This posting continues on the convergence topic but from different player (i.e. Operator) perspective. Trigger for this posting are two separate announcements from two European telecom giants. Telecom Italia confirmed that it is restructurings its telecom business into two separate units one focusing on fixed business the other on Mobile .Where as at the same time worlds largest mobile operator Vodafone announced that it is teaming with BT (British Telecom) to provide fixed broadband service under its brand to its UK customers .Idea behind this posting is to try to figure out underlying strategies behind these companies.
Telecom Italia presently has 40 billion Euros debt at the same time the group has quite large sized fixed (includes broadband) and mobile business. Many pure large mobile operators like Vodafone would envy and love to have such strong fixed business. Basic reason being that in converged market if they own both business they can bundle services better and in turn increase not only customer base but also churn out better operating margins. But for Telecom Italia story is different after failing to leverage both business together they announced that they would separate it into two separate independent entities eventually as many expect that it may sell its separated mobile unit for an estimated 35 billion euros .which could be used to clear debt and in turn will allow it to concentrate on fixed business .Already it has announced content deals with Fox to stream its movies for its broadband customer base .So in short strategy seems to be that it would concentrate only on fixed business but the same time expanding itself as Multimedia content provider. My view is that they may partner with some mobile operators to bundle services if the market looks attractive for bundled services .instead of owning all network to deliver those services in-house.
Vodafone on the other hand which is presently a pure Mobile player it has been speculated for long time that it would acquire some major fixed player ,took a another interesting but similar approach ,it tied up with BT to offer broadband services under its brand name in UK.Vodafone in 1990s was known for acquisition based mobile growth strategy .the underlying logic at that time being that scale matters and being a dominant global pure mobile player gives the required edge to maintain high growth rate .But in last year or so as in western markets the mobile subscriber growth totally slows down with no significant data revenue streams visible at the same time to offset the slow growth on pure mobile voice revenue ,Vodafone was under severe pressure to have a convergence strategy to sustain growth .The option was to go into acquisition spree as at did in 1990s only this time target being fixed Telco so that they can offer bundled services . Or partner with fixed Telco. It is with BT announcement that it is at least for now clear that it would pursue partnership route to converged services.
So basically one thing that can be concluded is that 2 big operators find that partnering route to converged services is better then owning all networks themselves to deliver those services. From my view point it makes a perfect sense to partner then to own all networks themselves .Reasons are many but most important among them is with present technologies there are no synergies to own all networks i.e. there is no significant advantage to be gained .The situation may change in future when single network can provide all services with good quality which in my opinion is not true at least at the present stage .Though you may argue how about IP as underlying tech to deliver all services but in my opinion we may have to really wait for some more time to really happen because with present available deployed network technologies none has bandwidth that can provide all services .Let me leave to next posting what I mean by it and try to argue with proper examples.
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