Could you share your thoughts on the current state of the telecom business and industry in Europe? In what direction do you see the industry headed?
Our industry is under transformation with tremendous opportunities, but there is a lot of stress. What was right a few years is now wrong. Remember a few years ago, there was only voice, one telco operator by country, pushing their product. Now you have 160 operators in Europe, and they are under a huge amount of stress. At the same time a lot of new companies are rising, we call these the OTT.
With so many operators doing business in Europe, what are some of the issues the telecom industry must deal with when compared to other geographies like the North America or Asia?
It’s a very interesting time for our industry. On one hand, you have fantastic companies, great wealth creation and growth. On the other hand, the traditional market is really suffering. Just in Europe, you have 160 operators, 4 in the U.S., 3 in China. There is a huge pressure, pressure on the price, pressure on the cost, pressure on the margin, and a lot of expectation.
What issues do you see as the root cause of the problems facing telecom operators in Europe?
There is an explosion of 3G traffic. By 2020, this traffic will be multiplied by eleven. At the same time, the revenues are flat, but in the best case, we are in deflation. It is very difficult for an operator to keep the investment and cope with the pressure on price EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and market expectation. If we don’t pay attention, we are going into a war. We need to reinvent the model, where the financing of the infrastructure will be done by not only the operators but third parties.
What should the telecom industry do to best position themselves for success in the future?
New companies are built around the customers, they are viral. You build an app, it goes around the world. It’s very difficult for those two worlds to work together. It is an ecosystem because everybody needs each other. The telco operator needs the OTT to create the traffic and the OTT needs the operator to get the infrastructure.
What will be the most important factor that industry players must deal with if the digital revolution is to take place?
For me, the most important thing is to define what is the core and non-core business of the players. When you look at the telco operator, clearly the core business is to build the company around the customer, whether they are consumers or whether they are enterprises. The big issue is about the network: some consider the network a core asset, some don’t. When you look at the CEO’s, a CEO who comes from the retail industry will think about the customer, the brand, the offer. A CEO who comes from the telco industry will think about the network.
The growth will also be fueled by all those new companies, who not only allow us as a citizen to have an easy life but also offer investors new opportunity ecommerce, big data, all those new application that create value. Not only at the transaction level, but also help us to gather holistic information around the people. So who will be the winners and losers, I don’t know yet.
In what ways does the European telecom market differ from the rest of the world?
I’m traveling around the world all year long, and I am amazed to see the different dynamic. In Europe, clearly we are struggling. 160 operators, we have room for maybe 60, 80. There is a lot of pressure on price, a lot of pressure on investment that is why we are late by the way. We are late on LT, we are late on 4G, and we are late on fiber. If you go to the U.S., it is pretty good. The ARPU (Average Revenue Per User), the revenue per user, is quite high, $80, $100 and its normal, compared to $15 in some countries in Europe.
The U.S., I think, has caught up with the late start into the mobile industry. Now, you have a very good 4G, you have good access at home and I think the ARPU is accepted by the market. My son, who is a student in Boston pays $100 a month, and is happy, and he has a student budget. When you go to Africa, this is a gold mine. Everybody wants to be there. Most of the OTT wants to capture the people in Africa. The issue is to build infrastructure. There is a lot of opportunity and money available. When you go to Asia it is fantastic, you have scale, you have an appetite for technology and you have also technology. So going around the world in our industry is a very interesting trip because no region looks the same.
Where do Over the Top (OTT) players fit into the picture and what kind of role will they play?
There has been a lot of discussion, OTT versus telco operators. The good telco operators, the bad OTT. I think because it is an ecosystem, we all need each other. An OTT will never invest in people. At the same time, a telco operator has people on the ground. The next generation model will be to have all parties working together and doing what they know best.
How will these technological changes impact people on a day to day basis?
One thing that has changed the world is the access to knowledge by everybody. We move from a world where “I know I am” to “I know I share”. “I know I am”, it means the knowledge was shared by very little people. Now, the knowledge is everywhere, everybody has access to knowledge. It is very interesting to see how R&D works. Of course, large companies are in the center. But the smart companies have opened their R&D to the world. Lots of people around the world, in university or people at home are working simultaneously on the same subject at the same time. And for me, the next generation product will be invented there. Not in a lab, but by a group of people working on a project, sharing knowledge onto the apps about something that will create value for communities.
Can you identify some of the concerns you have with so much change taking place?
My biggest worries today are what I call “close the gap.” Between now, and the end of 2020, there is a lack of CAPEX, OPEX to fund infrastructure and absorb the huge amount of traffic. We estimate that this gap is between 25 and 30 billion Euros. So we need to be very creative to see how those infrastructure changes will be funded, not on the original way. In our digital institute, we are very worried about the future. We are very enthusiastic about the technology, but we are very worried about the financing of the infrastructure.
We need to be creative, we need to work with all the stakeholders, public authorities, countries and also the big investors, to fund and build the infrastructure we need to absorb all this booming traffic.
What do you see as the core of the telecom business, the Network or the Customer?
Earlier in the year, there was a lot of discussion about networks, and lots of discussion about SDN, Software Defined Network, and Virtualization. And clearly there are two camps, the one who thinks that network is core and the one who thinks the customer is core. As always, the choice will be between the two. However, when you look at the growth of the traffic, the aspiration of the customers, the speed at which the new applications raise, you need to have very agile software application, and only SDN can offer that. So at the end of the day on the same software and the same application you will get provisioning, billing, whatever application you launch. And also the real-time monitoring of the network so when there is a peak, the network will be redefined in real time. That will help define, design and operate networks that will absorb this booming traffic.
With the industry in transition, and change happening all around us, are you optimistic about the future of the industry?
The good news is that at the end of the day the winner will be the consumer, whatever happens more people will have access to knowledge, more people will have access to applications, and the trend is very good for all the citizens around the world. So I am very, very optimistic.