Yesterday MTN - the African mobile operator - completed the purchase of 20% of Belgacom International Carrier Services (BICS) for € 74 million. BICS is the telecoms wholesale joint venture (jv) owned by Belgacom and Swisscom the incumbent operators in Belgium and Switzerland respectively. BICS future revenues will be reported by Belgacom (the majority shareholder with 57.6%) unlike the past where the partners had allocated proportionately.
This is ground breaking on three fronts. Firstly,an African telco buying into European incumbents is unheard of. Investment is usually in the opposite direction - Europe to Africa (e.g. France Telecom, Vodafone). Secondly, a wholesale operator with a three-way ownership is unique - the BICS jv was novel.. This model could realize the true value of the the wholesale function in the future. Thirdly, this makes the new version of BICS entity the leading wholesale operator in Africa.
Last month we published a paper titled The Changing Face of Telecoms Wholesale where we said (amongst other things) that wholesale operators are changing from national to trans regional and global entities, from standalone to collaborative partnership models, and adopting new business models out of commercial necessity. This deal ticks all three of these boxes. In a blog in September we also referred to the new "Scramble for Africa", so BICS including MTN is well placed in this race too. In short, we told you so.
This deal is a sign of the changing times we live in, and quite possibly a signpost of things to come. I am happy to discuss as ever.
The big story in 2008 was the near melt-down of the Financial sector, and the wider economic recession that followed has been the tale of 2009. As a company we have been tracking the impact of the recession on the ICT sector (Information and Communications Technology) through a series of articles over the past 15 months, but what about the recovery. Will the recovery be the story of 2010?
Before we can consider this question, it is important ensure there is no misunderstanding on the recession. The communications sector has undoubtedly been hit by the economic downturn, but this cannot be compared to the crash experienced by the auto manufacturing, airline, construction, and retailing sectors to name a few. For communications the recession has been relatively mild, as the figures posted by major telcos have showed.For example, in Q3 2009 (July to Sept) Telefonica posted revenues down 5.7% yoy (year on year), and AT&T income was down 1.6% yoy. So the bounce back for the sector is, relative to others, quite small.
As the global economy shows signs of coming back to life, so Spring seems to have arrived in the communications garden. The first buds of activity in the sector seems to be the proliferation of partnerships. there partnerships are germinating in many forms, and in all regions of the world. Bharti Cellular and MTN are continuing their merger courtship (which if it succeeds will create the second largest mobile company in the world), and AT&T and IBM are (again) jointly working on go-to-market opportunities in the converged ICT (Information and Communications technology) market.
It has been a busy week or so in the mobile world.
The perpetual pressure on revenues has been ratcheted up a notch or three. Deutsche Telekom is battling to block the Skype application on the iphone that it sells in Germany. The never-ending regulatory battle to reduce call termination rates saw UK regulator Ofcom impose a 21% reduction with immediate effect. And the specter of satellite based competition reared it's head again as the European Commission is about to allocate S-band radio spectrum to enable the owners to potentially offer pan European Mobile services. Clearly sometimes bad news really does come in threes.
But the mobile operators are fighting back with action on new business and costs. Using mobiles as a substitute for credit cards has been growing in popularity in the east for some while. This week credit card giant Visa and Maxis announced a deal to offer this in Malaysia using Near Field Communications (NFC) technology. Looking at costs, recent moves by Telefonica and Vodafone in Europe to share networks, and Zain and Essar in Kenya to do the same, is all about sharing to reduce costs.
Welcome to my inaugural blog on Telecoms. For readers I don’t know I have worked in the industry for over 20 years, and over the past few years have been interviewed by a wide range of media in connection with market developments in the sector. Here at Forrester I cover Telecoms Strategy and write for Vendor Strategists.