What Vodafone needs to do to stay alive, and may be even thrive

A lot is happening in the Indian Telecom market over the last couple of years. I have read much of the analysis around the Indian Telecom market across platform. Many of them have been insightful and educative.

I am not really going to reinvent the wheel here to summarise. A recent post by Bharat Jain, a batch-mate and friend of mine at IIFT, gives a good summary of what has been happening in the market. I think anyone who wants to quickly get smart on the goings on of this market, should definitely read this. Link given at the end of the article.

However, if you do not have the time to go through, a short summary here:

• Significant consolidation from 7+ players in 2011 to 4 players in 2020
• Measures being consciously taken to reduce debt
• Off late, significant interest and investments by Tech giants from West

Many analyses like these triggered some unstructured thoughts in my mind.

1. What can players like Vodafone really do in this time?
2. Are there upcoming opportunities elsewhere which can be tapped?
3. What can they do differently to counter Jio?

Prima facie #2, looks counter-intuitive. Where can there be any real opportunities in this Indian Telecom market? There are only so many more people who will need phones, data.. Yes, Digital penetration overall is growing. However, going behind this marginal growth is not sustainable for a player like Vodafone with Jio and Airtel as a competitors.

There is no magic wand to solve the challenge, but all may not be lost. Here's why

Much attention seems to going towards consumers who need mobile connectivity, while another key segment is always left high and dry.

Enterprises is a segment of the market which is getting very little attention by many but may be key for players like Vodafone

May be it's because not many people understand it as well as Consumer market.

There are 2 main reasons for why Enterprises makes more sense than Consumers for a player like Vodafone.

1. Strategy for Jio seems to be more around driving stickiness in end consumers by being a platform that brings cable, data, content together. Focus on Enterprises seems to be relatively lesser. Do you want to try and win a battle you have already lost, or do you want to get real and live and grow else where?
2. Addressable market in Enterprises is growing more than is visible. I didn't really convince myself about this with an n-digit $ figure from a research report, which I will always be second guessing. An on-the ground conversation with a prospect really did it for me.

In the course of meeting some prospects and clients, I happened to meet a family-run manufacturing business based in a Tier 2 city in India. It was everything that one would expect from a traditional family-run firm. Executives in their 50s-60s who have been in the company for decades, with a certain way of looking at business, its growth, ecosystem etc. Hierarchical, bureaucratic... Old school in short. Definitely not the Silicon valley-type company that raises $xxM from investors, burns it in 5-6 months of R&D on an exciting tech product.

Their request really surprised me.

They wanted us to advise them to monetize their nascent in-built IoT software.

This really was interesting. IoT is no longer a simple buzz word, but even traditional businesses have now understood potential of IoT and have started investing in it.

What makes this interesting for Vodafone specifically is, IoT will need an underlying Telecom infrastructure to work. Connectivity is the artery through which the life-giving data (blood) flows across the network. Without it, IoT would have remained a buzz word.

Machines, which are increasingly going to be sensor-fitted, will need connectivity to appliances on the edge, which in turn will need connectivity to broader network outside and there on to the data center and end user (business / consumer).

With govt. initiatives like Digital India, Smart City, this is bound to grow even further.

Assuming that enough is happening for increasing the TAM in Enterprises, there are 2 things Vodafone needs to do to capitalize on this.

Directly participate across the IoT value chain: End-to-end from Sensors to Applications for end-users

The IoT ecosystem is right now very nascent. The only component in the value chain which is potentially the most mature is the connectivity piece, where players like Vodafone play.

What this means is, though consolidation is over within the Traditional telecom market, if you are willing to look into the IoT ecosystem, there is growing market that is fragmented waiting for consolidation.

An E2E Bundled solution is of huge value for Enterprises, saving them lots of effort in multiple vendor management, especially, for companies which have intent to transform but don't necessarily have the in-house expertise for executing these projects. A lot of companies in India fall under this bucket.

If acquisition is not possible, close strategic partnerships is at least needed across the ecosystem to get as close to consolidation as possible. But even that does not come close to having the capabilities in-house through acquisitions.

Fund this transition with investments from outside

It may all sounds hunky dory and simple in the earlier point, but none of that is possible without adequate cash.

Its not going to be easy for a player like Vodafone to raise cash in its current state.

However, its not like investors in Jio are the only folks out there who believe in the Indian Technology story. West understands India much better nowadays and also knows the potential of technology in India.

The need of the hour is to do investor roadshows with this vision and more on-the-ground plans and leads in the pipeline to execute the vision.

But it has to be done quick, before its too late. For all you know, the next ace up Mukesh Ambani's sleeve could be Enterprises.

P.S: Link to the article referenced earlier: https://www.dhirubhai.net/pulse/indian-telecom-industry-why-appeals-us-tech-giants-bharat-jain/?trackingId=%2BUJ8FYGkS8Wp9RO2NGzdvw%3D%3D