One of the almost unique aspects of C21 Telcos concerns their strategies for growth. To an extent, these strategies are circumscribed by their various monopoly inheritances – despite the fact that most incumbent have been exposed to some degree of competition for anything up to three decades. It does not take too much scratching at the surface of telco structure to expose these embedded utility route.

This makes planning future strategies to defend and grow revenues somewhat complex. In many respects, C21 Telcos find themselves in exactly the same position they found themselves in during the 1990s, when many markets in places such as Europe were being opened to significant levels of competition for the first time.

As has been noted already in this series, the telcos got off lightly when faced by the first wave of new entrants. These early competitors were often thwarted by over-protective regulation which favoured the state interests in the former monopolies. Combined with unsustainable levels of expenditures so typical of the technology ‘boom’, many new entrants simply failed as soon as market sentiment changed and brought about the ‘bust’.

Not that C21 Telcos can afford to be complacent as a result, even if they continue to exercise significant market power in areas where the standard-bearers of competition had gleefully predicted their imminent demise. New and better organised competitors are on the horizon and, just as in the earliest days of liberalisation, C21 Telcos again face the difficult decision over whether to join them and how.

Seconds out, second time around
As before, one thing is clear to the point of being bleedin’ obvious:effective new competition naturally leads to a decline in market share and in almost every case a reduction in margins as well. These effects can be offset or least minimised by a steadfast defence of market share (by both commercial and regulatory means) and the prospect of increasing market volumes which new competitors can help to stimulate. This much is understood by the C21 Telcos – they’ve lived through it once – so it will be interesting to see how they react to more unfettered competition this time around.

Beyond this essential defence of their existing markets, C21 Telcos must decide the degree to which they try to compensate for lost revenues in their core markets by entering new markets, whether at home or abroad. During the 1990s, their performance in these arenas was little short of a disaster.

The options open to C21 Telcos in this area are the same as last time.They include forays into non-telecom businesses, notably those that are still converging with traditional telecommunications such as IT and media; there are opportunities in bread-and-butter telecom operating in other markets, wether in neighbouring countries or in emerging markets further afield; and there are the range of so-called ‘global’ telecom services which typically focus on the needs of multinational customers (MNCs).

The tactics for growing business in these areas are eerily similar to those open to telcos in the 1980s and 1990s. There’s go-it-alone aggression; there’s alliance and strategic partnership whether geographical or skills-related; there’s full-blown merger and acquisition.

It is the current coincidence of an increase in effective competition and the C21 Telcos’ return to comparatively robust financial health that make this whole field so fascinating to watch. For five years now, the C21 Telcos have been cowed, trying to repair the damage caused by their over-exuberance in the 1990s. This appears about to change: there are some stirrings in the playpens where C21 Telco chiefs tend to be found. The search is on again for new streams of revenue and, with their warchests replenished, C21 Telcos are on the move once more.

Count to ten
For all their size and the potential weight of their punches, C21 Telcos must resist the temptation to rush headlong into every opening, every new market, every new opportunity. What they need to have learned is that to fly off in every direction just because there size and strength allows does not constitute a ‘strategy’.

Call it the ‘Redux paradox’, if you will: telcos were damned lucky to get away with their last bout of reckless behaviour and will need to show a bit more nous as they enter a new period with opportunities for growth seemingly present at every turn. Yet already one sense a return to the vacuous language and self-justification of yore, a dusting off of the jargon and platitudes with which telcos contrived to hide the absence of a logical or thought-through strategy.

C21 Telcos can aspire to enter and succeed in markets removed from their natural core. They can also back and to extent control the opportunities created by the proliferation of new technologies. They can also play a meaningful and profitable role in improving ICT provision in all countries of the world, not just the lucky few as at present.

The jury is still out on whether C21 Telcos possess the native intelligence required to react to this situation successfully and sustainable. The wait, in all likelihood, will not be too long.
Jim Chalmers

Monday: the series concludes with a look at how C21 Telcos are trying to change their image in the eyes of customers and investors