Proximus eyes escape abroad from low-growth telco reality

Telcos in Europe will be the first to tell you their sector is not doing great, with high costs and low returns. Digital Transformation World, an event hosted annually in Copenhagen, went as far as to declare "code red" for the industry amid much talk about AI and APIs as potential revenue streams.

Belgian incumbent Proximus is, meanwhile, betting on its largely platforms-based international segment.

In an interview with Light Reading, Proximus' CEO Guillaume Boutin pointed to the low-growth reality of European telcos, saying it is capex intensive and cannot be expected to grow by double digits. To tap into higher-growth opportunities, Proximus is instead eyeing the platforms business through its international division.

This is a unit made up of international carrier BICS, digital identity firm Telesign and the latest addition, communication platforms-as-a-service (CPaaS) company Route Mobile, the acquisition of which was completed in May.

For now, the good old national telco business model still seems to represent most of the group's income, with Boutin saying the international segment currently brings in 25% of revenues. Yet he expects this share to grow. While Proximus' traditional telco activities are growing by 1% to 3% a year, its international activities are registering a two-digit rate of growth. 

According to the company's latest results – for the second quarter of 2024 – domestic revenues at Proximus grew by 4.6%, but pro-forma revenue from the international segment fell by 5.3%, while actual revenue registered a 13.3% increase. Proximus said at the time this was caused by lower margin services and "lower CPaaS SMS volumes following the ongoing move from SMS-only to Omnichannel solutions."

Yet Boutin seemed highly optimistic about the future, including omnichannel solutions. He highlighted them (alongside others like IoT and digital identity) as one of the key opportunities for the company in the future.

"That's one trend which is extremely important, and that can create a lot of new opportunities, because it's linked to the development of AI powered interactions with end users," he said.

Meanwhile, he argued that put together the three companies are well placed to tap into opportunities in the market and serve large customers including hyperscalers.

BICS, he said, plays a key role in digital communications services, having around 500 direct connections with MNOs worldwide, which is important for message delivery. He gave the example of Amazon: "If you want to create an account and you are in Australia, if your journey to create that account is not instant, then you lose a customer."

Another key aspect, according to Boutin, is creating an engagement platform that ensures the right message is delivered to the right person at the right moment, which is where Route Mobile comes in. The company also delivers multichannel management, said Boutin. "You may want to send an SMS as a large brand, and then you follow that with an email, and then you engage in a WhatsApp conversation," he elaborated.

Seeking synergies

"That unique combination is a suite of service that is, for us, the future of telecommunications," he said, stressing these are over-the-top systems. Meanwhile, he said, Telesign's fraud prevention system helps prevent fraudulent account creation, adding this is a "nightmare" for hyperscalers and large companies.

Having all three companies under one roof presents an opportunity to cross sell, Boutin said, as their core markets differ. "Telesign is super strong in the US, Route Mobile is super strong in the Asian market, and BICS is super strong in Africa, Asia a bit, but Europe as well," said Boutin.

Boutin again cited Amazon as an example: "For Route, when they talk to Amazon India, to deliver all the messages of Amazon on the Indian subcontinent, maybe that Amazon is using Telesign in the US, but not using Telesign in India. And then, you know, it's Amazon. It's such a big organization that then you can start to cross sell also the Telesign antifraud systems to this customer."

Apart from the cross-selling opportunities, there are also synergies on the cost side, although Boutin dismissed a suggestion these may involve job cuts, adding that the company will need a lot of resources to cope with the growth. 

Instead, the idea is that by acquiring Route Mobile Proximus has gained an R&D presence in India, giving it an opportunity to bring more development activity to the country, where costs are lower than they are for Telesign's R&D in the US and Europe.

Meanwhile, combining Route Mobile and BICS' coverage will cut costs by a small amount per message sent, which should translate into a scale advantage, reducing the cost of delivering the service.

For BICS, Boutin said that the traditional voice and messaging business (in decline overall) continues to be an important opportunity.

"We are concentrating and managing more and more for others the voice and messaging activities, and we do that all over the world," Boutin said, citing the example of Ooredoo.

Another opportunity for BICS is travel eSIMs. While those have not necessarily been a great thing for Proximus' Belgian operations, they could be for BICS. In June, the company announced a deal with Carrefour that will see it provide the eSIM and roaming worldwide for the retailer's eSIM offer.

At the same time, Boutin acknowledged there is more work to be done to better capture synergies across the international business of Proximus. The international segment currently lacks a single brand and fully integrated product suite, he said, adding that Proximus is currently working on advancing these integrations.

Asked about challenges awaiting in the international segment, he pointed to creating a single culture across the whole company. The second biggest challenge, he said, will be maintaining the ability to innovate and staying on top of trends in the industry.