Diversify and conquer

Do telcos need to start diversifying? And when you already offer voice, data and video to residential consumers, mobile consumers and businesses of all sizes and in all vertical markets, what does diversification really mean? There are some who would say that telcos already have gone too far in trying to diversify into the world of self-branded TV packages, but as landlines disappear, voice market value vanishes and broadband growth modulates, where else is a telco to go?

Canadian telco Telus last week explored one possible answer, saying it would invest $100 million over the next three years in its 1,500-employee Telus Health Solutions unit. Telus acquired healthcare data services and transaction processing firm Emergis almost one year ago, and at the time, the deal might have inspired a collective scratching of heads. Now, it seems clear that Telus sees the healthcare sector in particular as an area in which it can generate new revenue by delving deeper.

As the telecom industry faces the likelihood of being more harshly affected by macro-economic doldrums in the months ahead, should U.S. telcos do the same? It is not immediately clear to me whether a major U.S. telco would be allowed, regulatory-wise, to acquire a major sector specialist the way that Telus acquired Emergis, but regardless, you could argue that the big U.S. telcos already have positioned themselves strongly enough through the managed services they offer in various vertical markets to reap the benefits. If there is room to grow and generate more revenue from sectors such as healthcare, perhaps it can be accomplished simply by forging stronger, deeper relationships with those customers that eventually lead to telcos taking over more responsibilities.

On the consumer side, there is early evidence that telcos are looking to diversify by becoming household technology helpers for consumers with highly-connected homes. They are leveraging those existing broadband connections into something more.

Diversification, of course, has a double meaning. As telcos diversify their revenue possibilities, they may not necessarily need to diversify their organizations, or, more specifically, their asset holdings. The telecom industry has indeed consolidated into fewer, larger, broader-reaching companies, but diversifying to attack new market opportunities in a timely manner requires leanness. We have wondered recently if more telcos should outsource voice or traditional landline management in some way, thereby allowing them to focus even more on services. Maybe rather than adding in order to diversify, telcos should instead subtract. Beware of conglomeration, a word whose sound could not be more apt to its meaning and consequences.

-Dan

For more:
- The Toronto Star has Telus coverage

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