Telecom sector ramping up investments in tech as traditional growth areas slow

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However, some are heeding calls for a stronger presence in the tech space. Bell Canada, in recent years, has vowed to transform into a company that focuses primarily on tech services, beyond core telecom offerings.

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That’s been backed up by a slew of announcements lately, including the launch of its services brand Ateko, which unified recently acquired tech companies FX Innovation, HGC Technologies and CloudKettle under a single umbrella.

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Bell is also making artificial intelligence a cornerstone of its growth strategy, announcing last month it will open six AI data centres as part of a plan to create the largest AI compute project in Canada.

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Investing in sovereign AI — when an entity builds and operates its own AI systems — has become “an emerging theme for telcos,” said Desjardins analyst Jerome Dubreuil in a research note.

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“Canadian telecoms are looking for new areas of growth, and data centre operations may help if Canadian organizations are looking to partner with local operators that can also offer telecom services,” he wrote last month.

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THE PERKS OF ‘TRAVELLING LIGHT’

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While Bell owner BCE Inc. expands its tech portfolio, its investments in other non-core areas have waned. In addition to divesting its stake in Maple Leaf Sports & Entertainment to rival Rogers Communications Inc., the company also shook up its media division last year, selling off 45 radio stations while ending some TV newscasts.

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Other major telecoms are also shedding assets as they look to reduce costs and shrink their debt. Telus Corp. has said it is exploring the sale of a minority stake in its portfolio of wireless towers, while Rogers is in the midst of selling a minority stake in a portion of its wireless network infrastructure.

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Pogorel said divestment of physical resources by telecom operators has become a “massive phenomenon” internationally. By generating cash through the sale of towers, it creates new opportunities to expand into adjacent, non-traditional sectors.

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“This opens space for innovation,” he said, noting that in France, two-thirds of mobile towers are no longer the sole property of telecom companies. That figure stands at 79 per cent in Finland and 68 per cent in Ireland.

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“This is good for their balance sheet,” Pogorel said.

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“A purely service telco travels light. It doesn’t have the burden of multibillion-dollar infrastructure. Travelling light, they … are more able to innovate.”

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PARADIGM SHIFT

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The big telecom companies “are in kind of a transition phase,” said Erik Bohlin, Ivey’s chair in telecommunication economics, policy and regulation.

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“These big telcos are moving away from their infrastructure to becoming more and more software companies,” he said in an interview.

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“The very cherished idea in Canada … that infrastructure competition is the name of the game, that might be tapering off just because of what is going on in technology.”

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Telus, which also announced plans last month to open two new AI data centres, has undergone a transition of its own into the tech services space, said Carlos Cabrero, director of customer experience excellence for Telus Agriculture and Consumer Goods.

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“My non-Canadian friends often ask me, ‘What the heck is a Canadian telco doing in the agriculture space?”‘ he said at the Ivey event, where he also highlighted growth of the company’s Telus Health subsidiary.