Who Will Be The Next FAANG Member?

Today’s juggernaut of the world’s priciest stocks are the result of a mash-up of previously disconnected industries. Amazon is Sears meets IBM . Google is advertising meets librarians.

But before FAANG, only a very select few individuals were able to forecast that these disparate areas would merge into new industries that have transformed our lives – and generated huge returns for those early investors. Identifying the next FAANG member will likely create the next generation of Peter Thiels and Sequoia Capitals.

A fundamental way to predict this is to look for industries where there is a strong potential for technology to create significant operational efficiencies or reach entirely new markets or both. One such industry is telecommunications. While, according to a report by GSMA, two thirds of the world’s population are connected by mobile devices, the technology used to connect them really hasn’t changed in two decades. It is wired telecom towers powered by the grid, which are both expensive to install and maintain.

Power and connectivity     

The Telecom Infra Project (TIP) may be the industry vortex that could foster the next FAANG. TIP was founded by Facebook , Nokia , Intel , SK Telecom and Deutsche Telekom . Today TIP boast more than 500 companies from around the world as members, with a collective mission to build new technologies, examine new business approaches, and spur investment in the telecom space.

Like the original FAANGs, TIP brings together disparate industries to create a whole new technology landscape that never existed before. One good example of this is the TIP Power & Connectivity group, co-chaired by Facebook and Telefónica.

Facebook aims to bring an additional 1 billion people onto the Internet to fuel its user growth. Telefónica, one of the world’s largest telecom conglomerates, already operates in 17 countries and delivers service to 343 million people. As part of TIP, its “Internet Para Todos” initiative will bring an addition 100 million people in South America online, thereby growing Telefónica’s access base by 30%. By collaborating, these companies can reach a mutually beneficial goal of giving more people access to the digital world.

There is an imperative for these companies to find a new way to power telecom infrastructure, as the lack of low cost and reliable power is the primary impediment to adoption and use of telecom and data in the unconnected areas of the world.

According to Bloomberg New Energy Finance (BNEF), for those without access to power, charging accounts for up to one-third of the total cost of owning and operating a phone. This takes away both subscribers and subscriber revenue from telecom and internet service providers. Power can also be the largest operating expense for telecom providers.

When power is rolled out to a new area, telecom demand, data volumes, and internet usage spike at the same time. Solving the power problem is a critical step toward significant growth in revenue and profits for the world’s leading telecom companies over the next decade.

Early disruptors

It’s early days, but this mash-up between power and telecom could be the next FAANG.

With so much potential for greater market share through operational efficiencies, companies like Facebook and Telefónica have started looking at ways they can revolutionize how telecom infrastructure is powered – and clean tech is proving to be a cost-effective and reliable power alternative. Solar hybrids are 54% cheaper than diesel for off-grid telecom towers, according to Bloomberg .

This also raises the possibility that, one day soon, your telecom provider could also be your energy provider.

Telstra , for instance, has entered the market with its “Connected Home” strategy, bringing both telecom and solar power to its customers to deliver Smart Home services. It sees a natural synergy between these previously separate verticals and is stepping in to take a leadership position. With 5.4 million households, it has a bigger reach than the largest energy company in Australia, which covers only 4.2 million households. Morgan Stanley research analysts recently suggested that a $10 to $20 billion investment by Telstra in energy assets could make sense.

Both Vocus (VOC.AX), which covers the Australian and New Zealand markets, and Amaysim (AYS.AX) have also entered the market of joint power and telecom offerings.

So, too, has NineStar Connect of Indiana. An early mover, NineStar was created from the merger of Central Indiana Power and Hancock Power in 2011, with an objective of unlocking operational synergies, opening new revenue streams and improving the quality of service to customers.

Just as the original FAANGs disrupted existing industries, these companies are creating a new business model for delivering telecom services and power to our homes.

A new era of utilities

Telecommunications has a 30-year lead over traditional energy infrastructure because it has already evolved to a wireless world. You don’t need to explain to a telecom executive about the power of wireless. It is already a part of the company’s DNA.

With the maturation of solar, off-grid “wireless” power will revolutionize how we power telecom infrastructure to deliver services over the next 10 years. As it does, we will see a corresponding growth in revenue and profits in telecoms companies as operational costs fall, and market size increases. This also raises the opportunity for these companies to own the new power supply for our homes and businesses as well, opening up new revenue streams.

Of course, it’s still too early to call who will win out in the evolution of power and connectivity. But we’ll be keeping our eyes on that space for the next visionary leader to join FAANGs.