Do telcos dream of electric services? Morgan Stanley thinks they should

electricity power utilities
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ITEM: With telcos struggling to reinvent themselves to keep up with the sexy, nimble digital players disrupting their business, Morgan Stanley has a suggestion – why not power your service bundle with … um, power?

As in electricity services.

According to the Sydney Morning Herald, a research note from Morgan Stanley said that big telcos might be better off giving up trying to compete with the Facebooks, Googles and Amazons of the earth on the digital front and looking instead to the energy sector as a new revenue opportunity.

It’s not unprecedented – Australian service providers Vocus and Amaysim are already cross-selling electricity services to their customers. The Morgan Stanley note says that telcos could go a step further and buy into a power company, SMH reports:

The Morgan Stanley research suggests this could be a lucrative approach.

A $10 to $20 billion investment in energy assets from Telstra could “make sense” for increasing profits and strengthening its balance sheet and earnings as the National Broadband Network’s impacts are felt.

Telstra has already done this, albeit only to cover its own power usage. But with further investment it could potentially convert that into a revenue stream.

According to SMH, the main benefit of adding electricity service to a telco bundle is that it’s one less bill for consumers, and potentially cheaper than having two separate bills. Owning the power supply might also add value to smart-home services like smart meters.

On the other hand, this isn’t the first time we’ve heard about the parallels and potential synergies between the telecoms and power utilities industries – namely, massive infrastructure connecting most of the buildings in a given market (at least in urban and suburban areas), and the subsequent billing relationships.

Way back in the early 2000’s, power line communication (PLC) technology – which enabled data transmission over existing electricity cables – was hyped as a way for utility companies to bring competition to the broadband sector, or at least to become a partner for telcos whose fixed broadband reach at the time wasn’t as widespread as the electricity grid. Famously, it didn’t work out for the most part, mainly because PLC technology was too slow and unreliable to compete even with DSL, let alone fiber. The technology still exists and has improved over the years, and at least US telco AT&T hasn’t given up on it yet. But most have.

Granted, that’s a different scenario to what Morgan Stanley is proposing– instead of power companies getting into telecoms services, telcos should get into power services. But there’s no guarantee those synergies will pay off in an ownership scenario – just ask PLDT, which owned stakes in two power companies (Manila Electric Co – a.k.a. Meralco – and Global Business Power), but sold them both off last year so it could focus on telecoms.

Meanwhile, the SMH article warns, just because there are parallels between telecoms and energy utilities doesn’t mean they’re the same business from a sales or customer-service standpoint. Telecoms customer service teams and frontline staff would need serious training and a shift in mindset to effectively sell electricity services, even as part of a service bundle.

Also, said Simon Downes – spokesperson for Australian electricity and broadband comparison site Canstar Blue – combining broadband and power services into a bundle could backfire in the longer term:

“In the energy space, prices move so fast compared to mobiles and broadband, so if you put all your eggs into one basket it could lead to trouble further down the path. You could end up paying the lazy tax.”

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John C. Tanner
About John C. Tanner 365 Articles
John Tanner has been covering the Asia-Pacific telecoms industry since 1996. He has two degrees in telecommunications, and worked for six years in the US radio industry in various technical and advisory capacities, covering radio and satellite equipment maintenance, studio networking, news writing and production, the latter of which earned him several regional and national awards.

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