Bells and whistles aren’t all that, just look at Orange and T-Mobile

When you talk about the telcos in the digital era one of the super trends we’ve been watching is content. But is the desire to diversify causing more damage than good?

The theory is sound. Invest in content to add value to a converged offering and source new revenue streams to counter declining numbers in the quarterly statements. But when you look at the telcos who are making the most positive moves in the industry, they aren’t the ones making super investments in content. They are focusing on the boring job of improving the network and customer experience.

We’re going to focus on a couple of different telcos to argue our point. On one side of the equation you have BT and AT&T, while on the other side you have Orange and T-Mobile US. One side is buying Time Warner and trying to dominate the football broadcasting game, while the other is spending billions on trenching fibre networks and securing important spectrum licenses for the 5G world. One side is struggling to assert itself in the connected economy, while the other is raring to go.

Let’s start with the pro-content telcos; BT and AT&T. The last few years have seen BT go head-to-head with Sky in an effort to control access to football in the UK. It’s an expensive business, more recently BT scaled back its football ambition only paying £885 million for 32 matches a year over 2019-21, and the benefits haven’t really been that exceptional. Growth in video subscriptions have stagnated recently and there have been questions about how good the offering actually is.

On the other side of the Atlantic, AT&T is spending more than $100 billion to acquire Time Warner. Admittedly through this deal AT&T will be purchasing some of the most popular TV assets worldwide, but the whole transaction has proved to be unpopular in some corners of the country, most notably in the White House. Even if securing Game of Thrones is a major coup for the content ambitions of the telco, you have to wonder whether $100 billion could be better spent.

Both of these telcos are viewing content as a means to diversify and futureproof the business for the connected economy where consumers are increasingly hungry for on-demand entertainment. At the same time, both of these telcos are finding their influence in their home markets dwindling and questions are being raised by investors surrounding the suitability of these strategies to take the business forward.

Now let’s have a look at the other side of the equation. Orange and T-Mobile US are two companies which are performing well in a tricky period and laying what look like very stable foundations for the future. Both of these telcos are also spending a lot of money, but the difference here is the investment is being directed more towards the network. It might be boring, it may not grab headlines, but it looks like it is a strategy which is working.

In Europe, Orange has been rolling fibre out like it’s about to go out of fashion. Over the last 12 months, €7.209 billion was spent on CAPEX as the team seemingly looks to create a better customer experience as opposed to trying to compete with the OTTs in the cut-throat world of content.

In the US, T-Mobile has been improving its 4G experience steadily over the last couple of years and is now turning its attention to nailing 5G. CEO John Legere and his cronies aren’t looking to entice customers through attractive content offerings or gimmicks, they are rolling out the network to as many people as possible and making it as fast as possible.

Both T-Mobile US and Orange are making very positive impacts on the markets in which they operate in. There are success stories through awards and positive financial results, and a very optimistic outlook for the next couple of years. The rest of the industry might believe tempting customers through the promise of shiny red balls might be the way forward, but ultimately success is being seen by the companies who are focusing on what really matters to customers; connectivity.

And this seems to be having a very positive impact on the spreadsheets. Orange released its financial results last week, with year-on-year increases popping up all over the place, while T-Mobile US can’t stop bringing on new customers. On the other side of the coin, BT’s CEO Gavin Patterson is looking like a man on borrowed time and AT&T is looking very uninspiring.

Perhaps the relentless pursuit of relevance is ironically making some of the telcos less so. The basic principle of communications service providers is to connect customers to the rest of the world. Maybe some telcos have forgot what their basic purpose is. These are the telcos which might struggle the most when it comes to the next era of connectivity.