The traditional business of a Telecom Operator used to be an extremely profitable one with steady growth rates. But now it has been exposed to a wind of change for some time and looking at the graphics below of predictions for services (based on data from STL Partners analysis) taken from Dirk Rohweder blog, and the wind is not likely to stop blowing anytime soon.
Different strategies are currently being explored by the operators to address this constant change in the market landscape. Depending on whether you decide to love and embrace that change, or view it as a threat you need to stop, this is handled in separate ways. Some strategies are more innovative and positively looking at new opportunities, some are mere packages of measures to survive and some are of course addressing a mix of both.
So what is the situation? What is done and where to go from here?
- Stagnating and/or Declining margins and revenue - huge investments in Networks are needed; both in capacity and new functionalities to cater for the steeply increasing demand, and this combined with less willingness to pay for the services provided is not creating a bright future for the industry.
Today we see Consolidations of Networks like Telia & Telenor in Denmark or Telenor & Tele2 in Sweden (2G/4G) to lower OPEX when gaining economy of scale. Others are focused on Mergers/Buy-Outs to enhance product portfolio and revenue or simply extinguish competitors, like AT&T buying DirecTV and now going for Time Warner or Hutch & Vimpelcom merger in Italy.
In the next step Operators need to approach their operations in another way - this quotation, which I just love, says a lot:
"Network operators will…all become big data companies or go out of business". "If you see a cell tower, you're wrong, "[It's a] data gathering platform." By Professor Viktor Mayer-Schonberger of Oxford University
And by analyzing their network data, Network Analytics, it is possible to combine the actual fact with experience to become more proactive and by that reach higher scoring on Network Quality KPIs & Customer Experience (NPS), receive best RoI on the OPEX spend and drive down cost in maintenance. Examples of Operators who are using Network Analytics in order to improve are OTE and Telecom Italia with Analytics and Visualization
- Increased Competition - New Entrants in the market like different kind of OTT players, Cable companies, Utilities and even Telecom vendors all want at least a slice of the operations pie – if not all of it ; offering similar, same, other or better services for less or even for free. According to Ovum, OTT social messaging applications cost CSPs $32.5 billion in lost SMS revenues in 2013 and are predicted to reach $54 billion this year. Examples on OTT players are Google’s Project Fi, apps like Facebook, WhatsApp, kik, and vendors like Ericsson going for Verticals; connected vehicle
Unsuccessful tactics, applied by GSMA Associations with their Operator members like for example AT&T, Bell, Deutsche Telecom, Orange, Vodafone, Bharti, Telia ++many more, like blocking OTT players through initiatives such as GSMA Joyn to make it harder through enforcing RCS (Rich Communication Services) standards. Or fighting with launching new similar services like their own TV/Content/Streaming services, making own Apps and/or IoT initiatives like “Telia Sense” – the connected car.
In my opinion the underlying vital focus for the Operators should be to get much closer to their customers – become relevant and beneficial for them – to build loyalty and increase the usage of existing and new offerings. The Operators need to start using the data they have and recognize the value they will receive when applying analytics, preferable in real-time or near real-time – and act on the results. Examples on successful Operators using an analytic approach are:
Telenor: by combining advanced analysis with sales and business knowhow, leading to improved knowledge of each end-customer's needs ensuring more personalized sales and dialogue, with defining next best offers that are relevant to the individual customer as well as profitable for the company.
Telstra wanted to provide tailored, individual experiences for each of its 9 million customers to bring their customer closer proven by enhanced NPS (Net Promoter Score).
Data is a never-ending source, like oil used to be, and by applying analytics the results can provide direction/support on how to proactively move forward in the market and with which new services – do not drown in all your data, apply analytics and you will swim in information.
- Tougher Regulation – Regulators are setting more strict regulations on how to handle roaming traffic, usage of private data and Net Neutrality which are all affecting the telecom operators’ revenue negatively and also fencing their choices on how to move forward – how to counterstrike against that?
One thing Telefonica did was launching the Big Data unit “Luca” to acknowledge how valuable the data is to become a data driven company: “Data is a critical asset for the future of Telefonica and any organization. With Telefonica’s fundamental prise to always maintain privacy, security and the transparent use of the data, we want to help our clients understand its full potential”
A term, which I particularly like, summarizes the importance of data to be treated as an actual valuable enterprise asset is “Infonomics” coined by the industry analyst Doug Laney to describe his proprietary research and consulting around quantifying information’s value and defining how to manage information as such.
Squeezed in all this it is easy to realize what a huge change transformation the industry, or should I say industries, is/are taking on and I think you got to love and embrace it´s potential otherwise it will be a rough ride ahead.