The Verizon-Yahoo deal in the US might be a surprise to most, but could be pointing a new strategy that Caribbean telcos could adopt?


Those who keep an eye on tech news in the United States (US) would be aware that global tech firm, Yahoo Inc., had been under performing for a number of years, and as we had highlighted in a recent post, it had been trying valiantly to turn its fortunes around. However, earlier this week, 25 July, broadband Internet and wireless communications firm, Verizon Communications Inc. (Verizon), announced that it intended to acquire Yahoo!’s operating business for USD 4.8 billion (Source: Verizon).

As indicated above, Verizon is one of the top telecoms firms in the US, having evolved from Bell Atlantic, and initially AT&T Corporation. It is ranked the 13th top US firm  by Fortune, and has 173,300 employees in 2,700 cities, in 150 countries (Source: Verizon) . Further, in 2015, it had annual revenues of USD 131.6 billion, and a net income of USD 17.87 billion.

While the takeover of Yahoo! was not necessarily a surprise, the purchaser was, as there had been speculation that other firms were interested. However, through the sale, Verizon, a formidable and global telecom business, will be acquiring a formidable and global Internet business, which is especially popular for its web portal, its email and messaging services, along with its news services, to name a few.

However, why would a telecoms firm – which provides infrastructure, bandwidth, and connectivity services to customers (residential, business, government, and even other telcos) – invest in an online content provider? The reason is this: although telecoms is integral to all of forms of  electronic communications we enjoy, the business itself is slowing down, and becoming invisible. Additionally, policy makers, regulator and customers at large continue to lobby for the rates for telecoms services to be lowered even more than they are currently, further eroding the return on investment and profits that telcos traditionally had enjoyed.  

Currently, the services and applications that are layered on top of a telecoms foundation are where the attention, and to an appreciable degree, where the value is at. More importantly, a focus on Internet content offers telcos as means to diversify their business, while still complementing their core business.

To varying degrees, Caribbean telcos are plagued with some of the challenges that are being experienced by Verizon and other telcos in developed countries. Revenues from fixed-line telephony, mobile/cellular communication and broadband Internet services have been decreasing , along with the average revenue per user. Moreover, the options available to reverse those losses within the construct of providing telecoms services is very limited. As a result both Digicel and (then) Cable & Wireless Communications, for example, indicated that they would be a decided focus on developing the data and broadband Internet segments of their business. However, is that enough?.

For several years and in many countries across the region, the copper cable network, upon which fixed line telephony and fixed (ADSL) broadband services were delivered, was poorly maintained; hence would benefit considerably from being repaired and upgraded. However, in the environment of open competition, sector regulation and number portability, firms may no longer be able to unilaterally decide their price points. Further, if there are other service providers in the market, customers can choose to vote with their feet and move to another provider that might be offering more attractive products and/or rates..

On another note, zero rated net neutrality has become popular in the Caribbean, and especially with Digicel. Though mobile/cellular data subscribers can enjoy access to online platforms, such Facebook, Instagram, Wikipedia, among others, without depletion of their data cap, which in turn can bolster traffic on mobile/cellular networks, it could be argued that the approach is very passive, when they could better leverage resources to play in the content services space.

It must be highlighted that in addition to Yahoo, Verizon also owns mass media firm, AOL, which in turn owns The Huffington Post, TechCrunch and Engadget. Hence, it is likely that the Verizon is positioning itself not only to influence content services, but also to strengthen and more fully integrate its telecoms platform in the delivery of high bandwidth services.

Mobile/cellular applications, Internet services and platforms  developed in the region could benefit considerably from the support of Caribbean telcos (not just Digicel and Flow), in terms of investment and the delivery of their products and services both within the Caribbean and internationally. However, Caribbean telcos may need to see themselves not just as providing telecoms infrastructure connectivity, but also as fostering and nurturing the delivery of content to their valued customers.

 

Image credit:  Flazingo Photos (flickr)

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