If the world was simple when it comes to building telecoms infrastructure, we would just build a network, customers would ask us to connect them to it and then they would pay us for the services over a long period of time, thereby assuring our investors of a return on the capital employed.
That was the thinking at the start of the millennium, and it clearly didn’t work, with many operators ending up with Chapter 11 protection and the like. It also led to multiple networks being financed and built literally next to each other, with them all competing for the same finite set of customers.
The world has changed and nowadays we are all faced with several economic realities:
- Primarily, the first customer on the bus isn’t going to pay for the bus, so even if we are building an asset for another operator the asset needs to be leveraged by finding other customers for it.
- Secondly, it takes time (and usually longer than we first thought) to sell whatever we are selling, whether that be FTTP to Mrs Miggins or Data Centre-to-Data Centre connectivity to a partner or a carrier.
- And thirdly, most of us have investors and investors who are usually impatient – so we all need to leverage the asset quickly.
Therefore, partnerships are the answer! Let’s explore why:
- Having multiple partners all engaged in trying to sell the asset at the same time will bring in more customers quicker.
- Partnerships also give us assets to sell in areas where we haven’t even built yet.
- A concentrated sales effort means that the end-user is much more likely to receive the message relevant to them.
- An indirect model such as this may mean lower margins on a percentage basis, but it will surely increase the overall return and the key element is that it will happen quicker.
- It will speed up the rate of return thereby making your FD and your investors very happy.
- It will speed up the deployment of full fibre, thereby delighting Mrs Miggins.
And finally, it will speed up getting your hands on more of the investor’s capital, which in turn speeds up the rollout and so the cycle goes on…
The world has changed and nowadays we are all faced with several economic realities.
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