2021 saw transformation driven across the telecoms, media, and technology sectors with the scaling of emerging technologies and service applications. 2022 will be no different and, if anything, the speed, and potential for disruption, of industry transformation is likely to increase. 

Our experts at Delta Partners recently discussed the key trends that they anticipate in 2022. While some trends seem to be a natural linear evolution, others are more structural, creating opportunities for new value creation (or loss).

 

#1 Sports: Changing sport ownership structures

Victor Font, CEO, Delta Partners – vf@deltapartnersgroup.com

Private equity companies are continuing to invest in sports teams, leagues and HNWIs, and sovereign wealth funds are also increasingly interested in deploying capital across the value chain.

However, while PEs and SWFs are looking for profit and status through their investments, fans are generally opposed to majority ownership deals that threaten sports tradition. So, another budding development in sport is initiatives to offer ownership and control to fans, e.g., in the aftermath of the European Super League attempt, a fan-led review of football governance in the UK made wide-ranging recommendations with which the government has promised to engage fully. Manchester United also pledged to allow fans to build a meaningful ownership stake in the club after the fallout. Another fan-led initiative is the Fan Controlled Football league in the US which raised $40M in its Series A round led by crypto investors this year.

Exhibit [1]: Loss of public confidence in the current UK domestic football authorities

While we expect to see deep pockets continue their acquisition spree, threatening traditional sport’s ownership structures in 2022, we also expect to see more fan-led initiatives gaining traction to counter external investors and regain control of clubs and the game. As club supporters gain more influence over club decisions, the clash between profit and tradition could significantly hamper the PE and SWF investment trend.

 

#2 Analytics: Synthetic data, the ultimate data currency?

Roman Izquierdo, Senior Managing Director – ri@deltapartnersgroup.com 

The data privacy model bias is a big issue for AI. For companies like Facebook and Google to continue to innovate using data, they need to find a ‘safe’ way to synthesize data that is not considered as personal data. Facial recognition is already considered a concerning invasion of privacy. On top of this, AI can generate personal data without the permission of the individual, and data breaches are not uncommon.

A solution to these concerns is synthetic data. Synthetic data can be leveraged to generate simulations of scenarios with limited data and to improve the accuracy of supervised Machine Learning models. Data scientists already use this technique to manage sparse, unbalanced data. However, more recently it is becoming automated to a greater extent, and, as computation power gets stronger, it can be run at scale, thus becoming a viable approach to data trading.

Exhibit [2]: By 2030, synthetic data will completely overshadow real data in AI models

In 2022, we expect synthetic data to become the solution for tackling privacy concerns and data security issues. Firms should be incentivized to protect data and build trust with data suppliers to ensure that private data won’t be used.

 

#3 ESG: Wider industry commitment to net zero in a reduced timeframe

Andrew Snead, Senior Managing Director – asn@deltapartnersgroup.com 

Mobile operators representing around 30% of global revenues have made carbon neutral and net zero commitments against varying timelines, extending to 2050, in line with the Paris Agreement.

In 2021, 13 mobile operators across Europe announced a 2040 net zero target as part of the European Green Digital Coalition launch. So too did one of Africa’s largest mobile operators in MTN, in addition to the target of averaging a 47% cut by 2030. These will be achieved through accelerated substitution of renewable energy in place of fossil fuels. These commitments are mostly coming from developed markets.

Exhibit [3]: Overview of global telecoms operator ESG commitments

In 2022, we expect to see that companies will bring forward ESG commitments and prominently show these in investor presentations. This will be aided by development of more tools to enable ESG reporting. We believe that more operators will come to the realisation that both investors and customers will expect carbon neutral and net zero commitments to be delivered well in advance of 2050.

 

#4 B2B / Wholesale telecoms: ‘Application-first’ drives enterprise ICT networking

Sam Evans, Senior Managing Director – se@deltapartnersgroup.com 

Enterprises will increasingly shift their ICT focus to being application-first, and therefore, all upstream requirements will be used to inform networking requirements.

