All good things come to an end. 2014 was the first year when the total global revenue of Telcos had a marginally negative growth. Was it the beginning of the end? Will Telcos, the way we know them, not last? My answer is a resounding yes, but their fate hinges on the extent of Digital Transformation they undertake; here is why:
Current Telecom Environment in Developed Countries:
- Data usage is going through the roof
- However, ARPU is not growing proportionally
- OTT Services account for nearly 50% of the traffic during primetime, hence infrastructure capital costs are increasing
- Market penetration of wireless is approaching 100%, thus revenue is stagnating
- As intensity and frequency of new technology disruptions increase, time window to recuperate tech and services investment, decreases dramatically
- Higher costs of handsets, mean subsidies are expected to be higher, as the price plans are not increasing proportionately
- More new entrants in the traditional Telco space. As a consequence- EBITDA is dropping with constant Revenue and Opex pressures
….So how are the operators countering these forces?
Using Digital to Open New Frontiers (New Markets, New Segments)
- Pivoting to become digital lifestyle brands
- Blurring the ICT lines and evolving digital strategy from being plain vanilla Telcos to providing content, healthcare, IT services, and cloud services
- Flexible architecture, digital processes to enable shorter time to launch new services
Using Technology to Transform Customer Experience and Lowering Costs
- Leveraging combinatorial emerging technologies (AI, IoT, Big Data, AR, VR) to improve engagement and provide focussed, relevant, and targeted experiences
- Provide self-serve medium and digital communities to help answer questions
- Building foundational capabilities in modular fashion
- Transforming the network to be efficient and software based vis-à-vis monolithic silos working in tandem
- Constantly measuring performance through investments in analytics, data lakes and mining for insights on customer behaviour
But this journey to become a Digital Service Provider (DSP) is not easy!!!!!
- Traditional Telco culture and team structures are not accustomed to extremely fast-paced change
- The machinery is slow, processes not optimal, and it takes time to move the wheels. Being nimble and quick to respond in an organization with tens of thousands of employees is challenging!
- Investor relations focus and the pressure of meeting in year numbers, equates to spending capital on short term needle movers and not long-term industry movers
- To pre-empt it, clearly the Digital Transformation exercise has to be a top down mandate, to ensure realization of its true impact
In a nutshell, as Service Provider’s strategy and tactics begin to evolve, its becoming apparent that the digital infrastructure will soon become the backbone of every aspect of a telecom operator’s business in the future:
- Sales and Marketing: reach, acquisition, retention, loyalty, and eventually advocacy
- New Revenue Streams: helping pursue adjacent industries, new products and services
- Opex Reduction: customer support, internal processes, and analytics
- Network Transformation: provide bandwidth and QoS on demand, change network routes etc., software defined networks/radios
- Enablers: building IT capabilities
Telco industry has a unique opportunity to be the digital gateway to the future. I cannot see any other industry driven as much by bits and at the same time faces disintermediation challenges for the same reason. The time to act is now!
mobileLIVE has developed an extensive set of tools and frameworks to enable the digital journey for customers, and are happy to help!