Telco winners and losers

What makes some telcos more successful than others and how can they survive in this constantly evolving, turbulent market place?

The telecommunications landscape undeniably looks nothing like it did ten years ago when MyNetFone was born. The internet had only just become mainstream and people were still heavily reliant on landline phones to make calls. Today however, IDC reports that worldwide smartphone shipments have reached 1 billion and Australia’s internet adoption is close to 85 per cent. Technology has transformed the way telecommunication service providers deliver services and in essence, evolving the telecommunications model to remain competitive in what is an over-saturated market.

Reflecting on the past ten years, Australia’s telecommunications industry has seen numerous companies throw their hat in the ring, attempting to sweep away market share from the nation’s big two, who have continued to dominate for decades.

Naturally, there have been winners and losers, however relatively few have managed to stand the test of time or stay true to their origins.

Short-lived contenders

For example, Alpha Telecom, who sold phone cards and services direct to end users, went into administration less than a year after entering the market in 2003, while Techontap, who billed itself as an ‘xSP’ (x-services provider), closed within two years.

Start-up company ‘Make Me Wireless’ provided wireless broadband network to rural communities for four years before being deregistered in 2008, whilst Broadband Phone Pty Ltd, who claimed to offer a new breakthrough handset that would bring VoIP to homes and small businesses, has seemingly disappeared off the radar.

Long-standing challengers

Of course, there have also been some successes. MyNetFone is one such company that have gone from strength to strength from founding in 2002, ASX-listing in 2006, organic growth followed by strategic acquisitions. On the company’s 10 year anniversary, MyNetFone stands strong and self-sufficient as a challenger to traditional telcos.

Others have succumbed to industry consolidation, including Unwired, which launched in 2004, was taken over by Seven Network in 2012 and more recently sold to Optus. Similarly, ASX reseller Mobile Innovations, later known as Engin, went down the same road, being bought out completely by Seven Networks in 2011 before it was sold to ISP Eftel a year later, then shortly after, was acquired by M2 Telecommunications.

Is there a recipe for success?

So what makes some telcos more successful than others and how can they survive in this constantly evolving, turbulent market place?

While the industry still remains dominated by a few major providers, the evolution of technology, namely the mainstream adoption of mobile devices and ubiquity of internet access, have resulted in the substantial erosion of traditional landline revenues and opportunities for ‘disruptor’ players to enter the market. In particular, Voice over Internet Protocol (VoIP) providers and over-the-top (OTT) players, have been consistently named as the services that are posing major threats to traditional telco revenues.

Ovum recently predicted that OTT VoIP will cost telcos globally $479 billion by 2020, and this number is quickly increasing. Further, Cisco’s latest report on Mobile Data Traffic, found that WhatsApp is leading in worldwide messaging traffic.

The penetration of broadband has provided a platform for OTT services to effectively compete with telcos. With these predictions and statistics, it’s hard to deny the disruptive nature OTT is having on the traditional value ecosystems.

In order to compete and succeed in this changing landscape in the long-term, providers have to focus on innovating to deliver value-added services. Reselling the networks and services of others, subject to the whim of wholesale pricing changes, or jumping on the bandwagon of already-peaking trends does not translate into a sustainable competitive advantage.

The key to longevity is to embrace change as an opportunity to look for niche customer needs and ‘own’ the answers to them. In the business space, voice is becoming ‘vanilla’ and businesses are looking for added-value features that provide a solution to their needs, not just a dial tone – such as hosted phone systems, conferencing, support for multi-location offices, faster turnaround on moving phone numbers.

In the residential space, the gamut of opportunity is as endless and the technology innovation curve is steep. By 2020, an entire generation will have grown up in a primarily digital world, with computers, the Internet and mobile phones, being second nature. As a result, their familiarity with technology, reliance on mobile communications and desire to remain connected regardless of where or when, will transform the way we work and interact.

But one thing is certain, innovation and R&D will be critical for telcos to ensure long-term success. While the future of the telecommunications industry is changing at a rapid pace, it is certainly bright for those providers who understand and can capitalise on evolving consumer demands and pave their own way.

Rene Sugo is the co-founder and CEO at MyNetFone

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