In this model, the role of the network operator can be constrained as system integrators can bring together services from best-in-class ERPs, cloud providers, security specialists and network operators. 

Exhibit [4]: Evolution of enterprise ICT requirements

A recent Omdia Survey showed that only 44% of enterprises preferred carriers to be the providers of their network services. As the ‘application-first’ trend continues, we should expect enterprises to seek stronger relationships with application providers or systems integrators as opposed to network operators.

This creates a fundamental question for the network operator in 2022. Do they seek to ‘go up the stack’ and compete with either application providers or system integrators, or do they seek to specialize in the infrastructure layer, potentially evolving to become pure InfraCos and benefit from the high levels of available private capital?  We will know more by the end of 2022!

 

#5 Customer Experience: Rethought human approach to deliver best experience at lowest cost

Daniele Pe, Senior Managing Director – dpe@deltapartnersgroup.com 

The shift towards digital does not eradicate the need to have human interactions, but rather the nature of the human interaction is different: more complex queries that demand an increased level of sophistication, knowledge and emotional intelligence.

Exhibit [5]: 25% of customer interactions were automated in 2019; this is expected to be 40% by 2023

At present, it is a hit and miss while people transition from human sales to online automation and chat bots. Interestingly enough, the chat bots are also transitioning simultaneously towards actual humans behind the screens who can pick up on distress, emotion, needs, and requirements to provide real time personalized solutions.

In 2022, we expect that companies will rethink the profile of front-liners, their value proposition, and the approach to recruiting and upskilling. To deliver on this, while keeping costs under control, we predict that companies will start to accelerate the digital transformation of their care channels, leveraging technologies such as AI and RPA to empower agents and remove menial tasks that distract them from focusing on what matters: customer resolution and happiness.

 

#6 Gaming: First 5G-centric game takes off

Vincent Stevens, Senior Managing Director – vs@deltapartnersgroup.com

No silver bullet has been identified yet in consumer 5G. Most popular mobile games today do not require a 5G connection (e.g., FreeFire, Mobile Legends, Genshin Impact). AR/VR is often hailed as the “killer” use case for 5G, yet no significant commercial success has been demonstrated in gaming.

Niantic’s Urban Legends is a first attempt at publishing a 5G-targeted AR game, with ample game developers expected to publish theirs (e.g., AT&T and Meta launched “Warp Speed Worm”).

Exhibit [6]: Consumer willingness to pay compared to interest in 5G gaming and AR/VR features/apps and their timeline to go mainstream

We expect 2022 to be a tipping point year in which a first global 5G-centric game commercial hit will be published in partnership with telecom operators, where the game will require a 5G connection and offer the player an immersive (most likely AR) experience.

 

#7 Emerging Technology: Telecom operators to play a greater role in blockchain

Javier Alvarez, Senior Managing Director – jav@deltapartnersgroup.com 

Blockchain applications have so far been on the backburner for many telecom operators. Some telecom operators have made strides though. Deutsche Telekom has grown their staking-as-a-service business, and they, along with Telefónica and Vodafone, have deployed a trial for automated settlement of roaming agreements.

Blockchain, however, can and should become a strategic topic for telecom operators. Deploying validation nodes in proprietary data centres will help telecom operators avoid becoming “dumb data centres” in the Web 3.0 era. Deploying blockchain layers in their IoT application layer will enable automated settlements and secure data transfers and storage.

Exhibit [7]: Blockchain in the telecom industry

In 2022, blockchain adoption will accelerate for many telecom operators. They will start to understand the role they can play in the telecoms ecosystem, which will mainly be as validation nodes initially, and the benefits that blockchain can bring to their internal (roaming) or external (IoT) services.

