Major operators exploring adjacent businesses in an evolving ecosystem
The largest operators are moving beyond their traditional telco businesses (mobile and fixed) to explore new revenue streams in a fast-changing competitive landscape. While this strategic play has different flavours, timelines and scales, the predominant drivers are the convergence of telecoms and media, the rise of IoT and the evolution of the wider digital ecosystem.
In the US, AT&T is taking a lead position in the Media and Entertainment industry, although its Time Warner bid – which follows that of DirecTV in 2014 – is still subject to regulatory approval. Verizon has also made a number of acquisitions across several areas – digital media and advertising (Yahoo and AOL), IoT (telematics and smart cities) and fibre networks – ahead of the 5G era. In the IoT space, many European operators such as Telefónica, Orange and Vodafone have IoTdedicated lines of business that provide solutions across verticals. In November 2017, Vodafone also launched ‘V by Vodafone’ in Germany, Italy, Spain and the UK. This is a consumer-oriented IoT product range that includes tracking solutions for cars, pets and bags, as well as home security. Several operators – such as Turkcell in Turkey and SK Telecom, Singtel and NTT DoCoMo in Asia – are also targeting the wider digital consumer space by offering a range of digital services and content including fintech, e-commerce, content, lifestyle, advertising/digital marketing, identity and security solutions. In the fintech market, Orange Bank launched across France in November 2017, offering a full consumer banking service on a mobile-only platform.
While telecoms will continue to be the dominant source of revenue for operators, these new businesses provide new revenue streams, help navigate the IoT learning curve and add business capabilities in the digital space. For example, Turkcell makes nearly 20% of its domestic revenue from digital services, while Smart Life accounts for 10% of NTT DoCoMo’s revenue (both as of Q3 2017). In the US, AT&T makes 26% of its revenue (2017) from DirecTV – this figure could become nearly 40% if the acquisition of Time Warner goes through.