Telenor sets sights on ads as network revenue stagnates
22/08/2016 12:48
* Plans to use Tapad to enter mobile advertising -CEO
* Sees "small" acquisitions in this segment
* Sees 20-30 pct yearly growth in digital services market
* Facebook, others challenging telecoms business
By Joachim Dagenborg
ARENDAL, Norway, Aug 22 (Reuters) - Norway's Telenor
TEL.OL will set up a separate business unit to claim a share
of the rapidly growing mobile advertising market in Asia, Chief
Executive Sigve Brekke told Reuters.
Telecom operators like Telenor are facing challenges to
their traditional business as increased data usage has opened
the door for digital content providers like Netflix NFLX.O and
Spotify and messaging companies such as Facebook FB.O to
capture an increasing share of network revenue.
Telenor aims to fight back by staking a claim to a slice of
the mobile ad market that is growing fast, especially in
emerging and developing markets where a rise in smartphone sales
is giving many consumers access to the internet for the first
time.
"A lot of digital players are coming in and taking parts of
the value chain," Brekke said in an interview last week. "It's a
very demanding situation for mobile players right now and we are
forced to make a decision on what we want to do going forward."
Its advertising strategy builds on technology from Tapad, a
U.S.-based startup it acquired earlier this year for $360
million, which is designed to place relevant ads as individual
users switch between their devices. urn:newsml:reuters.com:*:nASM0001OJ
"We will try to use Tapad as an entry into mobile
advertising as a separate business unit in our Asian growth
markets," Brekke said, adding that Telenor "needs to be able to
do business in a different way going forward."
Telenor has more than 211 million mobile phone subscribers
across Asia, Scandinavia and southeastern Europe. More than 90
percent of those subscribers are in its six Asian markets,
including Bangladesh, Pakistan and Thailand.
Global mobile advertising is set to top $100 billion in
revenue in 2016, representing around 16.5 percent of all media
ad spending, according to a forecast last year by eMarketer.
More mature markets like the United States, China and
Britain now account for two-thirds of all mobile ad spending
among the top 20 markets, but mobile ad markets in the rest of
Asia such as India and Indonesia are at least doubling in size
every year, albeit from a far lower spending base, the media
research firm projected.
"DUMB PIPE"
"You can choose to be a 'dumb pipe', a network provider or
you can try to take a larger digital position," Brekke said.
Industry-wide, he said he expected annual growth in networks
of 1 percent, compared to 20-30 percent in digital.
In addition to the Tapad acquisition, Telenor has started a
joint venture with Norway's Schibsted SBSTA.OL within online
classified ads in Asia and Latin America. It also operates two
bank and financial services providers in Serbia and Pakistan.
Digital businesses such as advertising and financial
services accounted for just 2 percent of the group's total 2015
revenues of 26.5 billion crowns ($3.22 billion).
"The question is how far you should go into this segment. We
will not do as some of our competitors have done and take
positions in content like music and video streaming. That is not
for us," Brekke said.
However, he did expect the company to make some smaller
acquisitions to boost the move into mobile advertising.
"Some of it we can manage ourselves, but sometimes we will
also need to acquire competence. These are just small
acquisitions. We are not planning any major acquisitions right
now," said Brekke.
Telenor is expected to give more details on its future
digital strategy at its capital markets day in London on Sept.
22.
($1 = 8.2294 Norwegian crowns)
(Additional reporting by Eric Auchard in Frankfurt; Editing by
Adrian Croft)
((joachim.dagenborg@thomsonreuters.com; +47 233 16 592; Reuters
Messaging: joachim.dagenborg.thomsonreuters.com@reuters.net))
Keywords: TELENOR CEO/DIGITAL