New Telecom Market Alters Investment, WCA Experts Say
The telecom investment community is more reserved in the current boomlet than in its predecessors, but there are sweet spots to hit, panelists said Tues. at the Wireless Communications Assn. conference. Investment opportunities are present in the content, spectrum leasing, and specific international markets, they said, though incumbents’ sheer size makes the venture capital community a bit leery of smaller operations generally. Smaller companies that show an ability to adopt a large customer base rapidly have an advantage even in the face of other shortcomings, the investment analysts said.
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Telecom is an industry naturally unfriendly to venture- level investment, said Mark Ein, Venturehouse Group CEO. With a shrinking number of consolidated giants on the provider side dealing with a shrinking number of giants on the vendor side, clever innovations have a harder time making it to market, he told us. Unlike the Internet boom, when many hardware innovations were essentially plug-and-play and the market “cool” was to go with startups, entrepreneurs now face major interoperability concerns just to get their product out of development, he said. Proprietary standards, concentrated buyers and a lack of money in the mobile space make Ein particularly bearish on wireless, he said.
But there’s business out there, especially on the content side, he said. With all the “great networks” now in deployment, creative investors can still make money in telecom by offering wireless broadband-based video, music and entertainment innovations. A good management team coupled with a disruptive content application could convince investors easily enough, he said. Another positive development will be the fallout from AWS spectrum auctions, he said, where smaller companies will have the ability to grab “real estate.” The market isn’t quite as “frothy” as during the PCS auctions, when there was business plan after business plan crossing his desk, Ein said, but “there’s a good amount of new business models out there.”
Anyone who develops a true “always-on” device for mobile broadband will have a window into the market, said Derek Mattson, managing dir.-Media & Telecom Mergers & Acquisitions, Friedman Billings Ramsey. Small but very important factors like true mobile capability and screens rendered in familiar views will get investors’ attention, he said. Just as important, he added, could be cash flow and ability to retain customers (even with a small base).
For larger companies, the answer may be in developing markets, especially Brazil, several international panelists said. Brazil’s urban wireless market is shaping up to look just like S. Korea’s, said Lelia Loria, pres. of media conglomerate Grupo Abril. The company was the first to bring triple play and HDTV to the Brazilian market and uses its leverage in broadcast to push its broadband image, she said. Paul Thurneysen, vp strategy, LCC International, said Brazil is poised to overtake Japan next year as the 4th largest wireless market, a reality that shouldn’t be lost on investors there. “It’s not so much the technology” that a vendor or operator deploys in any developing market, he said, but the adherence to several basic tenets: Coverage, capacity and throughput. Any companies, large or small, that are sticking to those rules should be attractive to investors, he said.
Brazil and Korea is where the money is going, said Thomas Jasny, vp-wireless broadband networks, Samsung Telecom America. Jasny said he’s on 2 panels at WCA, both non- American: “The leadership position isn’t in the U.S., it’s in other markets,” he said.