CXTech Week 29 2023 News and Analysis

The purpose of this CXTech Week 29 2023 newsletter is to highlight, with commentary, some of the news stories in CXTech this week. What is CXTech?  The C stands for Connectivity, Communications, Collaboration, Conversation, Customer; X for Experience because that’s what matters; and Tech because the focus is enablers.

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Covered this week:

  • AT&T and Verizon Reach Historic Lows. Weighed down be Lead.
  • Proximus Buys Route Mobile
  • Piper Sandler Downgrades Twilio
  • Linear channels ‘may not be core’
  • TADSummit Agenda continues to Grow
  • People, Gossip, and Frivolous Stuff

AT&T and Verizon Reach Historic Lows. Weighed down be Lead.

Both AT&T and Verizon have reached historic lows.

It’s easy to claim because of little new revenues from 5G. But that isn’t the case. That’s going to hit in 2025. It’s a culmination of a number of factors.

For Verizon:

  • Underwhelming quarterly results contributed to Verizon stock lagging the market in the first half of the year
  • Rising interest rates made short-term bond yields more competitive
  • A surge in tech stocks from interest in artificial intelligence has contributed to Verizon stock lagging the market, and hence why you see all the AI talk in telecoms
  • Consumer wireless business: 263,000 retail postpaid phone net losses in the quarter may have dragged down shares in pre-market trading
  • Lead-sheathed cables: A Wall Street Journal report revealed potential liabilities related to lead-sheathed cables for both Verizon and AT&T. BT in the UK has the same issue, many telcos in business before the 1960s have similar issues.
    • Lead sheathed cables were extensively used between the late 1880s through to mid 1960s across many parts of the phone network (access and interexchange).
    • During my apprenticeship at BT I was in the field over a few summers, I’ve seen and touched those cables and records, I’ve heard the tales.
    • Problematically, there are many cables that are forgotten about, replaced by a modern transmission link but not removed as they were directly buried, or simply ignored.
    • Reports mention that cleanups of lead-covered telephone cables could cost the industry tens of billions of dollars have weighed down the stock.
    • The problem for most carriers is knowing where the old plant is.
    • A friend who lives on a farm was digging a new vegetable patch a decade or more ago and discovered such a lead-sheathed cable, it ran well over 1000 ft and was in surprisingly good condition, so they ripped it out and melted it down for lead shot. The phone lines went to a processing barn ripped down in the ’70s.
  • Rumors of an Amazon-DISH Network partnership for wireless phone services. Dish are already partnering with Amazon providing the 5G core compute infrastructure. Beyond this is speculation, existing MVNOs offer value plans, I’m unsure the impact will be that significant.

For AT&T

  • AT&T’s quarterly revenue of $30.14 billion fell short of the $30.27 billion expected by analysts
  • AT&T’s disappointing Q1 cash flow sparked a downward trend in its share price
  • AT&T’s first-quarter earnings showed slower subscriber growth than expected
  • Lead cables – see Verizon for more details.
  • AT&T’s long-standing struggle to outperform the market casts a shadow over its investment appeal
  • Price targets: The average price target for AT&T is $22.08, which represents a 41.31% increase from the current price of $15.625. While it looks like a bargain, investors are not jumping in.
  • And the Amazon-DISH rumor.

It’s just a number of factors hitting at once, nothing to do with 5G. On the lead-sheathed cables, it’s a tough problem. It’s impossible to run an audit to find every cable. The records are incomplete for most telcos, especially going back to the 1880s. Even in the 1980s records where still on big A0 sheets, like blueprints, hand written and amendments made over the decades. Neglect, privatization, cost cutting, digitization, fires (including bombings in world war 2), etc. have all taken a toll on the accuracy of these records.

Likely the high profile cables going through lakes and rivers will (and are) being removed. However, getting a clean bill of network health on lead is going to be tough as there will always be some forgotten about cable, perhaps in some of the old buildings in NYC. With our house built in the 1950s, we discovered 2 basement windows with lead paint about 15 years ago, when we thought the house was lead free.

TDS Telecommunications identified 10 miles of lead covered cables in its U.S. network. TDS Telecom is an American telco, and is the seventh-largest local exchange carrier in the U.S. My guess is there’s much more lead waiting to be discovered in their network.

Proximus Buys Route Mobile

After Tata ‘bailing out’ Kaleyra, more on that in next week’s article. We had a significantly larger deal from Proximus buying Route Mobile. They paid $722M for a 58% stake, the deal is likely going to get more complex given Indian regulations. However, it’s a nice valuation for the remaining aggregators / business messaging providers.

This is the third ‘CPaaS’ investment after the acquisition of Telesign by BICS in 2017, and BICS acquisition of Indian business messaging company 3m Digital Networks Pvt Ltd (mobtexting) in 2021.

With Gupshup, Mitto, tyntec, GMS – Global Message Services, MessageBird, Soprano Design, etc. still independent; which wholesale connectivity and interoperability services provider is going to move next to buy an SMS aggregator / business messaging provider next?

We’ll be having a no BS discussion on this at TADSummit in October.

Piper Sandler Downgrades Twilio

Piper Sandler downgraded Twilio, saying sales will be “messy” and upside is limited. This is directly linked to TCR mess we’ve talked about.

