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| Friday, 18 May 2007 | |
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The search for sustainable business models is a plague on all mainstream telco business houses in markets like Europe. Opportunities and avenues for growth tend to look short-term at best.
Having mused over why private equity is interested in the telco sector and what those parties might do on seizing control, it’s worth examining the ‘fend-off’ strategies. The most obvious one of these is the weight of opposition to private (and typically foreign) takeover of a ‘national’ asset. Increasingly, investment rules disbar such quaint political sentiments. More important, therefore, is that telcos pre-empt the likely measures that the PEIs would favour or find others means of bolstering or expanding revenues in their own right. This is more or less what is happening just now. A PEI-led approach bears twin pillars: increasing efficiency via cuts in costs and sweating the assets. A private investor would place this atop the corporate agenda. Telco chiefs tend to find the former, at least, as culturally counter-intuitive, while being unable to apply the necessary sauna-like atmosphere for the second to occur. One-time state owners and their agencies allow them to get away with this formula for a flabby corporate body. This is borderline OK if, and only if, the telcos come up with something as good if not better. But where? With traditional voice revenues in steady decline, the consensus is that wireless voice and fixed or wireless broadband access are the new drivers of growth and profit. It’s a seductive idea but a wrong one. The cash cow of a decade in mobile telephony take-up has shown the first signs of yielding less. Just as voice has suffered from VoIP, so wireless voice could suffer from W-VoIP, at least between consenting adults with high thresholds when it comes to call quality. It’s too soon to say the same of fixed broadband. The various flavours of Wi-FI are distinctly low-fi when bandwidth and performance are factored in. Not that this offers any succour to the copper-based fixed-line telcos: the limits of xDSL technology are now being pushed to the extreme and it’s an easy bet to make that if 8Mbps is desirable today, 20Mbps or more will be demanded in a year’s time. And that, my little pumpkins, is far beyond what aged copper can deliver. So are the broadband-crazed ADSL merchants of today about to see the bandwidth rug pulled out from under their feet? If so, can they respond with sufficient financial resource to re-invent the crumbling wheel of the local loop? That’s been tried in Germany but has landed incumbent Deutsche Telekom firmly in the EU regulatory dock. Faced with these assaults on revenues, major telcos are turning back to what they once thought they new best: globalisation. On Monday, in the penultimate piece for this series, we ask whether this new twist on an old trend has any more chance of succeeding than last time around, when it failed dismally. Jim Chalmers |
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