Internet of Things – Cars are on the way


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The wrong kind of connected car, texting and driving

Often, especially outside the United States, mobile telecom operators trade at depressed earnings multiples. They do so even though the markets they act in are de facto oligopolies (due to spectrum licensing), and mobile operators tend to be cash cows. There are many possible reasons why this happens.

One of the reasons has to do with perceived large competition. This happens because mobile telephony has high fixed costs – to provide the infrastructure, which enables the wide provisioning of the service. It then has low marginal costs, that is each additional subscriber doesn’t cost much to serve. As a result, every operator has an incentive to act very promotional to steal subscribers from the others.

Additionally, mobile telephony is seen as very capital intensive. This is so because providing the infrastructure is very expensive. On top of it, mobile operators need to buy spectrum licenses to serve each market. The capital intensiveness, though, is somewhat cyclical. It happens when the network is first built, and at large technological jumps, like 3G, 4G or in the future, 5G.

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