The analysts cut the rating from Overweight to Neutral, while increasing its price target to $71 from $56.

“While Twilio may be finding more stability than prior quarters as crypto and other headwinds abate, the macro-environment uncertainty and recent divestitures will create ‘messiness’ for sales estimates ahead that are likely too high,” they commented.

In addition, they view the CPaaS sector as the emerging counterpart to the CDN space, and with the software portfolio slowing, Twilio is likely to deploy its $3.5 billion in cash for additional software mergers and acquisitions, despite limited investor interest.

This is why the CPaaS label is so nonsensical. Why are they referring to a telecom application server? The TCR is about A2P SMS. Most of Twilio’s marketing is around customer experience, customer data, and workflows. These are all programmable communications, or as we refer to in this newsletter, CXTech. And it’s not a counterpart to a CDN, thanks about video streaming. Though there is an interesting discussion about the convergence of RTC video and broadcast video we’ll have at TADSummit (session outline coming soon).

Moreover, the management team has already implemented internal initiatives to enhance performance, such as reducing the workforce by more than 25%, divesting underperforming divisions, and addressing go-to-market and structural challenges. The consolidation of the dual-share class took place on 6/28, and they anticipate that margins and free cash flow can surpass the Street’s estimates. Although the management remains steadfast in keeping CPaaS and Software integrated, given the present valuation, they believe there is limited potential for upside based on a sum-of-the-parts valuation.

TADSummit is going to be interesting, we survived the pandemic. Programmable communications helped us through it, and now it’s being squeezed. Keep an eye open for Twilio’s Q2 results on Jul 26, 2023. I know they’re working hard to make them good, however, the activist investors are circling, Pipler Sandler has downgraded them, TCR is making life ‘interesting’ in the US, and aggregators continue to consolidate…

Linear channels ‘may not be core’

It’s finally been said out loud, linear channels may not be core. Content owners prefer direct to consumer streaming as there are no middlemen and all in customer data is theirs alone. This has always been the long term goal of Disney, as I mentioned in the TV delivery evolution report, which I made free to download ten years ago. It’s just they now say it in public.

Now the battle is between the streaming channels. Disney has already mentioned licensing, like they did before channel exclusive content became the fashion.

We saw Netflix’ customer numbers rise last quarter, 5.9 million subscriber, versus the 2.1 million additions expected, as the account sharing removal program bites. Though revenue was below expectations, which caused a drop in stock price.

The move to streaming has enabled a diversity of consumption models to flourish. I know some people think Netflix and Prime TV have nothing worth watching. While for my family, those services in additional to YouTube provide way more content than we have time to watch.

The skill for the streaming service providers will be nurturing fresh edgy content for their target audiences; not stuff that plays it safe, rehashes tired overrated franchises, or does a ‘Witcher 3’ (by the end it just feels like it came from a TV series writer intern factory, especially the Art of Illusion episode, so far off Witcher 1).

TADSummit Agenda continues to Grow

Another week another few updates to the TADSummit agenda. If you’d like to present just send a message to me.

Think of TADSummit as the ONLY event where frank, ‘no BS’, conversations can be had with practitioners from the field. Building a successful business comes through understanding what is awesome and also what is not awesome. That later segment can be hard to find through the industry’s marketing.

Keynote: Beyond the IoT – programmable connectivity for the digital enterprise

Mike Bromwich, CEO / Co-Founder Stacuity & Tim Dowling, Co-Founder Stacuity

  • The IoT label is increasingly meaningless in an enterprise context.
  • Labelling initiatives as “IoT” symbolically separates them from an enterprise’s general IT.
  • With traditional approaches to managing mobile connectivity, this is appropriate because the enterprise can only control the IoT services at arm’s length.
  • However, in the emerging era of programmable/software-defined mobile networking, the enterprise can now assume full control and manage its connected devices like any other IT asset.
  • Following the success model of WiFi in the enterprise, its managed like any other wired asset. Stacuity enables this model to be extended across programmable mobile networks.

Chrome extension to monitor WebRTC outbound flows, troubleshoot and learn

Philippe Sultan, Senior WebRTC Developer at Livestorm

  • Presentation of a simple Chrome extension that monitors published WebRTC streams
  • How working on live stats help understand how WebRTC works
  • A practical example of how live stats help troubleshoot audio/video issue

People, Gossip, and Frivolous Stuff

Phelim O’Doherty is now Senior Vice President at Acxiom. He spent 15 years at Oracle working on their communications product and broader CX portfolio. Before that was with BEA, Sun and Aepona! He’s lived the telecom API journey!

Rita Lopes is now DevOps Master at QXIP B.V.

Alexander Kunzi ia now DT Global Account and Regional Sales Manager at Titan.ium Platform, LLC. I’ve known Alex since his time at Acme Packet / Oracle.

Brian Levin is now Head of Sales at Shiftwave. I’ve known Brian for almost 2 decades, since his time ay Mobliss and Useful Networks (another telecom API enabled business), then through his Perky Jerky journey.

Alan Williamson is now Vice President, MNO/MSO Sales at Airspan Networks. I’ve known Alan through his time at Mavenir.

Greg Casey is now Sales Director at Digital Realty at Digital Realty. I’ve known Greg since Dial2do, one of the first telecom API enabled start-ups. A great case study on the irrelevance of OneAPI and CAMARA.

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