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 2014 and 2015.
10 October 2014
TMT: The latest trends and the future of the sector
We will continue to see the rise of the internet of things being adopted by all sectors in some shape or form with healthcare, transport, life sciences and energy leading the way.
How Does A Firm Benefit From Using A TMT Expert?
We are now seeing new products and services, convergence, and innovation at a faster rate than ever before. In the digital age in which we live all companies have – or certainly should have – a digital strategy. Having TMT sector experts to support implement this is fundamental to that strategy’s success.
It is through digital that TMT really comes into its own. Digital inevitably involves at least one of “T” (technology) “M” (media) or “T” (telecommunications) and increasingly so, more than one of those sectors. Having experts on board who understand TMT and where these sectors operate individually and collectively is hugely beneficial to a firm – particularly as the newer products and services require stronger collaboration and partnerships across TMT industries and companies.
Have There Been Any Recent Regulatory Changes Or Interesting Developments?
One of the highest profile regulatory changes – causing surprise in legal and technology circles – is the 13 May 2014 judgment from the European Court of Justice which called into question the legality of search engines collating personal information and then facilitating respective searches (widely known as “the right to be forgotten”). The implications of this judgement are far reaching and not just for European search engines.
The introduction into UK copyright law (with effect from 1 October 2014) of an exception to a copyright owner’s exclusive right to reproduce, and authorise the reproduction of their works where a person uses the work for caricature, parody or pastiche also has important consequences for IP protection.
In the telecoms space the amending of the EU telecommunications regulatory framework continues its parliamentary journey. The new legislation aims to move towards a single market for electronic communications without cross-border restrictions or unjustified additional costs.
What Are The Main Attractions And Challenges For Investors In Your Jurisdiction?
Network infrastructure, next generation technologies, and rapidly adopted market trends (take wearable tech – a year ago most people were still asking what it was) create challenges and attractions for investors. On the one hand investment is costly but on the other it is a necessity so as to stay competitive with others in the TMT market.
As a side note, MIFID 2 will also bring with it investor protections that will influence conduct, in wholesale and retail. Given the converging of technology and telecoms with money and the drive behind digital and contactless payment schemes, it is worth having an eye to whether these changes will influence – negatively or positively – proposed business plans.
Are There Any Key Trends Or Strategies Currently Being Implemented?
The buzzword is “mobile”, whether we are talking about mobile health, mobile money or mobile content, mobile will continue to dominate all sectors and not just in TMT. Vertical sectors – automotive, life sciences, infrastructure – will all be influenced. Industrial connectivity through the internet of things and Machine2Machine communications will continue to explode into businesses as well as our ordinary day to day lives. We will also continue to see transformation projects and technology and telecoms driving smarter ways to work and live.
The cloud is also evolving. We are seeing newer models, hybrids and a focus on devices. Emerging markets will continue to embrace mobile, bypassing more traditional technologies, and be a huge source of growth across TMT. Content and value added services also continue to grow with the focus on gaming, video and TV.
What Types Of Litigation And Disputes Are Creating The Most Work For Media & Entertainment Lawyers?
Perhaps the most interesting area of development is in respect of the use of data online. We are bringing an action on behalf of some individuals against Google in respect of its collation of data regarding Internet use by means of the Safari browser. In addition, there are a number of cases relating to the right to be forgotten on search engines arising from the Google Spain case. Meanwhile, the ICO has taken to imposing hefty fines on entities which breach data protection law, some of which are challenged in legal proceedings. Reflecting that mood, corporates are becoming increasingly concerned with the potential for data security breaches with breach of confidence actions pursuing information which has inadvertently gone astray becoming more common. Moreover, the European Commission is debating a new data protection law with even stricter laws and greater fining powers.
In terms of more traditional media claims, libel lawyers are still digesting the Defamation Act 2013 which came into force on 1 January 2014. In particular, the effect of the “serious harm” test in section 1 is being carefully assessed. Currently, this is providing a significant deterrent to new libel claims.
What Capital Raising Opportunities Exist In Local and International Markets?
Capital raising opportunities are strong in both local and international markets. According to Renaissance Capital, IPOs in the US have raised a collective $40.5bn already this year, making 2014 the most successful year since the dot-com bubble boom of the early 2000s.
