The new wave of convergence washing over the sector and how it can give operators an advantage dominated discussions on the Strategy Panel at the TelecomFinance Conference 2015 on 5 February in London.
Hervé Malausséna, managing director at Moelis &…
The new wave of convergence washing over the sector and how it can give operators an advantage dominated discussions on the Strategy Panel at the TelecomFinance Conference 2015 on 5 February in London.
Hervé Malausséna, managing director at Moelis & Company, was of the belief that convergence was being driven by consumers and was here to stay. He pointed to how young people were shunning cable and opting instead for over-the-top content services like Netflix, and said the customer relationship is changing.
The top 10 telecoms companies in the world 10 years ago were very different to what they are today, and will be even more different in the next five to 10 years.
Malausséna said BT’s convergent acquisition of EE made a lot of sense and should work. However, he noted that mobile was different in the UK compared to its European neighbours as it was often sold through distributors like Carphone Warehouse and Phones4u and had a cheaper image, with a focus more on price than services, but predicted this will change.
Malausséna also noted that convergence could bring other challenges, such as in France where bundles have brought prices down.
Peter Stephens, partner and global head for telecoms & media investments at Virgin Management, said the definition of convergence had changed. For him, his smartphone represented convergence as it fulfils a range of functions which were previously separate.
Companies that could provide different elements like TV, broadband, mobile and complimentary services could provide exciting packages for consumers, Stephens said. “You don’t have to own everything to make it work, but it sure helps.”
Eutelsat’s strategy director, Jean-Hubert Lenotte, suggested that for him the biggest converged company in the TMT space is arguably Apple, because it has created so much value by building a whole ecosystem for consumers.
Lenotte also said there needed to be acknowledgement of the need for network convergence, pointing that investments in networks were starting to create less returns for operators.
He predicted that the winners would be companies agnostic about technology and willing to mesh networks, of which Eutelsat’s satellite infrastructure would be a part of.
Jim Ryan, chief strategy officer at Liberty Global, said the cable group’s attitude to convergence was that it wanted its home customers to be able to take their services out of the house with them.
Liberty Global has had success doing this through MVNO agreements in the UK and Belgium, but Ryan said it does not necessarily mean that they should buy their own mobile operator.
Net neutrality
The discussion next turned to broadband operators’ bête noire: net neutrality.
Ryan said Liberty Global takes the view that you should only regulate what needs to be regulated, and if the market forces allow something to work then you do not need to touch it.
He said that 95% of peering agreements were currently done by handshakes and the rest by contract, and only a small amount of that is litigated. The key is to maintain investment, he argued. Stephens agreed and said that they have to keep up with consumer demand.
Anna Krzyzanowska, head of broadband at the European Commission’s DG Connect, said net neutrality was hugely controversial and that people had different definitions and visions.
She said she was looking for the minimum gentlemen’s agreement between the different market players so that no-one was blocked from developing their businesses, although she said this may be naïve.
Malausséna said that in terms of regulation more may need to be done in the US because of the small amount of players and high prices, whereas in Europe prices were too low for operators to compete on a global level. He suggested there needed to be a rebalancing and for more mergers in Europe to be allowed.
Krzyzanowska said she did not think anyone in Europe would have a problem with big European telcos merging, the focus being instead on specific restricted markets. She said a merger between Deutsche Telekom and Orange would not be controversial, and larger operators would provide a balance against OTTs, as it would make for a stronger negotiating partner.
