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Telecom Business Review | Monday, September 12, 2022
Telecom operators must rethink their asset strategies to avoid falling behind
FREMONT, CA: Until recently, the common mantra in many industries was "asset-light": transferring capabilities and infrastructure to "better owners" to shift from fixed to variable costs, increase agility, and concentrate on core competencies.
In today's rapidly evolving telecoms industry, however, being asset-light is insufficient. What is required is a strategy based on "asset-right": a holistic approach involving re-evaluating what is core and non-core, understanding the interdependencies between various actions surrounding various assets, and aligning the strategic enablers and outcomes.
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In addition, there is no time to waste in transitioning to asset-right. As the new wave of asset-centered transactions—acquisitions, divestitures, carve-outs, joint ventures, and collaborative partnerships—gains scale and momentum, telecom operators who fail to rethink their asset strategies will be left in the dust, forced to play catch-up.
Why is asset-rights management so crucial, and why now? Several forces converge to put telcos' asset positions in the spotlight. As industry participants increase their network investments, sector performance faces formidable headwinds as the capital intensity rises and leverage continues to rise. As the 5G and fiber land-grab continue and new deployment models gain traction, the pressures are unlikely to abate soon.
Non-traditional parties, including tech hyperscalers and private equity investors, are investing in or financing telecoms infrastructure. In addition, there are willing buyers and partners for telecoms assets on the market. And across the globe, government oversight and investment in telecom infrastructure are expanding, from national 5G strategies to fixed gigabit backbones. Virtualized and software-defined network architectures are becoming increasingly important for operators' differentiation.
All of this adds up to a burning platform for telcos—a rapidly-evolving environment with expanding reasons and opportunities to acquire and sell assets. And where separating infrastructure and services can assist telcos in unlocking the value to finance a new product and service innovation era.
TAKING A GLOBAL PERSPECTIVE
The urgent need to re-evaluate infrastructure positions is, therefore, not surprising. In doing so, they identify numerous opportunities for novel asset approaches and transactions throughout the ecosystem and the entire telecoms value chain.
Many participants are already working to unlock value in various ecosystem components. US telcos pioneered the sale of data centers, followed by European incumbents. Cable providers and technology companies use mobile virtual network operators (MVNOs) for asset-light entry into consumer mobile. Active infrastructure network sharing agreements are expanding to include 5G cloud cores and rural 4G. In addition, the tech hyperscalers now own or lease more than fifty percent of the world's undersea bandwidth.
These targeted actions generate value in and of themselves. However, the key to a successful asset-rights strategy is to adopt a holistic perspective across the entire portfolio and landscape, considering the interdependencies and interconnections between various assets.
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