Once upon a time telecommunications meant phone networks, but as connectivity has become ubiquitous telecoms companies are looking for ways to become more than just utilities or sets of ‘dumb pipes’ and the scope of their venture investments has expanded accordingly.
So what exactly is strategic for a telecoms firm in 2022?
“What is relevant in the telecom space today is not what was relevant 10, 15, 20 years ago,” says Mario Mele, vice-president of corporate planning and strategy for Telus Ventures, the investment arm of Canada-based Telus.
“Things like basic connectivity are more than just table stakes now, but it’s ‘what’s that next level of connectivity in terms of the internet of things and the specific areas of the internet of things (IoT)’?”
Telus Ventures is typical of the new breed of strategic telecoms investor, exploring not only core telecoms and network technology but areas as diverse as digital health and agriculture technology, reflecting the areas into which Telus itself has entered, as IoT technology expands the realm of connected technology.
Singtel Innov8 has invested on behalf of Singapore-headquartered telecoms group Singtel since 2010, backing companies in a range of consumer-facing sectors and in particular online services providers. Singtel has begun offering entertainment content and mobile financial services to customers and that feeds into Innov8’s strategy, along with technology that can protect the increasing amount of customer data those added services require.
In the full telecoms report:
- 5G starts to pull telecoms sector out of investment doldrums (free to read)
- Web3 is a ‘game changer’ for telecoms says Telefónica Ventures (free to read)
- Singtel on the hunt for new 5G tech with extra $100m (free to read)
For subscribers: - What is strategic investing for a telecoms company in 2022?
- Investments in telecoms startups halved in value last year
- Telecoms incumbents part of $50bn worth of exits in 2021
- A resurgence in telecoms funds?
- Fundraising by university telecoms spinouts picks up
- SoftBank creates ripple of job moves in telecoms sector
“We’re looking to invest in the next generation of digital services and platforms that could potentially be partners for members of the Singtel group,” says Innov8 founder and CEO Edgar Hardless.
“Digital economy is a trend we’ve been investing in for many years and that’s just going to evolve if not accelerate. Cybersecurity is also something we’ve looked at for many years and will continue to be very important going forward. Customer data privacy is something near and dear to our heart, and we’ve been involved in that space for a number of years.”
Core technology still needs building
That’s not to say core telecoms technology is no longer a concern.
“In terms of connectivity, there are a lot of networks and a lot of challenges along the way,” says Pablo Moro, head of investments for Telefónica subsidiary Telefónica Ventures.
“For example, open-source [wide-area networking], network virtualisation and added value on top of the networks. There are a lot of startups there, and we have a challenge to find them and analyse them so we can make investments there.”
Swisscom’s corporate venture unit on the other hand pursues a dual mandate, investing in directly strategic companies internationally while pursuing a more diverse range of startups in its home country of Switzerland, where it can benefit from a broader range of services, according to Dominique Mégret, head of Swisscom Ventures.
“Internationally, it’s very focused on telecom, IT and the cloud, where we can add strategic value, because that’s the only way to get with top VCs,” Mégret tells Global Venturing. “If you are a customer or you can help American companies coming over to Europe with business development, that is how we justify ourselves investing in those companies.
“In Switzerland, we are a lead or co-lead VC and we’ve got a very broad approach: deep tech in particular, because it’s a country with a lot of deep tech. It doesn’t have to be linked to Swisscom directly because anything we can do to grow the Swiss tech ecosystem is good for the country and for Swisscom.”
5G heralds new opportunities
“How important is 5G? I think it is the next evolution of where life is ultimately going,” says Mele.
“If you look around, what is ultimately happening with the evolution of all technologies is that having a phone and having that connectivity wherever you might be, at the speeds and at the needs that you otherwise have, regardless of industry, regardless of service, is fundamental to today’s economy as far as I’m concerned.”