In the UK, public markets are (finally!) very 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; unified communications, greater bandwidth. BYOD will continue to rise. Apps will continue to flood the market, but they will be more targeted.
How Can The TMT Sector Sustain Its Recent Growth?
By continuing to invest and innovate. As tripleplay moves into quadplay and TMT investment, consolidation and acquisition trail continues, embracing digital change and ensuring the implementation of a digital strategy is paramount.
From an individual company perspective, it is very much about differentiation from competitors. Hence focusing on customer experience, best network, efficient cost management, smart IP protection and proactive portfolio management are all tools to ensure continued growth.
What Considerations Need To Be Taken Into Account When A Company Is Looking To Update Its Portfolio?
Smart portfolio management is essential which in turn means a proactive (not reactive) approach. Disposing of weak performance or non-controlling assets is only one part of this. The parallel part is identifying where to invest and being quick to respond to market trends and opportunities. This could mean the acquisition of new complimentary assets (Google buying Nest, Vodafone buying Ono in Spain and Kabel Deutchland in Germany) or the acceleration of investments.
How Can You Effectively Finance And Valuate TMT Assets?
The key to effectively financing TMT assets is firstly identifying the asset and secondly 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. “Assets” mean different things in different TMT industries and depend on what network or platform a company is valuing; for network infrastructure it could mean anything from towers to cable, data centres to copper wire; for a MVNO it could mean its customer list, for a technology company its software and hardware.
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 TMT sector. The secondary market for assets of this type continues to grow hence improving the accuracy of valuations and valuation methods.
Are There Any Exciting Technological Developments On The Horizon?
Small cell architecture (basically, low powered radio access nodes that have a short range and operate in both licenced and unlicensed bands) will play an exciting role in the future of mobile. It is already an important part of 3G data and of 4G services and is expected to play a more vital role when we get to 5G. The big players are embracing the opportunities; indeed only a few days ago Alcatel Lucent announced small cell related partnerships with Qualcomm and JC Decaux.
White space technology will move from pilot to reality. We will see more regulators follow the path (already established by regulators such as Ofcom in the UK and the FCC in the US) of liberalising and facilitating the use of white spaces spectrum – the unused frequencies of spectrum that are allocated to broadcasting services. It is similar to the spectrum used for 4G and hence has significant potential to deliver widespread broadband internet.
How Can TMT Companies Harness Breakthrough Innovation to Boost Revenue?
The Chinese e-commerce giant Alibaba is a poster child example of how recognising a market trend early (for them it was the growth of the Chinese consumer) and building a business around it can reap huge financial success. In September of this year Alibaba generated the largest IPO in history by raising a record-breaking $25bn.
On perhaps a less “headline worthy” but more fundamentally important note is IP protection. Breakthrough innovation can only boost revenue if it is properly protected at its inception. A company-wide international patent strategy is not merely nice to have; it is a necessity in the world of TMT.
Can You Outline The Opportunities And Obstacles Presented By Big Data?
Organisations are still slow to embrace ‘big data’. The challenges remain the lack of metrics and benchmark price points for data and data applications, reluctance by organisations to share customer data with third parties due to a fear of losing competitive advantage and technical challenges stitching together old and new databases.
More fundamentally, the sheer volume of data which is now generated and stored by many organisations makes it much harder to even know where to begin extracting value from that data. With more data, comes less focus.
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?
In short – More of the same and then some on top!
Just to name a few: We will continue to see the rise of the internet of things being adopted by all sectors in some shape or form with healthcare, transport, life sciences and energy leading the way. 3D printing will grow, it won’t become the norm but it will become more affordable and hence more accessible. Adtech (advertising technology) will drive innovation, not just for online media but for software, systems, hardware.
With a new European parliament taking office on 1 November 2014, the natural progression of several key proposed regulatory changes has slowed down. However we are still expecting the new commission to continue its drive towards a telecoms single market.
First published in the Corporate LiveWire Technology, Media & Telecommunications 2014 Virtual Roundtable; a platform for TMT experts from around the world to discuss the latest regulatory changes and jurisdictional developments.