 

#8 Corporate Strategy: Major telcos will establish “hyperscaler-agnostic” cloud partnerships

Joao Sousa, Senior Managing Director – js@deltapartnersgroup.com 

Major telcos have been establishing infrastructure partnerships with hyperscalers (e.g. AWS, Azure, Google cloud) to power their IT applications, network functions and develop capabilities for edge computing services. On the other hand, Hyperscalers have been dabbling in telco’s infrastructure to accelerate their international expansion and densification of zones within a country (e.g. Data centers, dark-fiber).

Telcos – Hyperscaler partnerships aim at:

1.  Building virtualized networks with cloud infrastructure to gain agility, reliability and benefits of scale
2.  Monetizing existing infrastructure (e.g. Dark fiber and optical networks) by providing connectivity for cloud and edge compute
3.  Developing 5G private networks in a cost effective manner (e.g localized 5G network for an airport based on cloud infrastructure and platforms provided by Hyperscaler as opposed to traditional vendor)
4.  Integrating cloud and networks to offer compelling edge computing services and take full advantage of capabilities to be introduced with Advanced 5G (Release 18)

Exhibit [8]: Hyperscaler-agnostic cloud partnerships

While for the first 3 objectives operators tend to partner with a specific Hyperscaler, the development of compelling edge computing services will require “hyperscaler-agnostict” cloud partnerships. Reason being, edge computing services such as XR based gaming, autonomous vehicles and immersive versions of metaverses require that users of different telcos interact in a platform running on edge cloud resources with edge integration with networks. Operators will need to interconnect with major hyperscalers as no single hyperscaler will provide all key applications / content. This requirement will include roaming services, calling for the development of an industry platform to integrate networks with clouds.

 

#9 Digital Infrastructure: Investment surges across asset classes

Audi Pous, Senior Managing Director – ep@deltapartnersgroup.com 

5G and aggressive FTTH penetration targets will result in continuous investment in fibre (FTTH, national long distance and deep fibre). Optimal profitability will shift from tier 1 cities to tier 2 and 3 cities in order to avoid overbuilding.

With less opportunity left in macro towers, investment in small cells/private networks will accelerate in 2022. Key drivers will be the increased availability of 5G high/mid-band spectrum, evolution of OpenRAN architecture, the potential of new network sharing and neutral host models, and new B2B use cases.

Additionally, the data centre footprint will continue evolving from far edge to edge, driven by the migration to cloud and the need to bring content closer to the user.

Exhibit [9]: Small cell and macro RAN revenue 2019 – 2024 on a normalised scale

In 2022, we expect to see more capital invested in next-gen digital infrastructure such as Wireless NetCos, edge data centres, and satellites. This is because of the very significant amount of capital expected to be deployed from infrastructure funds, the potential increase in interest rates, and the increased prices of traditional asset classes like towers, data centres, and fibre. The limited financial strength of the telecoms industry to cover the demand supply gap will result in more carveouts of infrastructure and more partnerships between telecom operators and institutional investors.

 

#10 Smart Cities: Investment in smart infrastructure and low latency connectivity

Josep Que, Senior Managing Director – jq@deltapartnersgroup.com 

Smart Cities are more relevant than ever. Over $300bn has been invested across 2,200+ initiatives over the last 3 years, and the industry is set to be worth $821bn by 2025. Investment is largely going towards smart infrastructure and low latency connectivity that is continually getting closer to the edge. Sharing agreements for infrastructure are also increasingly popular because of the high cost involved.

Two forms of smart infrastructure that are growing and improving are electric vehicle charging infrastructure and wireless power. Ubiquitous charging infrastructure will ideally use electricity that is locally generated and stored to reduce grid capacity. Wireless power will become more prevalent. It will reduce wiring and maintenance costs as well as power smart homes and personal gadgets.

Exhibit [10]: Global technology spending on Smart City initiatives and smart city market size growth predictions

In 2022, we predict that investment in smart infrastructure and edge connectivity will increase significantly from both foreign and domestic parties. However, investors are still cautious following the pandemic and the negative global economic impact that had. The amount of foreign investment received will likely correlate to the level of investment coming from the Smart City authorities themselves.

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