Over the past two weeks, telco results have been reported across much of the media. They are mainly down with some notable exceptions, as telcos moved to support customers, but the outlook and mood vary widely.
Just one issue of Mobile World Live had headlines revealing bizarre telco results. Airtel returns to profit; Rakuten takes a hit but eyes ‘tremendous’ profitability; KDDI focuses on cost cuts; Singtel warns of loss, and Docomo braces for slow growth.
Telco results are one thing, but these stories demonstrate a wide variation in how telcos see the next year or so. And it looks as if the established telcos are less optimistic than the newer ones.
As Richard Windsor points out, there are basically two directions a telco can travel. Be better, faster and cheaper than your competitors or add value by leveraging your platform, probably in partnership with others.
For years the industry and its observers have been saying that telcos as packet pushers are a wasted opportunity. Yet, while margins were high, telcos responded by continuing to push packets and still posting rosy results.
Then, in response to falling margins, fierce competition and the need to invest in new technologies, telcos tried some partnerships. Some were reasonably successful. Partnerships with Spotify or a Sports channel went over well, where services could be bundled and value-added.
Some telcos went further and bought media companies, notably AT&T and Verizon, both of whom have recently dumped them, causing massive write-offs. The reason, as Windsor says, is the lack of the right kind of management. It is one thing to get home of an evening and tell your partner that you just bought Time Warner, hoping to look cool. It is quite another to deliver on that purchase.
Media and telcos have always had a strange relationship, and one seems to be in fashion when the other is not. A decade ago, media companies wondered whether to buy a telco to get access right into their customers’ living rooms. Then markets went the other way, and it turned out that telcos could buy media companies to have content they could deliver over their platform. Big tech companies have also had their moment of wondering whether a telco would be a good thing to own.
Telcos will continue to scratch their heads about which way they should go. In the end, though, it comes down to the experience and skill of the management to deliver on whatever strategy they choose.