Where is the horse to pull the 5G and 6G carriage

Where is the horse to drive my carriage

A short history for the above picture is necessary. I had posted a video in 2019 of how the three companies mentioned above would have issues selling their 5G equipment without a VBE model to accompany it. My analysis was based on the VBE model for 5G equipment and the value it brought in for the customers who would buy 5G equipment from the three companies mentioned above. This analysis had started when I had asked a senior executive of Telia Sonera a Swedish Telecom operator (around 2017) on how they evaluated their transition to the next G equipment which was brought to them by Ericsson, Nokia and Huawei. He was in TeliaSonera since 1999 when 1G had started. His answer was we have coffee (called Fika in Sweden) and then we change the equipment to the next generation. And my counter question was that before doing such capital investment do you not evaluate how much revenue the new equipment is going to bring it which will payback the investments you have done. And his answer was there is no such study, the new equipment gets you new capabilities. He had retired from Telia Sonera in 2009 and that is when I started to dig deeper into the revenues of TeliaSonera from 2009 onwards to 2016. What I did was plot the annual reports for Telia Sonera from 2009 to 2016 and the figures shocked me.

The decline in net sales was 22% net income was 69% in 2016 from the 2009 figures, but just a 2.9% decline in margin. What these figures meant was that the telecom operators did not have a revenue growth when they brough the new 4G equipment and now the three HEN companies short for (Huwawei, Ericsson and Nokia) wanted to sell them the next G equipment which would enhance whatever values they sold and make it great again. I was intrigued and started looking at why the transitions from 1G to 3G went relatively smoothly and the reason was as indicated in the diagram below.

Let me explain the figure above, from 1G to 3G the benefits of replacing the existing equipment was easily monetised and accepted by users. when users went from desktop wired phones to 1G phones, it was a miracle in itself, you could be moving around and be able to take calls and speak from where ever you were. from 1G to 2G the voice calls were clearer and you could also send Short Message Services called SMS. From 2G to 3G you could also have video conferencing and data speeds were higher and you also got GPS and the mobile phone companies enabled these features on the mobile phones. All in all there were many benefits for a user when the telecom operator he brought from transitioned to the next G service. But when 4G came the technology and user enabling benefits were miniscule. With each G transition the benefits decreased and that is where the telecom operators competed among themselves with services offering better data packets etc and that brings us to 2017 when we see the TeliaSonera annual reports. Also globally there were many telecom operators merging as they could not be profitable in the telecom area. In India Vodafone and Idea Mobile merged as they had huge revenue and profitability pressures on them. While the HEN companies were beating the band on the new technologies they were bringing to the market called 5G which would revolutionize mobile telephony offering MIMO and some sales bull#%#" they tried to justify their sales. Imagine this from a telecom operators who like Teliasonera has lost 69% net profitability from its 2009 figures. The pitch was Now "Dear TeliaSonera, replace your existing 4G equipment you brought in 2009 and replace it with the 5G equipment we are going to charge you with." I could clearly see this was a pitch destined for failure and ericsson soon found that out in 2024 when they had to layoff 1200 people in the 5G area. What got me thinking was that with the huge resources at their disposal, they did not think through the VBE model for 5G and in 2022 they brought Vonage for 6.2 BUSD in cash. That for me was akin to the picture I have presented above , buying horse reins and a beautiful leather saddle for a non existent horse. And that too when I could see that 5G could enable huge Business benefits for companies and users alike. But they did not think about the Horse to pull their 5G business forward. It was no wonder when Ericsson had two write offs and in 2024 the value of Vonage came down to 1/3 of the value it was brought for in 2022 of 6.2BUSD in cash (Billion in capital B). While I would agree to the purchase of Vonage when 5G services are being used, buying Vonage in 2022 when 5G enabled services were not there was akin to buying expensive horse reins and a leather saddle for 6.2 Billion USD. It was no wonder there were no questions asked about Vonages VBE model at the Ericsson board. And this was the same story at Nokia and Huawei. Huawei because of their Chinese culture, would give the 5G equipment at a discounted price to the one offered by Nokia and Ericsson where the Social costs are absorbed in the companies pricing.

I decided to present this story as Nokia keeps on talking about 6G equipment and how it will "#¤%&/((())))==?? (short for change the world) without understanding the real life scenarios for 5G or 6G equipment. So unless the HEN companies evaluate their VBE model and how their technology will add to value for their primary customers (the Telecom Operators) and their secondary customers people like you and me who use their phones to look at videos, the telecom operators will not invest in 5G or 6G equipment without an equivalent value plan and revenue generation these equipment's enable.

This is the story of three Hen companies which was to drive their horse cart with just nice reins and beautiful saddles without thinking about the horse which will drive their 5G and 6G equipment cart. The next 2 decades is going to see an explosion in the VBE model for communication equipment and companies that do not think through their VBE model will be extinct and irrelevant. Companies like mavenir , Cisco , Star link, Google etc. who will focus their VBE model on the users using communication and the data they have. If these companies can build their VBE models around monetizing data, then the existing companies called Freemium companies who have converted data to money with the Advertising model will be in trouble. But here a leadership which can keep its eyes and ears open is required. The irony being that the telecom operators to whom these HEN companies sell equipment to are sitting on huge advantages legally and logistically. However each of these advantages will be stripped from these companies if they do not evaluate their value model. They sit on three assets today, one being a valid verified identity, second is access to the identities communication link and third is his location. Location has already been negated by OTT or over the Top players. The complaint of the HEN companies and the telecom operators is that we invest in equipment and the OTT players take all the profitability around identity like Google, Facebook, You tube. So our investments in 5G would give a revenue boost to the OTT players is the argument. But my counter argument is evaluate the VBE model you are already sitting on and can build a strong revenue model for the future. With Chat GPT the telecom operators have an excellent position to challenge the freemium search model of google and Facebook. What is required is a thinking Leadership at the HEN companies, humble to understand the challenges their VBE model faces and working on it. The earlier link to the post I made in 2024 can be found here. This post was made giving the predictions I had made in the 2019 video and the ericsson news in 2024. https://www.linkedin.com/posts/abhijeetkelkar_ericsson-5g-layoffs-activity-7211984853418860546-vK_6?utm_source=share&utm_medium=member_desktop&rcm=ACoAAAA9XzwBWLHjWKLLt8DJ3xxHGQcxvXCWsfk

There is also a story on the 5G API model you see being touted by the HEN companies and this seems akin to me to a mobile services cartel to control SMS prices with telecom operators. I do not think this model will work. VBE models for a company is the Value model , business model and the ecosystem that supports the value a company brings to the market.Every company a brick in the wall company or a multinational like IBM or Nokia or Huawei has its own VBE model and companies since the last 200 years have used VBE models to analyse and compete in the market they are in . To view what VBE models are see this video https://youtu.be/2f5FXiRkAuc?si=nJ84272r9ONfH-pV and you will find more videos at our website here about VBE models.