Angry Birds have an 'Idea' - that the market can ape!

OK, agree, by the time you read this the news is a bit stale. Rovio, the makers of Angry Bird has tied up with Idea Cellular for carrier billing. Most headlines are reporting this development from the perspective of the gaming company and I am not going much into that analysis. 

But what is equally intriguing is the huge opportunity that third party over the top (OTT) vendors and app developers can monetize by inking similar deals with Indian telcos. 

It is an open fact that no matter what the value proposition is and no matter how the cost benefit ratio pans out, we love our torrents and we download free music as a reflex action. In this market, if gaming, video and e-commerce vendors can tie up with the telecom network providers, it is a win-win situation for everyone

• The OTTs have access to a much larger market (beyond the Apple store hooked metro users) who will be willing to spend a bit on additional services if they do not have to pay immediately - and have the purchase included in the monthly bill - the same thing that holds true for smart bytes
• The telcos also can now participate in the growing data hungry market opportunity than be rendered as dumb network pipes. Similar to the Netflix packages from Telstra and Viber packages from China Mobile, the Indian telcos too can bundle up a few of these apps and offer propositions where the user only pays for the data that they actually consume (and billed) rather than a blanket monthly subscription
• Carrier billing than in-app purchases would also ensure that the revenue assurance bit is taken care of and telcos do not end of losing a lot of revenue since they did not know how their data highways were used

Now before we go all ga ga over this there are a few pitfalls that should be kept in mind

• If we look at the Rovio-Idea deal it is purely a billing convenience. Angry Birds will still keep clogging Idea's data networks and make some other data traffic slower - that needs to be sorted out
• Till now the Indian telcos have been rather shaky on their stand on net neutrality. Now if they do decide to give traffic from Rovio preferential treatment along side joining the much hyped Internet.org, it might just violate the neutrality norms and make it difficult for a small start-up that is trying to popularize its app
• Last but not the least, this might also expose the telcos' billing infrastructure to the OTT servers that might not necessarily reside in India. There is a huge security gap here that needs to be adderressed

For now, this looks to be the first attempt by International OTTs to tap the growing Indian telecom market. Next we might just see Netflix and Deezer 'streaming' in. However, the home grown app front is also getting quite exiciting - that is another discussion though

The Telecom M&A wave - Consolidating or Insulating?

In the past two years, the global telecom sector has been swept by the massive M&A wave. Speaking numbers, the sector had already inked deals worth $250 bn by mid 2015, more than twice the size of deals in 2013. Mostly convergence and scale driven, this disrupted the player landscape as we knew even a year back. This article is an attempt to understand what really has been happening in the market and whether that can be called global in its truest self.

In Europe, large players such as BT and Liberty Global acquired complimentary capabilities, while Hutch and Sky consolidated operations across Europe. There were also a few bolt on deals such as Tesco's Blingbox being acquired by TalkTalk. Consolidation of this scale also meant that massive funds were required. Interestingly most players seemed to either raise equity or dispose non core assets and also wait for the right valuations than get into a debt trap. In that sense the wave also led to some market correction.

The US was not too far in terms of action. This market for long had been battling the saturation weight and cord cutting threat. Top players had swelled in size and coverage and no legroom seemed available. It is at this juncture that three important shifts happened. 1. Charter, previously a #3 acquired TWC and eventually Brighthouse to create a US cable behemoth. 2. Altice, the French telco entered the US markets with the Suddenlink deal and now is looking at Cox. 3. US telco investor John Malone woke up to the benefits of synergizing his US investments with Liberty Global, the European business. While these appear just scale driven consolations, the market impact was massive. US players found an outlet into Europe, a market so similar in terms of macro factors, yet comparatively lesser impacted by cord cutting, net neutrality and regulations. Content owners and distributors were still willing to go the 'Pay-TV' way. Similarly, the size gain by level 2 players meant the end of Comcast and TWC's market duopoly with pure play telcos such as AT&T and Verizon looking for intensely at the TV/content market.

Most of this activity seems restricted in the Western hemisphere with market analysts in that part of the world already commenting that the wave will subside soon since not too many opportunities remain. However, I still feel that a lot is yet to be tapped, particularly in Asia-Pacific. There is a huge opportunity for US and European players to leverage this part of the world - and currently no one is doing that, instead remaining satisfied and insulated in their own bubbles. In that sense the M&A wave is not really global.

1      Telcos from developed markets such as Telstra and SingTel are nearly the same in terms of market dynamics as say a Telefonica or Verizon. There is a huge opportunity to cross-leverage capabilities and try tapping complementary markets. The Western players get a whole new market to cover - a market that is still ARPU driven and churn intensive. The Asian players on the other hand will have access to subscribers who are willing to pay a premium for high speed data and not necessarily eroding the bottom line.

2      In other parts of Asia and Africa, telcos such as Airtel and Zain are surviving in a $5 ARPU environment and yet inking EBITDA margins of nearly 25-28%, comparable with any Western player. US and Europe's complete ignorance here is an imbalance. There is a good opportunity to leverage and to learn the $5 game, particularly as Western telcos battle saturating market on the home turf. There is also a space to explore how OTT content can be pushed on the newly formed data highways of emerging market telcos - content that consumes low bandwidth, is priced economically and yet looks at volume gain.

Needless to say most of them have come from my readings and thoughts from top of the head. Therefore, I do take the liberty of not quoting any source but just penning my observations.