Connectivity is not an asset, MWC told

This article was authored by Lachlan Colquhoun, and was originally posted on telecomasia.net.

Serial telecoms entrepreneur Alexey Reznikovich says that building an “enabled gateway” to customers is the key to survival for traditional telecoms players, who need to stop relying on the diminishing returns from connectivity.

Speaking at a keynote session at Mobile World Congress in Barcelona last week, Rezhikovich outlined how his company VimpelCom, now re-branded at VEON, planned to build that “enabled gateway” as he announced a free downloadable app which was a platform combining payments, entertainment and information services.

NASDAQ listed but headquartered in Amsterdam, VEON has more than 200 million global customers. VEON is both the new name for VimpelCom and for the “new personal internet platform” which integrates data analytics and artificial intelligence and includes partnerships with brands such as Mastercard, Deezer, and STUDIO+.

The company claims the app, which is free from data charges on VEON’s mobile networks, “tears down the archaic and inefficient bricks and mortar service model.”

In his keynote, Reznikovich painted a dark vision of the current state of the telecoms industry, claiming that its “corporate and bureaucratic” culture was scaring away young talented people, who much preferred to work at internet companies such as Google and Amazon.

“Young people don’t want to work for us,” he said.

The telecoms industry had worked “very very hard” in the last five years but “nothing has moved the needle.” He likened the industry to a “squirrel in a wheel” that was going as fast as it could, but not getting anywhere and was now exhausted.

“What are the three big lies of the telecoms industry?” Reznikovich said.

“The first lie is that data monetisation is coming. Well we are still waiting.

“The second is that we have billions of customers. Well are they really our customers or are they people who just tolerate us and are really customers of someone else?”

“The third lie is that we are utility so we have stable returns, and because we have spectrum allocations that is our safety net.”

EBITDA multiples for the telco industry were at around 6, while utilities were at multiples of 12 to 16, so it could not be said that telcos – which often had up to five competitors in markets – were utilities.

Reznikovich asked the MWC audience to raise their hands if they believed there was a bright future for the telecoms industry. Around 15 people in an audience of more than 500 raised their hands.

“I believe there is a bright future, but not in the traditional sense,” he said.

“We really need to shift the paradigm, and create new horizons, but without software there is no tomorrow for the telecoms industry.”

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