Expanding scope

Operators, vendors and application providers must collaborate to counter the challenges they face in the telecoms sector.

Tags: Bharti AirtelEricssonMergers and acquisitionsUnited Arab Emirates
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By  Roger Field Published  April 13, 2010

With Bharti Airtel poised to complete its acquisition of most of Zain's African assets, M&A in the telecoms sector is firmly back under the microscope. But it seems that no sooner is such a deal signed than speculation turns to the painful post-acquisition period, of integration and the tough task of improving the acquired operations.

When one operator acquires another operation to expand its geographic scope and subscriber base, as Bharti Airtel has done, it may be growing its business, but it is also faced with the typical operator challenges such as falling ARPU and prices on a much bigger scale.

If one common theme has emerged in the past couple of months, it is the need for operators, vendors and application providers, to work together to create new services for businesses and consumers that can help counter these challenges.

This is a subject that the CEOs from two of the world's leading telecom companies broached last month. Indeed, both Hans Vestberg, the recently appointed CEO of the world's biggest vendor Ericsson, and Srinath Narasimhan, CEO of Indian telecom giant Tata Communications, pointed to ways in which they are repositioning their companies to develop new revenue streams - and help their clients succeed - in a rapidly changing telecoms landscape.

Having earmarked a cool $200 million for building infrastructure in the Middle East, mainly for its TGN Gulf Cable System, Tata Communications (see World Connections)  is proving its commitment to push into new services including cloud computing, virtual private networks, telepresence and other value added services.

But far from trying to go it alone and monetise such services on its own, Narasimhan stressed the importance that his company places on working with partners, consisting of operators and other enterprises, in rolling out new services.

In a similar way, Ericsson's Vestberg (see Tough at the top) said that amid a tough market for vendors, he is determined to see his company push further into areas such as managed services, an industry that he estimates could have an addressable market worth some $200 billion. "The underlying trigger for managed services is efficiency, competence, and then change," Vestberg said.

Vestberg also sees potential for managed services to expand beyond its current set of services, and sees no reason why operators should not also seek to outsource other important aspects of their businesses, such as staff training and the integration of new technologies into their businesses, opening up further opportunities for vendors.

And while vendors are increasingly taking on the role of managing network operations for operators, Vestberg also sees the potential to forge closer alliances with other companies such as broadcasters and media firms. Similarly, Tata Communications is also eyeing the potential of media and entertainment, having recently acquired Mosaic, a digital content creation and management platform, from BT Group.

At a time when telecoms megadeals such as Bharti's acquisition of Zain's African operations is gaining so much attention, it is important to remember that service expansion may prove just as important as geographic expansion.

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