TMT trends in 2013/2014

In Corporate LiveWire Technology, Media & Telecommunications 2015 Virtual Roundtable Purvi Parekh discusses the latest changes and developments in TMT, with highlight topics including: market consolidation, IoT services and new technologies such as wearables and 3D printing, piracy, and the key trends expected for 2013 and 2014.

How Does A Firm Benefit From Using A TMT Expert?

The TMT sector is complex and innovative. With convergence and ever growing interdependencies knowing what is industry affecting – now and in the future – across the technology, media and telecommunications sectors is fundamental. Any company wishing to get advice on any sub-sector within the box of “TMT” will benefit from seeking advice from a firm that ticks all of the “T”, “M” and “T” boxes, not just one of them. There is more to giving advice than just citing the law, there is having a point of view and a TMT expert who can draw on experience in all of these sectors can give a firm exactly this.

Whether a firm is seeking advice on “4G” or “4K”, the underlying principles around infrastructure upgrades, contracts with manufacturers and suppliers, consumer terms and conditions will have much in common. Leveraging experience and best practice across other TMT sectors will give a company a competitive advantage.

Have There Been Any Recent Regulatory Changes Or Interesting Developments In Your Jurisdiction?

The European Commission has announced a reform package to create a single market for telecoms. The package consists of wide and roaming-free mobile plans; simpler rules to help companies invest more and expand across borders and the first-ever EU-wide protection of net neutrality.

How Are Regulators Stimulating Investment In TMT Across The Region?

The single market proposals put forward by the European Commission (see Q2 above) are intended to create a more dynamic and innovative telecoms market with significantly fewer barriers to entry. Europe will therefore be a more attractive destination for investment, thus fuelling growth.

What Capital Raising Opportunities Exist In Local And International Markets?

With 7 of the top 10 corporate deals in the TMT sector this year, capital raising opportunities remain strong in the local and international TMT market. In the UK, public markets are finally becoming increasingly receptive to new capital raisings, especially those with the strong equity growth stories that typify TMT businesses.

Consumers remain driven by the need for the latest smartphones and mobile devices and apps; it is a trend that continues to rise. It means the need for more bandwidth, consolidation of TMT procurement, more content, dynamic provisioning & smarter technology.
The worldwide deployment of LTE, richer and more unified communication services Machine2Machine and enterprise services all represent key examples of TMT investment opportunities. Cloud businesses, security businesses and mobile businesses are also seeing particular investment interest, beyond more ‘traditional’ software and services businesses.

Where Can Investors And Shareholders Find The Best Opportunities?

At a regional level, whilst many TMT investors have been lured by the bright shiny lights of Shoreditch, in the UK Cambridge remains the more established technology centre with capital raising opportunities and opportunities for investment. Cambridge has a legacy tech collection of proven concepts and well established and successful entrepreneurs, particularly in software and hardware businesses.
The last 18-24 months have seen a growing trend particularly from the west coast of the US looking to invest in UK assets. (e.g. Accel-KKR’s investment into Zinc Ahead, and Francisco Partners’ acquisition of Kewill).
Internationally there is a marked increase in Asian TMT businesses investing into Europe to grow their international platform. US multinationals have built up significant cash reserves in Europe and there are continuing strong signs that they intend to use that cash to invest in the region. Investors from all ends of the investment spectrum from Angels, to private equity to strategic investors are seeing Europe as an attractive source of innovative TMT assets at prices that offer better value than in many other parts of the world economy.

In What Ways Would A Company Alter Their Telecommunications Strategy When They Are Working In A Mature Market Or Entering A Developing And Emerging Market?

Telecoms law and regulation is more established in mature markets. This comes with the burden of both compliance and restrictions on the freedom to set prices for telecom services. There will usually also be a high level of telecoms take up combined with more players operating in that market; hence there is a need to focus on keeping and increasing ARPU (average revenue per user). Companies will need to look at ways to genuinely differentiate themselves from the competition, whether it be through offering “all you can eat” price plans or bundling up value add services.
Telecoms regulation, particularly around issues such as roaming and termination rates is not at the same intense stage as in mature markets and hence there is greater revenue to be made in emerging markets. Customer take up is not as saturated. Companies who understand how to leverage the most from the regulatory landscape and who can innovate with low cost handsets and smart data plans will be successful.

