The Rise of Netcos

As debt-laded telecoms operators spin off much of their infrastructure, the industry is changing fundamentally. Thanks to the magic of multiple differentials, we will see more of the so called netcos, infracos or towercos growing in the telecom ecosystem, presenting much greater shareholder value than that of the original mother company.

Why are netcos likely to become dominant players and what will be their playing field? How will the demarcation line between netcos and servcos evolve? And how will netcos interact with other ecosystem players and create win-win relationships?

Netcos are regarded as low-risk businesses that will generate steady cash flows over long periods by leasing their infrastructure (e.g.: towers, fibres, datacentres) to telcos and service providers. They are simpler businesses with few core processes, requiring low levels of people and IT resources, leaving space for the management to focus on serving a small number of customers with higher operational excellence.

As netcos are spun out traditional telcos, they will need to re-invent their culture and become more agile to innovate and adapt to new technologies. Netcos will play a leading role in the increased demand for connectivity, by focusing on maintaining, upgrading and diversifying the network infrastructure, expanding coverage and building faster and more resilient networks, serving servcos to provide a holistic solution to end-customers. To that end, they will need to drive technological experimentation and innovation, partnering with external players, such as hyperscalers, system integrators or technology vendors to open up new revenue streams.

With the significant scope for growth in their core market, netcos are at risk of disrupting adjacent sectors, ending up competing over the same turf with servcos. A line must be drawn between netcos and servcos, allowing both groups to differentiate themselves and pursue growth opportunities in a win-win relationship. While netcos are gaining their space, servcos’ primary concern will be creating and maintaining a close relationship with the end customer, by improving service experience in B2C and exploring the B2B segment enabled by new 5G capabilities and IoT trends.

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