TMT companies emerged as winners during the pandemic crisis. Whether it was telecoms needed for home communication and remote work, tech firms recording the historical growth of market capitalizations whether they were cloud, e-commerce, streaming, gaming, AI, or last mile players, they all found themselves in the best position to benefit during the pandemic. Furthermore, this sector is now more relevant than ever. Now, it is all about finding new business models and having ideas to create new value.

TMT

Technology firms are attracting investors. This year is a record one for technology in terms of the number of IPOs with hundreds of billions of dollars being raised by technology firms across the globe. Countries in Central and Eastern Europe now have unicorns and the number of start-ups is rapidly growing again. There was a remarkable IPO of UiPath, which became a publicly traded company, reaching a market cap of 36 billion US dollars.  

Several traditional sectors will be disrupted by the new technology-driven competitors. One of them is Healthcare. The pandemic has shown that remote medicine can work and remove lots of the frictions from the traditional process of going to a medical institution to see a doctor.  

Another is Education. Many universities have switched to online learning, and after settling in to the initial adjustments, the level of experience offered is not lagging behind the traditional classroom. Furthermore, the experience can be delivered to students at a significantly lower cost if delivered online.  

The Financial sector is already adapting with fintech apps, developed by tech firms, replacing time-consuming visits to bank branches and AI removing the need to go to physical locations to get insurance. 

There are indeed many opportunities to remove frictions from customer interactions by developing technology-based solutions and deploying new business models. For tech firms, key challenges will be in scaling-up their businesses and selecting who the best investors are to support them along the way. 

Telecoms (or telcos) have also fared well during the pandemic. Demand has been high for their services and many have managed to get growth on both top and bottom line.  

Many countries and operators have made commercial deployment of the 5G service. However, there are missing elements, namely the new business models and services. The industry has not changed much from that perspective in the last decade as it is still based predominantly around the communication services whereas, today, data plays a more important role while customer experience has been improved. However, investors sentiment is still not with telecoms. Arrival, pre-revenue EV company has similar market capitalization like whole British Telecom that earns 23 billion GDP a year in revenues and has EBITDA of 34%. Investors would like to see more growth from the new services. One solution to close this gap was to focus on the adjacencies. 

However, the only substantial case of that was telco’s engagement in streaming media. In this respect, the event of the year is the disposal of Yahoo and AOL by Verizon and recent spin-off/merger of WarnerMedia, owned by AT&T, with Discovery. Overall, the telco and media convergence has not worked well as there were simply not enough synergies to justify the initial high investments into the media and content that are needed to keep pace with the global streaming giants such as Netflix, Disney and Amazon.  

Telcos need to do better and should use the rest of 2021 and the wave of post-crisis consumer hunger for new products and services. In line with this, they need to come up with better, novel business models and innovations. One possibility is to engage in broader platform-based businesses, which were proven winners in 2020. Many sectors will be impacted by new platform-based entrants, whether that is health, education, automotive, home, transportation, insurance, or other sectors.  

Other areas that require innovation are around customer engagement. The pandemic response has proven that telcos can operate fully when digitally enabled in their customer touch points. Now, they need to stay on this course and radically re-think and re-shape their customer engagement to close the NPS gaps towards the most advanced technology businesses. 

Dejan Ljuština