How Can Companies Prepare For Wireless Spectrum Shortage And To What Extent Do Emerging Technologies Such As Heterogeneous Networks Or HetNets Have The Potential To Address Some Of The Concerns?

It is well known that demand for spectrum exceeds supply. To counter this spectrum has to be used in the most efficient way and spectrum assignment permitted. Regulators are one part of the equation in ensuring that companies who are granted rights to spectrum use it efficiently; they increasingly combine this with coverage obligations to ensure that it is not only the intensely populated urban areas that benefit.
Heterogeneous networks (HetNets) can provide a way to expand mobile network capacity and coverage and therefore can address some of the issues around traffic demands and performance. However the standards around HetNets are not yet widely adopted and technology design choices relatively untested. Whilst they can provide a solution, it is not an immediate one.

Copper Cable Theft Has Become A Persistent Headache For The Telecommunications Industry Since Demand Ramped In 2004 And The Price Of The Metal Spiked. What Preventive Methods Can Be Put Into Place To Reduce This Concern?

Copper cable theft is an issue for telecom operators due to the high value. It is an attractive commodity for thieves who onward sell it to scrap metal dealers. The theft of copper cable costs the UK economy an estimated £1billion per year.
Other than making the network less “valuable” by substituting aluminium for copper (which does not perform as well), preventative measures include making cable more identifiable to discourage third parties from buying stolen cable, using methods such as SmartWater (which showers the thief with an invisible traceable liquid which lasts from months to years, visible under UV light) and deploying specialist technology that can quickly pinpoint exact locations of theft by tracking where cable is cut.
The UK have also introduced specific legislation imposing tighter controls on dealing with scrap metal, hence making it harder for copper thieves to as easily dispose of stolen copper.

How Can You Effectively Finance And Valuate TMT Assets?

The key to effectively financing TMT assets is knowing what is bankable. To have an opinion on this you need to know the sector, not just know what the assets are but also understand their interdependencies and the impact that the legal and regulatory TMT environment may have – both now and with upcoming planned regulatory changes. An example is in respect of the network infrastructure: TMT assets could mean anything from towers to cable, data centres to copper wire; hardware to software and anything in the continuously converging land in-between.
It is also vital to work from valuations which are trustworthy. Fixed assets will have valuations in company accounts. Intangible assets are more difficult but specialist valuers work in the sector and the secondary market for assets of this type is growing and improving the accuracy of valuations and valuation methods.

Can You Outline The Opportunities And Obstacles Presented By Big Data?

The rise in big data comes with challenges and opportunities; bear in mind that over 90 percent of the data stored in the world today was generated just in the last two years.
One of the greatest opportunities is the successful exploitation in the value of big data. The data is richer and can lead to more targeted exploitation. There are proven successes in search engine optimisation and the use of cookies and other web analytic tools which can lead to greater brand awareness resulting in increased sales and revenue. Fraud detection and credit referencing is more robust.
There are legal risks too. Those who will have read the recent news about the enforcement action taken against Google from six European Member States will be aware of the legal and regulatory challenges that data can bring. There are significant costs involved in storing and managing and retrieving data, just because of its vast size. Security breaches and cyber-attacks are increasingly common, with which comes reputational damage and a knock on impact on revenue.
A smart data strategy depends on working out what questions you want answered and then gathering the data to do that, legally and securely. On the flipside, a good compliance strategy is built on only gathering and keeping the data you need and securely wiping the rest in accordance with a documented retention policy.

What Key Trends Do You Expect To See Over The Coming Year, And In An Ideal World What Would You Like To See Implemented Or Changed?

The TMT world is embracing change, communication services are richer, the converged end of telecoms and technology continue to merge and new and innovative services continue to grow.

First published in the Corporate LiveWire Technology, Media & Telecommunications 2013 Virtual Roundtable; a platform for TMT experts from around the world to discuss the latest regulatory changes and jurisdictional developments.

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