Adopting a dual approach
By positioning themselves as B2B technology providers to their SMB customer base, telcos can enter three distinct markets with stellar growth opportunities: Cybersecurity, with an estimated market value of $139billion; Cloud, with $445 billion; and the Internet of Things (IoT) currently valued at $384 billion.
1 Freeing up cash by divesting their non-core assets
Verizon sold Verizon Media (Yahoo, AOL) in 2021 for $5 billion and Huffington Post business in 2020. Selling off its media properties and focusing instead on its wireless networks and other internet provider businesses.
AT&T spun off WarnerMedia to Discovery “to focus its capital expenditure on building out its wireless network rather than spending on entertainment content to compete with Netflix, Disney and other streaming services”.
Vodafone successfully IPO’d Vantage Towers to free up $2.2Bn (18.3% stake sold). Vodafone had 19 M&A transactions since FY19, for portfolio optimization.
AT&T sold Vrio, their former pay-TV operations in Latin America and other non-core assets including Crunchyroll (anime business), Playdemic (mobile gaming business) and Xandr (programming advertising marketplace).
Telefónica sold 60% of fiber subsidiary in Colombia to KKR. The operation is part of "active portfolio management policy" which is based on divestment in non-strategic assets to reduce leverage.
2 Investing in low-latency and cloud services companies
To sharpen their competitive edge over other IT providers, Telcos are investing in low-latency infrastructure and cloud services companies.
The newly freed-up funds are used to invest in capturing future business, starting with their necessary foundation: next-generation low-latency infrastructure (fibre optic network and 5G). Good examples are Telstra switching 95% of all actuaries to 5G by 2025, and Orange recently reaching 1500 sites in Spain with 5G.
With these now available financial resources, telcos are moving to expand their new business model as technology providers by acquiring and/or becoming cloud service providers.
Telstra Purple acquires internet of things specialists Alliance Automation
Aqura Technologies UAE telco Etisalat acquires cyber security firm Help AG
Telefónica Tech acquires Cancom UK&I to build up a leader in cloud and digital services in Europe
Orange acquired multiple cloud based, infrastructure and cybersecurity companies (Enovacom, Business & Decision, Basefarm, SecureData) as part of its digital revolution.