Telco Bifurcation - Trainwrecks and Lotto Winners
Great note from pal John Sviokla on a smart move by Deutsche Telekom below and a cool AI phone (it's not really a phone anymore but that's another article).
Trundling Trainwreck
Most of the telcos trundle along and will do so until satellites combined with where the revenue pools are relegate them to margin starved utility status.
They intellectually get that the actual revenue growth opportunity is above the network. They all watched billions built on 4G and whined about missing out on that.
They often lack the leadership and context to leverage cloud-based, AI-infused, and software-defined products, services, and partnerships.
That's ironic, as 5G is a software-defined, cloud-native platform specification. It is 50 times more AI-intensive to run well than 4G.
Satelittes
The past 15 years of just getting satellites into space combined with tech improvements that mean you can pack so much more into a much smaller /lighter device should terrify telcos:
Launch Costs: ~90% reduction
Satellite Utility: 100–1,000x improvement in compute, data, and resolution per kg.
Future: Starship and AI-driven satellites may further reduce costs to maybe by a further 10x while boosting utility via onboard AI/ML processing.
Meanwhile, in Telco World, I have to dig holes in the ground for fiber and stick radios on poles, burning billions of dollars in annual capex.
The game switched from cricket to rugby, and my top-flight cricketers are getting murdered on the rugby pitch!
That's pretty obvious. But in the Telco world, the game is changing/has changed, and many firms have doubled down on cricket players.
How many telcos have top leadership or boards with real experience and depth in software, cloud, and AI?
I like the idea of Journey Talent (mostly because I invented it). Suppose I am going on a long arduous trek across rugged, dangerous terrain that is unknown to me. How dumb would it be to follow a leader who has never been there before or knows about it? If you are going on a new journey, sprinkle in talent from top to bottom that have been on that journey before, i.e. Journey Talent.
A person that John Sviokla and I both know and admire, Alan Kay, said "context is worth 80 IQ points". My take on that is the lack of context is negative 80 IQ points.
When you look at boards and CEOs in the telco world there is a context opportunity for the journey ahead.
Bifurcation between lottery winners and train wrecks
There are pockets of brilliance in the Telecom world, and I think those will continue to show differentiated results. George J. Fischer at TMo definitely gets it, Ã…sa Tamsons at Ericsson (yes, not a telecom company, but nonetheless) and indeed some of the Telecom leadership in Japan and at DT.
That will crush some of the other trundle players.
The recent analog is Jio's amazing success. (use your GenAI to dig into that).
So, yes, it will require billions in investments, but there's an example of how that pays off very well. Also, a minor detail, TMo has gained $80B in market cap during the past four years while its top two competitors combined lost $120B in market cap.
$80B here, $120B there, pretty soon you are talking real money.
And China...
The big three Telcos in China are ahead with "and Intelligence", smart cities, intelligent healthcare, IoT wizardry, etc.
China Mobile (the world's largest telco) has 6000 hospitals on an integrated, fat bandwidth intelligent fabric helping patient outcomes AND asset utilization/cost structure. China's 5G edge compute footprint 5G dwarfs the rest of the world.
All three have done innovative work with ports, layering in an intelligent fabric that improves cost structure and throughput. Shanghai has a Smart Port from one, Tianjin is fully digitally twinned by another, and the third has clever autonomous vehicles working 24/7 at Qingdao and Tianjin. This is simply Henry Ford changing how cars are made, but with today's real tech and for ports.
Someone should buy 40 ports and 4th Industrial Revolution the Dickens out of them (see what I did there?). BlackRock
If you can revolutionize a port with smart network/above the network innovation, you can also do that for factories, transportation logistics centres, campuses/cities, healthcare, defense, commerce, etc. VANTIQ is my favorite investment 100% directly aligned with that future.
Where Does This Land?
I expect to see massive change a few years out with hybrid AI intensive, fiber plus satellite platforms focused on the network as a base foundation serving as an enabling platform for the next layer up solutions/platforms.
Intelligence where / when you need it inside a proactive, preventative, pattern matching, predictive, process performant, personalized, power connected, permissioned, pragmatic and precise fabric.(Toby's 10Ps)
The Distant Future - 2027
Think about an additional 10x cost improvement in satellite delivery coupled with just a 3x utility improvement per kilo over the next three years.
These four together portend such a huge uplift:
The number of satellites in space has grown 6 x over the past 12 years
This will triple in the next 3 years on top of that growth
Satellites work in network configurations. One telephone not so interesting. A few thousand phones has so much more value. A global blanketing network of course has so much more.
Again, the utility per kilo is moving at the pace of tech.
Just three years out, this is a new plateau, along with the AI goldmine, for early adopters to murder the trundlers across 30 verticals. Okay, not murder, but certainly they take their market cap and several current leaders take up golf on weekdays.
