Winner Take All

Winner take all is major trend in the application business.  In the 2010 to 2014 period, the top 20 percent of companies in the telecom, media and technology industries captured 85 percent of the economic profit in TMT industries.

The top five percent of companies—including tech giants such as Apple, Microsoft, and Alphabet (Google’s parent)—generated 60 percent. You might note that scale plays a role. In most of these businesses, there are network effects: the more users, the more valuable the network; the higher the revenue potential; the greater the profit margin and equity valuation premium.

Telecom providers are not in comparable position to "take all," simply because their ability to reach huge scale is limited: regulatory barriers and capital requirements being the chief obstacles. For that reason, the access services business will remain more fragmented than the applications business.


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