Although its global rollout has been slow thus far, the general consensus is that 5G will enhance the scale of existing digital products while also driving through new technologies. The telecoms companies will be in charge of putting that network in place, and so it makes sense for them to be investing in technology which will become more viable with faster network speeds and lower latency.
“There’s a huge impetus for us to look for potential solutions that can drive usage of the 5G network,” Hardless says. “A lot of it is happening on the enterprise side, though we’re also still looking at the consumer side and which applications are going to drive greater adoption of 5G.
“What we’re seeing is that there are a lot of innovations and new technologies coming out that want to leverage the low latency, multi-connectivity, high-bandwidth capabilities of 5G, and so we feel now is a really good time to make sure we have sufficient capital reserves to be able to deploy into the new technologies we think will help drive better services to customers on our 5G network.”
The Web3 rush reaches the telecoms sector
The biggest development in the tech space over the past two years has been the rapid growth of Web3 – the blanket term for blockchain-facilitated technologies such as NFTs, cryptocurrency and the metaverse – and although it may not seem a natural fit for telecoms investors, it can support sectors like online gaming in the consumer space and data management on the enterprise side.
“Web3 is going to be a game changer,” says Moro. “I think we as a telco are a very relevant player because all the themes of Web3 are going to be through the internet – through the pipes – so at the end of the day, the telcos have a really relevant play there.”
Telefónica’s offering has expanded to take on areas like NFT collections and it formed a Web3 development agreement with blockchain ecosystem provider Polygon in March. It is preparing for a company-wide Metaverse Day at the end of this month that will showcase its work with Web3, tokens, NFTs, virtual and augmented reality.
“Within Web3, we have seen a lot of spaces there, like play-to-earn, tokenisation, virtual and augmented reality,” Moro says. “In Web3 last year, there was $27bn of investment and in cybersecurity there was only $20bn.”
Swisscom Ventures’ interest in Web3 is on the infrastructure side says Mégret, citing its 2019 investment in Fireblocks, a custody management platform for digital assets that is now valued at $8bn. Singtel Innov8 is still formulating its Web3 strategy but is actively exploring deals across the sector.
“Enterprise blockchain has been around for a number of years but adoption is only coming about now,” Hardless says. “We’ve been investing in that space for a couple of years to learn about it and make sure those insights are provided to our business units.
“Similarly, things are happening in new areas like the metaverse – both consumer and industrial – and we’re investing ahead of the curve in what we think are some of the emerging players in the space who could potentially become interesting partners to Singtel group members over a period of time.”
ESG becomes a greater concern
Telecoms companies are also following their peers elsewhere in the corporate realm by getting more into environmental, sustainability and governance (ESG). Swisscom Ventures has quietly set up a small ESG fund while Moro predicts energy transition and sustainability will be two of the three key technology growth areas in the near future along with the metaverse.
“Energy prices have gone up and there’s a big drive by governments and by investors, in terms of focusing on sustainability,” Hardless says.
“That’s becoming even more important now, corporates are waking up to the fact they need to figure out how to measure their carbon footprint. How do they monitor it, validate it, audit it – all these things are starting to emerge, and what we are seeing now is the emergence of several tech platforms trying to help enterprises manage what is quite a complex space.”
For Singtel a key interest was technology to cool its data centres in a more efficient way. But as governments introduce more regulations and global heating impacts the climate more heavily, the range of sustainability-based offerings has broadened, and Hardless believes the space will reach ‘critical mass’ in the next 12 to 24 months.
“It’s very clear it has now become very important, but as a venture investor, we can only invest in industries once they appear,” he adds. “And it’s only in the last two or three years that we’ve seen a growth in companies which are now trying to help enterprises of all shapes and sizes get a better understanding of what they can do to reduce or limit their footprint.
“We feel it’s a good time to be deploying capital, which will benefit Singtel and its group companies directly, but which will also help us evolve and understand this important space”
Feature photo courtesy of Gian Cescon via Unsplash.
