Investors want to see digital business model differentiation, says Goldman Sachs

Telecoms investors are excited by the disruption affecting the industry, but cautious amid emerging business models, the Managing Director of Goldman Sachs’ Technology, Media and Telecom Group has said.

Nick Pomponi, speaking at the opening of the TM Forum’s annual conference in France on Tuesday, said it was “one of most interesting times since the introduction of mobile”.

But he warned that the investor community remained cautious as telcos try to figure out what new business models would drive growth.

“Investors are very excited by the disruption but [remain] cautious,” Pomponi said in a keynote discussion. “Are business models competitively differentiated and sustainable?”

Although he noted that investors understand it will take time to get them right, he warned price wars and giving services away for free “are not sustainable”.

He added: “Innovation requires significant amounts of capex [and] investors are concerned about ability to pay dividends.”

Overall, he said he was “bullish” on the telecoms sector in the medium term and on vendors in particular.

Another speaker on the panel, Netcracker CEO Andrew Feinberg, unsurprisingly backed up this view.

“Mobile-first customer interaction opens up many doors to new providers,” Feinberg said. “Our addressable market has grown significantly.”

The TM Forum’s senior leadership focused their keynotes on what operators in particular need to do to succeed.

Collaboration and culture are arguably the two most important elements, according to the industry body’s new CEO, Nik Willetts.

Digital requires “a radically different mindset”, Willetts said, and the industry needs to move from being “an ego-system to an ecosystem”. He added: “The next 12 months will determine the fate of many companies in this room in the next decade.

“If you have the wrong culture and don’t move fast enough you’re going to miss the boat.”

[Read more: TM Forum tackles thorny question of how to measure digital transformation]

GE Digital Europe CCO Deborah Sherry argued the case for collaboration. She said the company was working with Vodafone in the UK’s healthcare sector.

Specifically, the two companies are providing 250 hospitals with connected devices that feature GE Digital’s industrial OS Predix.

“Winning is about collaboration,” Sherry said, reiterating that telcos “need to think about business model change”.

However, the majority of operators who featured in the keynote presentations were not given the best opportunity to showcase if this message was getting through.

KPN, Orange and Telefónica were part of a discussion entitled BSS/OSS 2.0, with Telefónica CIO Phil Jordan not impressed: “We need to kill some of these old terms like BSS/OSS,” he said.

Orange CMO Jean-Marie Culpin talked about the need for marketers to play a more significant role and the importance of real-time capabilities.

It was left to KPN CTO Erik Hoving to attempt to show that a new mindset is alive and well at an operator: “Why do have billing systems at all?! There is no OTT company in the world that sends you a bill!”

Investors are unlikely to have had their concerns allayed, however.

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