Convergence: the new paradigm for operators

Thomas_de_VilleneuveConvergence has shaken up the telecommunications sector. Thomas de Villeneuve, the partner in charge of TMT at Apax Partners, comments on this new paradigm.

Connecting anywhere, anytime

For Thomas de Villeneuve, fixed-mobile convergence has become the norm. “A first wave of convergence combined operators’ TV, internet and voice plans.” In the last few years, a second wave has bundled these fixed plans with mobile service. By 2018, “80% of operators will offer a quadruple play plan (internet, TV, voice and mobile),” says Thomas. “4P plans represent a large share of certain markets, in particular those in which we have invested: 45% in Portugal, and more than 30% in Malta,” he adds.

The advent of fixed-mobile convergence has profoundly changed industry rules. Historically, an operator’s success depended on making the best use of one type of network, particularly access. “Today the issue is not only knowing how to get the most out of the infrastructure, but also continuously meeting consumers’ need for connectivity, with an optimal quality/cost proposition for all parties.”

Convergence allows operators to improve their plans and efficiency, thus overcoming one of the “eternal challenges of the telecom market”: offering the consumer more for the same price. Since 2008, Thomas notes, data use has increased nearly 200 times while operator revenues have grown only around 2.5 times. For consumers, quadruple play is simpler, cheaper and more user-friendly.

New paradigms lead to new challenges. First, from a technical viewpoint: “Everything will depend on operators’ ability to operate various fixed and mobile access networks, whether owned, co-owned or leased, in an optimal and integrated manner.” In other words, these networks will have to communicate, even though in some cases they are independent, each one subject to different constraints.

On top of this is a marketing and CRM challenge: to merge fixed and mobile plans into a single offering. “The fixed and mobile sales and marketing cultures were very distinct. Commitments and rate plans weren’t the same, and they weren’t sold in the same way.” While fixed-mobile plans have now become commonplace, “convergence can sometimes be lacking in the organisation.” Take customer service, for example: “For subscribers, it is incomprehensible to have to contact two different departments at the same operator for their fixed and mobile plans,” Thomas notes.

Finding a niche

There are “as many scenarios as operators”, with convergence sometimes happening through a commercial agreement. Mobile operator Nowo, brought into the Apax Partners fold in 2015, has relied on Portugal Telecom in this way, to make its entry into quadruple play. To catch up in an already mature market, Nowo is counting on innovation: a modular offer allowing customers to choose exactly what they need, as opposed to set plans.

Another operator supported by Apax Partners, Melita in Malta, has just announced its plan to merge with Vodafone Malta. This merger is part of a convergence strategy Melita launched in 2009 after obtaining a mobile license and becoming the first “truly convergent” European cable operator with its own 3G network. “Melita has considerable expertise in fixed and mobile networks and consequently will be able to offer the best possible service across all access networks.” The merger should allow Melita’s customers to benefit from 4G, and boost the investment capability of the two operators in anticipation of 5G, “a technology that requires denser infrastructure and often too much investment for a single operator.”

Operator tectonics: Apax Partners’ expertise

Thomas expects demand for convergence to accelerate sectoral consolidation across Europe. “The need for data and connectivity anywhere, anytime, involving all types of access networks is skyrocketing, and investment must follow. Consumers are demanding increasingly higher quality amid the industry’s overall deflationary environment.

Aside from fixed-mobile convergence, now well underway, a third wave of consolidation is brewing. “A network/content convergence is coming and appears to be one of the factors in consolidation between operators as well as between operators and media groups.”

Apax Partners has developed a high level of expertise on convergence, telecoms and media. Its mission is “to support operators on these now-essential new strategies.”

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