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Global 100 Telecoms

European and North American telecom providers faced consolidation and disruption as the markets recovered economically and major players sought to strengthen their networks, advance convergence and improve customer experience.

Flush with cash following the sale of its stake in America’s Verizon Wireless, UK-based Vodafone agreed to purchase Spain’s Ono. The transaction, along with the earlier acquisition of Kabel Deutschland, a German cable operator, strengthened Vodafone as a provider of high-speed broadband. These deals cooled speculation about a major trans-Atlantic hook up in which the American telecom AT&T would acquire Vodafone.

Meanwhile, challenger strategies disrupted the pricing model of the telecom category in the US, which is dominated by Verizon and AT&T. Not long after US regulators rejected the merger of T-Mobile and AT&T, T-Mobile introduced pay as-you-go pricing in a market where providers traditionally lock in customers to multi-year contracts sweetened with deep discounts on smartphones.

T-Mobile, the fourth largest US telecom, also offered early phone upgrades and free international roaming. The brand, which is majority-owned by Deutsche Telekom, added about two million customers in 2013, reversing a decline. Japan’s Softbank, which acquired Sprint, the number three US telecom brand, announced its desire to purchase T-Mobile. Combining Sprint with T-Mobile would create a telecom with over 100 million customers, roughly the size of the market leaders AT&T and Verizon. Other potential category disruptors include:

Virtual operators

Chinese regulators approved the applications of two electronics retailers, Suning and Gome, to offer telecom services. They have joined other non-telecom brands, such as Virgin, Tesco, and Falabella, the Latin American department store. These brands serve as Mobile Virtual Network Operators (MVNOs), renting capacity from telecoms and branding a service to gain a greater customer share of life.


Facebook’s acquisition of WhatsApp may shift more voice and text to free, over-the-top Internet alternatives. Data, more than voice and text, produces revenue for the carriers. In addition, the increased availability of free Wi-Fi in public places may divert more data transmission.

On-demand streaming

Recent developments threaten the pay-for-view model that drives revenue for telecoms. Comcast, America’s largest cable network closed a deal with Netflix and entered talks with Apple. These arrangements potentially offer content less expensively, with subscriptions, and without the delivery problems that impact streaming quality during high-use periods.

Building capacity

Brands addressed the key and ongoing challenges of the category: providing enough bandwidth to smoothly handle rising data consumption; and becoming more than a commodity delivery system ignored by consumers – until something goes wrong.

Both challenges continued to become more difficult for telecoms worldwide. Data usage increased with improvements in mobile device processing power and the option of multi-tasking on a single screen.

Vodafone planned to spend some of its Verizon proceeds on capital investment to strengthen its European network. Telecoms sought advantage of scale, investing in 4G infrastructure and amortizing the costs over large customer bases.

The high costs of these investments resulted in more infrastructure cooperation among carriers. With pressure on revenues because of Europe’s economic slowdown, telecoms requested an easing of rules to permit more consolidation and 4G rollout. Regulators have prevented further consolidation in the US.

Differentiating brands

To strengthen differentiation, BT added content. The UK-based telecom purchased the rights to English Premier Football, adding over two million new subscribers and driving up revenue. The added value helped justify premium pricing.

Vodafone offered customers a pricing package with content that included either Sky Sports or Spotify. Vodafone’s balance sheet strengthened with the $130 billion sale of its 45 percent stake in Verizon.

In a category noisy with competitive claims, the challenge to differentiate is compounded because consumers can be skeptical about what they hear. In the US, Verizon promoted its technical expertise in a series of full-page newspaper ads extolling its first place finish on a variety of technical metrics.

AT&T made similar points in an approachable style with a TV campaign titled “It’s not complicated,” in which a man in a suit sits at a low table with school children and listens to their humorous, but logical, explanations of why “big is better” or “now is better.”

Fast growing markets

European brands, looking to diversify out of the commodity constraints in their home markets, looked for profitable volume growth in fast growing markets. By purchasing the stake of its local minority partner, Vodafone took control of its business in India. It continued to develop business in Africa through Vodacom, a subsidiary.

Meanwhile, South Africa’s MTN continued to expand in the Middle East and in Africa. The Indian telecom Bharti Airtel is among the competitors also providing mobile services in Africa, an area with over a billion people underserved by fixed-line infrastructure and Internet.

Movistar benefited from the improvement in Spain’s economy and the brands extensive presence in Latin America. A combination of financial performance and brand strength drove its 56 percent increase in brand value.

China Mobile remained the world’s largest telecom by far, with over 750 million subscribers. After launching 4G, it rapidly expanded its network and introduced the iPhone. It also offered two low-price handsets under its own brand to increase its share of the 3G market, where it competes with China Unicom and China Telecom, which also are building 4G networks.

Competition heated up in Russia, with the merger of state-owned Rostelekom and Sweden’s Tele2 to create a fourth telecom in a market dominated by MTS along with Megafon and VimpelCom.


This year’s challenge, at least in the US, is the availability of telecom service without a contract. It will resonate with consumers who, as a general rule, dislike being locked into anything. You hate it, but you do it. Once a brand breaks that paradigm and says, you can get good connection without signing your life away, the consumer will pay attention. The big players will feel enormous pressure. They’ve become comfortable with the category’s stability. Contracts were seen as normal. But in the future, more consumers will ask, “If I can’t see the difference, why pay the difference?”

Allen Adamson
Chairman, North America