In ordinary times, BICS is one of the most important companies most people have never heard of.
When you travel and use your phone on a foreign network, that company and your own service provider must strike up an arrangement. Operators often rely on a few middlemen as the facilitators of these roaming deals. BICS is one such intermediary, pocketing millions of euros in revenues for the service it provides.
But its roaming business has been thrown into uncertainty by the outbreak of COVID-19. About one quarter of the world's population is now estimated to be living under lockdown. The skies have emptied of planes, and travel for many people is restricted to visiting the local shops or a jog around the local park. In the next nine months, Juniper Research thinks operators could lose as much as $25 billion in roaming revenues – roughly half what they usually make in a full year.
The impact on BICS remains unclear. A part of Belgian incumbent Proximus, it was unavailable for questions on the subject and is more than just a roaming middleman. As housebound consumers gorge on Netflix and other broadband applications, a surge in network traffic might boost demand for some of the international carrier services that BICS provides.
Yet BICS had problems long before the outbreak of the virus. Last year, its revenues were down 3.4%, to around €1.3 billion ($1.4 billion), as sales suffered. The culprit remains the old-fashioned voice business, weighed down by falling wholesale prices and tough competition. Voice revenues, which still account for the bulk of total sales, dropped 13.2%, to €815 million ($899 million).
Until last year, the good news was that sales of newer data services were helping to offset this decline. BICS estimates that about 50% of the world's data roaming traffic goes through its network, and the volume of 4G traffic doubled in 2019 for the third year in a row. "We can see an increase of revenue from the roaming business," said Mikael Schachne, the company's vice president of mobility solutions, during a recent conversation with Light Reading.
But even this data business has been under some pressure. For one thing, regulators in recent years have been chipping away at the prices operators are allowed to charge for roaming services. Moreover, the surge in traffic has forced BICS to make additional investments in its backbone network. As operators start to launch even higher speed 5G services, BICS has been pumping money into new points of presence "to be closer to customers," says Schachne.
In 2019, expecting the Olympics to go ahead in Tokyo this year, it also spent money on a tenfold increase in the capacity of its Japanese backbone. With the event now delayed until next year, the demand will not materialize as quickly as BICS had hoped.
Diversification is difficult for BICS in the current circumstances because so many of its recent initiatives bolt onto the roaming business. One simply involves targeting mobile virtual network operators, rather than just infrastructure firms. "We are seeing more MVNOs setting up a roaming service. MVNO is still a very fast-growing market," says Schachne. But MVNOs are affected by the same travel restrictions that will cause a roaming upset for network operators.
Nevertheless, efforts to expand into new business areas have been going well, Schachne insists, and some are likely to assume much greater importance in the time of COVID-19. Outside what it calls the "mobility" market, BICS now plays a major role in so-called application-to-person (A2P) messaging, making sure the messages generated by Internet applications end up securely on mobile operator networks. Fraud prevention is another growth area. "We can help tackle fraud by analyzing traffic patterns that we see on our network," explains Schachne.
Revenues from cloud communications are also growing, as BICS steps in to connect calls made by smartphone customers to people using Internet or mobile applications. "We are seeing an increase in traffic between end users and applications," says Schachne. As people confined to their homes become more reliant on Internet services, those traffic levels seem likely to keep rising.
Thanks to its takeover of Telesign in 2017, BICS is in a much stronger position in this telecom-meets-Internet market than it would otherwise be. Originally a specialist in fraud prevention, the Californian company was providing platform-based communications services to about 500 "digital" customers at the time of the deal, including 20 of the top 25 websites worldwide. "They were connecting Internet players, while BICS was connecting mobile players," says Schachne. "It generates an opportunity to increase traffic volumes on both sides and manage the cost structure more efficiently."
Notwithstanding the impact of COVID-19 on supply chains, perhaps the most attention-grabbing part of the diversification strategy right now concerns the much-hyped Internet of Things (IoT). Here, BICS is positioning itself as the middleman between the world's mobile operators and the organizations that want to embed IoT technology in their products. An example the operator planned to show off at this year's aborted Mobile World Congress is German Bionic and its robotic exoskeleton. Used for heavy lifting in factory and warehouse settings, this body-worn suit now features a cellular connection – courtesy of the BICS "SIM for Things" offer – so that sensor data can be monitored and analyzed.
Providing connectivity for less showy gadgets and equipment may be critical if COVID-19 continues to restrict people movements. After all, if a machine part can transmit its own status updates, an organization would not have to worry about dispatching a technician to check it.
But why would a company use BICS instead of a local operator? "We have the reach and daily relationships around the world, so we can set up IoT agreements and make sure everything will work seamlessly," says Schachne. This pitch could sound compelling to companies like German Bionic that ship or use products in numerous markets. BICS, moreover, is relying on virtual SIMs and eSIMs so that companies do not have to swap hardware in equipment moved from one country to another. "You don't need to change anything, and your device will be able to connect to any country in the world," says Schachne.
Today, such activities seem likely to account for only a tiny share of total revenues. But many of the newer services carry much healthier margins than the legacy voice business, and profits increased last year despite the sales decline. The "direct margin," as BICS calls it, rose 2.4%, to €325 million ($358 million), driven largely by A2P traffic, volume growth in data roaming and Telesign's mobile identity business. If profits are to hold up during the pandemic, that transformation will have to continue.
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— Iain Morris, International Editor, special to Light Reading