Platforms = success in Web 2.0 and Telco 2.0?
It's one thing to exhort business model change and write about platforms and better telephony and Telco 2.0 all day; but what about the financial results? So, here's a chart we made earlier. It shows the change in the share prices of 6 major telcos over the last 24 months; from top to bottom, MTN, AT&T, BT, Vodafone, Sprint-Nextel, and Deutsche Telekom. You may recall that we did a similar exercise back in November, 2006; our conclusions back then are borne out by the results.
It should be pretty clear that they fall into two groups; the Group of Success and the Group of Stagnation. If you were feeling dramatic, you could even borrow a soccer term and call the latter the Group of Death, the one in which the teams are most evenly matched; no-one is safe.
MTN's go-go performance should come as no surprise; they count as the world experts on emerging markets mobile and are also quite innovative. (The anomalous downward spike was from a plane crash involving senior executive staff.) They are following a "Telco 1.0" strategy of vertical integration because that is precisely what the market requires. Forget "horizontalisation" and clashes with the consumer electronics and IT giants; in many markets MTN is one of the largest electricity generators, just to be able to operate its networks. Just as Henry Ford once owned the rubber plantations, all emerging industries require entrepreneurs to facilitate a whole supply chain as well as often to work on demand creation. Nokia sends trucks round India demonstrating its services. These immature markets form natural barriers to entry.
AT&T has been able to reconstitute its old monopoly over large parts of the US. It's a Telco 1.0 where there naturally should be none. So far, so good -- but a change of party in power and some populist corporate bashing could present shareholders with significant political risk. Could AT&T survive with its current cost and product structure if Unbundling 2.0 came to the USA?
BT's advanced business model and technical strategy have been repeatedly praised on this blog. Most notably, they've played a perfect combination of defence (against the regulator to protect their legacy cashflows) whilst restructuring the business in ways that wean the retail and services side off monopoly rents of the copper access network. The shareholders get the cream without the company's culture getting fat.
On the other hand, Vodafone, DT and Sprint are all in the business of being just another really big telco; even if they are all beginning to think about how to get out of it. All three remain highly reliant on voice minute margins in fiercely competitive markets.
But surely, however far we go with Telco 2.0, we'll never catch up with Google? Will we?
Here's the same chart, but with Google replacing AT&T. Who would have thought that BT shares have kept pace with Google for most of the last two years? MTN, again, shows them all a clean pair of heels.
And just to ram home the point, here is a chart comparing leading Web 2.0 and Telco 2.0 players. The companies are, again from top to bottom, MTN, BT, Google, Amazon.com, Deutsche Telekom, and eBay.
Yes; Telco 2.0 can beat the pants off Web 2.0. But what is especially interesting here is exactly which companies in each group have prospered; MTN is a special case, but BT is an ex-nationalised, 100% penetration, Western European telco like DT. Amazon.com is in the business of selling stuff over the Web in great quantity and helping others do so; so is eBay.
It's BT, Google, and Amazon.com, though, who have mastered a platform strategy based on topline IT infrastructure, user-driven innovation, and partnerships.