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It’s tough being a telco

Telcos, telecommunications companies – the industry term for your phone service provider are under pressure the world over. Average revenue per user, the key industry determinant of profitability has been falling almost since they built the mobile phone towers. Recently, the rate at which that key indicator is falling has increased – basically, phone companies are getting poorer, more quickly.

But phone companies do have some advantages

The most common investment phone companies are making is in multimedia. The world over, people buying some voice minutes and a few GB of data are as likely to find they have also bought access to Netflix on their phone or a license to watch sport as they commute as they are to find that they are now being sold electricity.

There is, however, a single thing that phone companies have which can be used to take them in a new relationship. The economies of scale at play in the telecommunications sector have created a very different beast to the maths of the energy sector. Telcos are bigger than energy companies. And, importantly, they also have a mature monthly billing relationship with many millions of customers and at least some brand equity and trust with those people. To give you some idea of the value of that commodity, on average, phone companies have more than three times the customer numbers of electricity generators. Telcos need only upsell a small proportion of their base to energy in order to become one of the largest power providers in the country. And that would apply to whichever country they operate in.

The advice given by strategists in these difficult times is to pick an area in which you have a competitive advantage and work it as hard as you can. Telcos have a relationship, the infrastructure to charge customers, they’re used to bundling products, energy would raise the average revenue per user (their key measure of success) and customers with more products churn (leave) less often than those with just one. For telcos, energy is the gift that keeps on giving.

Some phone companies already sell electricity

There are examples of phone companies which have already started selling electricity to their customers. One such company is Australian telco ‘Amaysim’, a network reseller which launched nearly 10 years ago down under. Nearby, in New Zealand, TrustPower is owned by the country’s fifth largest ISP (Internet Service Provider.)

Potential problems associated with moving in such a new direction

There are differences, of course, between the markets for energy and the market for phone plans. Energy prices change daily, even hourly, introducing a rate of change that phone companies may find it hard to adapt to. Customer service, which is something phone companies have a less than perfect record at delivering to a high standard, may also prove demanding. Customers can be bounced between multiple departments to get their queries resolved as things stand, when they call their broadband service provider. Adding electricity and gas to that maze could accentuate the problem.

The risks if phone companies don’t sell electricity

There is a risk to inaction, too.

Google and Apple are both taking steps beyond the production of new phone hardware in to the telcos realms. Google operates Project Fi, it’s own national phone company in the US and there are strong industry rumors that Apple will soon be selling phone plans alongside it’s iPhone range. There is no reason Apple and Google need stop their, either.

Some analysts suggest that Apple, Google, Amazon and other technology companies including Amazon, could leverage their existing billing relationships in to reselling energy, too. These tech giants are renowned for moving fast and, if telcos are don’t join them, they could be left behind.

Why you should buy your electricity from your phone company

The benefits are equally clear on the customer side of the equation. For many, over burdened with admin already and increasingly busy with work and life, receiving a single bill and having a single ‘throat to choke’ in the event of a query is an appealing prospect. They are likely to receive a discount for their preparedness to move across to the telco from their old energy provider and similar incentives to keep them hooked up to telco power, when they land.

Summing up – you may well be buying your electricity from your phone company sooner rather than later

Who would be a phone company in 2018? Seeing their profits fall precipitously, most have bet the farm on a more ‘technology centric’ enhancement to their core offering of voice and data plans, than energy, video content.

Reselling energy, however, offers a less capital intensive alternative which draws on telco strengths while offering important new revenue streams. It may be less glamorous than stepping in to the world of television but it could prove a more successful business model.