It might be a self-evident truth that service providers of all types need to focus on creating new services that drive new sources of revenue. As legacy services of all types enter the “declining” portion of their product lifecycles, the need for replacement services is obvious.
What is less obvious are the potential and serious implications for the ability to raise capital. Here’s the basic problem: investors do not generally like to plow lots of capital into businesses viewed as “cash flow” instruments. Investors normally prefer to invest lots of new capital into “growth” businesses the offer the hope of large gains in the out years, even if the immediate returns do not occur for a few years.
On that score, cable and telco entities often are seen as “cash flow” plays, not “growth” plays. And there’s the threat. Investors do not like to invest lots of new capital in “cash flow” plays.
That means the ability to create a viable “growth” story is ultimately essential for service providers who must continue to invest robustly in long-lived assets.
The point is simply that without a credible “growth” story, it might increasingly become difficult to raise the investment capital necessary for that growth.
