A week in telecoms: Telefónica and KPN unveil growth strategies and NTT DOCOMO tackles supply chain emissions

Operators chart courses for growth  

Several operators have unveiled strategies and outlooks for longer-term growth alongside their financial reports this week, including KPN and Telefónica.

As Telefónica approaches its 100th anniversary next, the operator signaled it was entering a new phase with the launch of a three-year strategic plan for Growth, Profitability and Sustainability (GPS) alongside its results for the third quarter 2023. Over the next three years, the operator targets annual revenue growth of around 1%, EBITDA growth of 2% and free cash flow of more than 10%.

The telco outlined plans to keep growing consumer and B2B revenues as well as to further develop wholesale and partnership models. Here, the operator flagged new revenue opportunities such as Network-as-a-Service, where developers and software integrators are “new customers”, and API-based initiatives like the GSMA’s Open Gateway. Such new revenues are expected to gradually offset a slight decline in traditional wholesale services over the three-year period. In consumer and B2B, Telefónica expects annual revenue growth to be approximately 1.5% and 5%, respectively.

“At Telefónica we have a new vision and a renewed ambition to lead the future, because we are not just a telecommunications company, we are something bigger and even better. We are now a supercomputer,” said José María Álvarez-Pallete, Chairman of Telefónica.

Ahead of its strategy announcement, the operator also moved to strengthen its position in Germany, one of its core markets, with an offer to acquire the 28% of shares in Telefónica Deutschland that it does not own.

Meanwhile, KPN introduced strategic ambitions for the period from 2024 to 2027 with a new plan called Connect, Activate, Grow. Central to the operator’s plan is a focus on cost savings that can be derived from automation and artificial intelligence (AI) in operations. KPN said it aims to transform its operation model using automation and AI to “realize exceptional service experience and drive substantial savings in indirect costs.”

Another cornerstone of the plan is to continue its fibre rollout to cover 80% of households in the Netherlands by the end of 2026. The operator’s fibre footprint currently covers 55% of premises in the country. While the build continues, KPN expects annual capital expenditure to be approximately €1.2 billion through 2026 after which it will decrease to less than €1 billion in 2027 when the fibre investment tails off.

Vodafone’s Digital Asset Broker biz becomes Pairpoint

Vodafone and Japanese conglomerate Sumitomo have unveiled Pairpoint as the new brand for their Economy of Things joint venture, which was formerly known as Digital Asset Broker (DAB). The JV was established as a standalone business in May this year with Vodafone and Sumitomo owning 80% and 20%, respectively.

The new company houses Vodafone’s DAB platform for Economy of Things, which enables devices to “interact and trade securely” using “decentralized ledger technology.” The company describes the Economy of Things as the “next step” in connectivity and sites research from STL Partners that predicts up to 3.3 billion connected device will be trading directly by 2030, which would be 10% of the Internet of Things market.

According to TM Forum’s recent benchmark report, Telco revenue growth: Time for operators to place new bets, Vodafone is the most IoT-focused operator in Europe with 162 million IoT connections globally. Pairpoint leverages Vodafone’s IoT scale and can operate over any IoT connectivity platform.

Pairpoint is initially targeting electric vehicle (EV) charging in Germany and the UK, which is an IoT growth area that many communications service providers are pursuing, including BT, Deutsche Telekom, Tele2 IoT and Telenor Connexion. The service enables EVs to “autonomously transact and communicate with charging stations from many providers.”

The company is also working with partners such as IBM and MasterCard to bring more technology specialists into the Economy of Things ecosystem and add more use cases for other industry sectors beyond transport. By combining Vodafone’s in-house developed technology with Sumitomo’s reach across various business sectors, Pairpoint is the latest example of how CSPs aim to grow by monetizing platforms and leveraging partnerships.

NTT DOCOMO toughens carbon reduction targets

NTT DOCOMO has announced new targets to become carbon neutral across its entire supply chain by 2040, expanding its previous goal of achieving net zero from its own operations by 2030.

The hardest part for all operators’ carbon reduction strategies is so-called Scope 3 emissions, which are generated indirectly from their suppliers and product users and account for most CO2 output. For DOCOMO, supply chain emissions account for 80% of its total greenhouse gas emissions.

New measures under the operators new “Net-Zero by 2040” initiative include powering all its retail shops with green energy by 2030 and prioritizing “environmentally friendly” telecoms equipment and other products in buying decisions. The operator will support the procurement efforts with its own emission visualization tool called CO2MOS as well as consulting services. The operator also plans to launch a liquid cooling service, called Green Nexcenter, for more energy efficient data centers.