book to remake itself as a tech player in the fast-growing world of messaging apps.
US telecom giant AT&T has inked a series of huge deals to diversify by acquiring Direct TV for $67 billion and is awaiting approval to buy Time Warner for another $110 billion.
“Regulatory and pricing pressure on telecom operators forces them to look to adjacent areas for new sources of revenue and margins,” said attorney Tom Levine, head of Allen & Overy’s global telecoms practice. “There isn’t a consensus on how to do this.”
It’s also an open question whether the industry is structurally capable of big change. Telcos have dreamed for decades of breaking free of the shackles of consumer regulation and branching out into Internet services in their local markets, only to be consistently beaten by newer, global upstarts. These dramatic changes come as telcos brace to offer new networks ready to handle not just spiralling data use on phones but in cars, in factories and offices and even crop fields. The new generation of 5G networks will provide them new business options but also spells mounting competition from computer, Internet and industrial players with digital plans of their own.
Russia has emerged as the world’s most-advanced laboratory for telecom companies seeking to reinvent themselves as Internet players, as classic telecom business pressures, Western economic sanctions and government rules that reduce Silicon Valley giants to small local players create space to combine forces.
Vimpelcom, Russia’s No.3 operator, has undertaken a top-to-bottom overhaul of its business while gearing up for deeper Internet partnerships with the likes of streaming music and online taxi services. The company also focuses on emerging markets from Bangladesh to Algeria and is the world’s sixth-largest operator in terms of number of mobile customers served.
Megafon, the No.2 network provider, has acquired control of sister company Mail.ru, a major Russian Internet player — the Russian equivalent of Verizon buying Facebook — and plans to offer a new mobile version of social media site VKontakte.
Top Russian telecoms player MTS is so far sitting on the sidelines, but its executives have signalled they too believe their longrun future lies in Internet services.
Meanwhile, Telefonica sees its 4th Platform strategy as a way to stoke faster growth and compete aggressively with globally dominant Internet players while being a logical evolution of existing businesses, a senior company source said. The strategy builds on its long-standing investments in communications services, its broad geographic reach across Europe and Latin America and efforts to offer advanced money-making services on top of basic communication connections, but does not require making huge new investments, the source said. —