Telecoms' Strategic Divergence: Why Infrastructure Utilities and Data Ecosystems Are the New Binary Bet
3min read "text2img>A split image: on the left, a sprawling fiber-optic network stretching across a city, symbolizing infrastructure utilities. On the right, a futuristic data center with servers humming and digital data streams flowing, representing data ecosystems.
Telecom companies are at a crossroads. As 5G, AI, and broadband demand reshape the industry, firms are choosing between two divergent paths: becoming infrastructure utilities like BaseLink, or data ecosystem architects like DigiLife. The choice isn’t just strategic—it’s existential. Investors must decide whether to back telecoms scaling fiber as a regulated monopoly or those monetizing AI-driven data centers. The wrong call could mean missing out on 10%+ margin expansions or getting stuck in a regulatory quagmire.
Ask Aime: "Is BaseLink's fiber growth too risky, or should I bet on DigiLife's data-driven future?"
The Infrastructure Utility Play: Chorus Ltd’s Fiber Monopoly
Chorus Ltd (CHRYY) epitomizes the infrastructure utility model. As New Zealand’s sole nationwide fiber provider, it controls 87% of the population’s broadband access, having completed the government’s ultra-fast broadband rollout in 2022. Its dominance is codified: 100 retail telecoms rely on its network, and regulators have forced it to operate as a near-monopoly with capped wholesale pricing.
Chorus’s financials reflect the stability of this model. Despite a 1% revenue dip in early 2025 due to legacy service declines, its regulated asset base (RAB) stands at NZ$5 billion, growing to NZ$5.4 billion by 2029. The subsea cable project—a $2.3 billion investment pending final approvals—highlights its strategic bet on becoming a digital backbone for the Pacific region.
Ask Aime: Should I Invest in Chorus Ltd's Fiber Monopoly?
Why it works: Infrastructure utilities thrive on scale and regulation. Chorus’s fiber network is a non-negotiable utility, akin to electricity grids. Its risks? Regulatory pushback—New Zealand’s Commerce Commission is demanding it cut capex by 16%, arguing it’s overbuilding. Investors must ensure the firm stays disciplined: capex allocated to core fiber infrastructure should exceed 80% of total spending to avoid dilution.
The Data Ecosystem Play: Spark’s AI-Driven Pivot
While Chorus digs deeper into fiber, Spark New Zealand is betting on data ecosystems. Its data center capex (NZ$250–300 million over three years) targets 200 MW of capacity by 2026—a 40% CAGR—to support AI and cloud demand. The company is also courting co-investors for its NZ$1.2 billion data center portfolio, signaling a capital-light, high-margin play.
Spark’s strategy is paying off: data center revenue rose 13.6% in early 2025, and its focus on edge computing and 5G integration aligns with Microsoft’s and AWS’s hyperscale investments in New Zealand. The risks? Regulatory scrutiny over sustainability (e.g., its solar-powered data centers) and competition from global tech giants. To succeed, Spark must allocate >80% of capex to data infrastructure and maintain margins above 30%, a level achievable in high-demand markets.
The Peril of Hybrid Strategies
The real danger lies in firms trying to do both. Telecoms that split capex between fiber and data—without dominance in either—face regulatory penalties, diluted focus, and lower margins. For instance, Chorus’s copper-to-fiber transition has forced it to cut legacy ARPU, while Spark’s reliance on external investors for data centers introduces funding risks.
Indecisive players risk becoming stranded assets: legacy infrastructure without a clear path to profitability. Investors should avoid telecoms with capex split evenly between models or those failing to grow margins above industry peers.
Actionable Metrics for Telecom Investors
- Capex Allocation: >80% of spending should target one model (fiber or data).
- Margin Trends: Infrastructure utilities aim for 15–20% EBITDA margins; data ecosystems target 30%+ margins.
- Regulatory Alignment: Check if the firm’s strategy matches its regulatory environment (e.g., Chorus’s RAB model vs. Spark’s data center partnerships).
- Growth Catalysts: Fiber firms need subsea cable rollouts; data ecosystems require 5G/edge computing adoption rates.
Conclusion: The Binary Bet of Our Time
The telecom sector is bifurcating into utilities and ecosystems—there’s no middle ground. Investors should ask: Is the telecom doubling down on fiber as a regulated monopoly, or pivoting decisively to data-driven growth? Those straddling both risk becoming relics as AI and broadband demand surge. Back companies that commit wholly to one path—and avoid the hybrids. The prize? Telecoms with 10%+ margin expansions and regulatory tailwinds are primed to outperform.
The clock is ticking. Choose your bet.
