Telenor has a go at public cloud but needs AWS to help

The tie-up it announced with the hyperscaler last week implies Telenor is being less ambitious than it first made out.

Iain Morris, International Editor

June 26, 2024

5 Min Read
Telenor main office
Telenor's headquarters in Norway.(Source: Telenor)

Telcos, along with nearly everyone else, have not had the greatest success as public cloud providers – that is, organizations making their data centers available to multiple tenants for compute needs.

Back in 2018, AWS, Google Cloud and Microsoft Azure served about 57% of the entire global market for cloud services, according to data from Synergy Research Group. By the end of 2023, they controlled two-thirds of it. This left Alibaba, IBM, Oracle and Salesforce each with a share of between 2% and 4%. The market share held by the long tail of "others" had dropped about four percentage points, to less than 23%.

Many operators have been in retreat, instead promoting themselves as connectivity partners for the giants. Others strive to be the navigators between different public clouds for their own business customers. But in March, Norway's Telenor announced a curious venture called Skygard, redolent of the public cloud. The name evokes Asgard, the dwelling place of the gods in Norse mythology, and reflects Norway's desire to have its own sovereign fortress among the clouds. 

It is a joint venture also involving Hafslund, a state-owned energy firm; HitecVision, an investment company with an energy focus; and Analysys Mason, a consulting and analyst company. The essential plan is to provide energy-efficient data center services on "Norwegian soil," satisfying the demands of security-conscious businesses (or, perhaps, businesses that must comply with stringent local rules).

Telenor, Haflsund and HitecVision have promised to collectively invest 2.4 billion Norwegian kronor (US$230 million) in the venture, whose initial facility will be in Oslo. Talking up the "AI revolution," Telenor has also proudly identified itself as a customer of Nvidia, whose expensive and power-hungry chips (graphics processing units, or GPUs, to name them correctly) have become the workhorses of AI.

AWS takes center stage

But it was another company that hogged the limelight when Telenor provided an update on its cloud plans at last week's Digital Transformation World (DTW) event in Copenhagen. AWS, never mentioned in the March release, will seemingly provide the cloud infrastructure that hosts workloads for Telenor and its enterprise customers inside Telenor's data facilities.

"We are looking at different ways of addressing the sovereignty issue that regulators have brought up in Europe," said Ishwar Parulkar, the chief telecom technologist for AWS, when he met Light Reading at DTW. "Building our sovereign cloud is one of them and Telenor is another approach to achieving the same."

This begs various questions that remain unanswered. For a start, does the deal with AWS indicate there has been a shift in Telenor's thinking about Skygard, which the operator referred to in last week's press release about the AWS tie-up? Telenor's email response to the question was to say it has a "multi-vendor approach" and the option of "Nvidia or AWS" at its data centers.

Direct spending by Telenor on Nvidia would seem odd if it were heavily reliant on AWS. When it brings its technology stack into another party's data center facilities, AWS typically contributes hardware, including chips, as well as software platforms. Is Telenor, then, sharing the expense of GPUs, which AWS obviously buys in some quantity for its own data centers, with the hyperscaler?

"This is still a new space, so we'll see how it evolves, but our strategy is to offer all kinds of chips and architectures on our compute platform," said Parulkar. "We offer Nvidia GPUs as compute instances alongside our own silicon and x86. It depends on how telcos or other customers want to use it."

Nebulous affair

What's certain is that Telenor plans to shift some of its internal IT workloads to AWS, making it the anchor tenant for this infrastructure. "They are doing migration of their own application and then they are building new services in security and other areas that they can offer to enterprises themselves using that infrastructure," said Parulkar.

Less clear, unsurprisingly, is how Telenor and AWS would share any revenues they make from those businesses. Which one of them, moreover, would be the main point of contact for a customer? AWS declined to share further details on the subject, pointing out once again that its arrangement is still very new.

Similar tie-ups between hyperscalers and telcos have already happened elsewhere in Europe, though. In Germany – super strict about data privacy while it grew dependent on Russian gas and Chinese electronics – Deutsche Telekom's T-Systems unit has been advertising a sovereign cloud "powered by Google." The idea, it says, is to offer "full compliance with the requirements of German regulators – while retaining the public cloud functionality of a hyperscaler."

Sadly, sales growth at T-Systems has been nothing like that of a hyperscaler. Forever blaming a decline in the sale of "legacy" products for its difficulties, the division last year reported revenues of about €3.9 billion ($4.2 billion), a 3% improvement on the 2022 figure. Back in 2018, however, T-Systems collected sales of about €6.9 billion ($7.4 billion). It also remains unprofitable, with an operating loss of €71 million ($76 million) last year.

"The cloud market train left the station a long time ago and the telcos weren't on board," said John Dinsdale, Synergy's chief analyst and managing director, answering a query via email about the opportunity for telcos as public cloud providers. "In the early days a few tried to compete against the main cloud specialists, but it didn't go well for a variety of reasons – too much investment required, too little focus, no international footprint or brand, wrong skillset, insufficient credibility with target market, and too many critical issues in their existing core networking markets."

For all the apparent negativity, Dinsdale does believe some telcos have a role to play in domestic markets where regulators fret about sovereignty and related issues. But it's a relatively small role, he thinks, saying, "This will not have Amazon or Microsoft quaking in their boots." Especially, he could have added, if one of those two is in on the act.

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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