Why Private Equity funds should push for Telecom Enablers.

Over the past two years Private Equity (PE) has become a major part of M&A activity in the telecoms sector and several exits have shown the high values PE can extract. We believe PE is right to reactivate its interest in telecoms, as the sector is both attractive and PE goals and methods fits the current state of the sector: 

• Telecoms is attractive, as it is the biggest part of the economy, and has growth faster than GDP.
  

• Most telecom operating companies (telcos) still have low productivity relative to other service and Utility sectors so PE methods should be able squeeze more value out of them.
  

However the window of opportunity for standard PE methods is closing fast. The industry is striving for productivity improvement and so squeezing out more value by itself; the industry believes its traditional markets are saturated, so is going for growth in new services which are higher-risk and so more VC than PE investments; the increased interest in telco M&A is pushing up acquisition prices. 

The key question for PE is therefore: Are there value-extracting opportunities beyond traditional methods or should PE quickly sweep up the few remaining attractive telco M&A candidates, then move on? 

We believe: Private Equity investors should extend their traditional PE methods to open up many more Telco M&A candidates, and take the Telcos from the hunting to farming level by complementing the Net-co and Serve-co arms of a Telco with an Enabler arm, adding 50% to the Net Present Value (NPV) of investments in five years!

We support this statement in seven chapters: 

1. Private Equity (PE) investors in telcos should extend their standard methods to discover more hidden value, improve telcos as utilities and generate immediate pay-back at low investment and risk.
   
2.  Most of the few existing Telecom Enablers have neither the scale nor the end-user focus, so discover very little of the potential.
   
3. The full Telecom Enabler concept can add USD 500 Billion of new telecom enabled and telecom-embedded opportunities over the next five years.
4. Telecom Enablers generate above normal margins by customising the generic commodity netco products and services into the premium services demanded by end users and the emerging telecom enabled business models, also boosting total demand for netco services, and so creating a win-win-win.
5. There are nine revenue streams totalling USD 500 Billion by 2010 opened progressively by the Telecom Enabler to benefit end-users, a wide range of telecom-dependent businesses, Virtual Network Operator (VNO) and Service Provider (SP) partners.
6. In a rapid changing telecom landscape the Telecom Enabler concept proves robust in any extreme future, while the conventional utility oriented telco model is under strong pressure.
7. Telcos can become and/or build Telecom Enablers themselves, unless Private Equity investors move faster and do it first.

The Telecom Enabler maximises Telcos revenue yield by supplying the means for all end-user facing entities to empower all their consumer and business customers to gain all possible valuable benefits from applying telecoms in their everyday lives: 

• supports all types of end-user facing providers of products and services whether corporate IT and telecom buyers, telecom resellers/service-providers/ISPs virtual network operators and the full range of retailers from corner shop to hypermarket to online store
• renders all the diverse wholesale voice and data offerings of telcos into a complete palette of "Lego-bricks"
• provides the end-user entities the capability to offer telecoms as "bubble-pack" white-label products side-by-side with their current portfolio, or to bundle telecoms with their current offerings or customise telecoms to the specific needs of their target customers or embed telecoms as an integral part of their products or services
• makes this easy through all the back-up technical support, understanding and fulfilment services
• This is analogous to an airline reservations system that enables hundreds of thousands of travel agents from premium-priced corporate agencies through adventure- or culture-tour specialists to "last-minute" and bucket-shops to offer their target customers the most appropriate mix of flights, hotels, cruises and extras, thereby maximising the overall revenue yield of the travel and hospitality industry. 

The 20 pages "must read" for executive decision makers:

What is a Telecom Enabler - first page of Chapter 2

Top four priorities for Telecom Enabler €500B revenue streams 

• Increased consumer voice traffic - Section 5.1
• Enable businesses embed telecommunications into their products and services - Section 5.2
• Partner with social and business networking to boost the "chat culture" - Section 5.3
• Become the preferred partner for massively multiple service providers who know how their target customers can better apply and benefit from telecoms - Section 5.4

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