Changing times for telecoms
Advisory firm PricewaterhousCoopers says a changing environment is forcing telecoms operators around the world to change their business models.
Johan van Huyssteen, PwC Southern Africa’ s Communications Leader, believes that the real test for telecoms companies is only beginning.
He says: “ Globally, with broadband becoming ubiquitous and services exploding, the telecom value chain is rapidly fragmenting as many operators are losing out to application, content and device providers who are accumulating much of the new revenues and opportunities which currently exist.”
PwC highlights six key challenges that need to be addressed by operators, which will assist telecoms companies to be successful in this new business environment and allow them to claim their rightful share of future revenues in the digital era.
Establish customer ownership and understanding
Customer loyalty and brand trust is shifting away from the service operators towards the device itself and the online applications accessed through it. To turn the tide on the trend, operators must reshape their business to put the customer first in all they do.
Monetise new services effectively
The rising penetration of both fixed and wireless broadband has enabled the launch of many new online services with the mobile handset becoming an indispensable converged lifestyle tool handling virtually everything people need. To capture the opportunities and revenues from newer and emerging services the best approach may be through collaborative revenue sharing partnerships which will bring access to critical expertise and speed up the time to market.
Achieve economic returns from the continuing rise in digital traffic
Consumer demand continues to drive huge rises in the volumes of data traffic that operators have to carry across their networks. Although not yet that prevalent in South Africa, we have seen many consumers moving towards fixed-price access plans globally. With the increased broadband capacity in South Africa (due to the landing of various undersea cables, i.e. Seacom, Eassy, WACS) broadband prices are decreasing which may result in similar models going forward.
Under this model, it may become increasingly difficult for operators to sustain economic returns for broadband data usage and going forward, depending on the evolution of the broadband market, operators may have to adopt a user-based charging model for mobile data.
Improving operational simplicity and efficiency
This is a major objective for many operators who have grown by consolidation and the use of “ bolted-on” solutions to handle new services. This has left many of them with highly complex and inefficient operating models. One of the key attributes for success both now and in the future will be greater organisational agility in order to respond to both internal challenges and those posed by the fierce competition from the application and device suppliers, who have had some competitive advantage in recent years due their higher degree of ability and speed to market.
One critical step which many operators have yet to take is to remove customer, product and business intelligence from the various silos and centralise it on an enterprise-wide basis. By unifying all this intelligence into one central entity, the operators will benefit from greater efficiency, agility and responsiveness to external change, whether driven by customers, competitive dynamics or regulation.
Managing regulatory risk
In recent times, regulators have taken a renewed interest in the telecoms industry both at a national and global level. Considering the wide array of matters being dealt with by regulators, especially in emerging markets, it is becoming increasingly important for the Regulators and other stakeholders to establish and build strong positive relationships in order to amicably resolve the issues being dealt with.
Creating value through consolidation
Consolidation will continue in the telecoms sector, however the industry will now see deals driven by emerging market giants who may be seeking exposure in developed markets. Consolidation will also be driven by three objectives – economies of scale, fixed/mobile convergence and sustainable cost reduction which will help to provide a robust platform for growth in the digital age. The priority of any deal is to create shareholder value – something which has proved elusive in some instances in the past.
Van Huyssteen concludes: “ With each technological advancement operators face an exponential rise in the data traffic being carried across their networks which results in a corresponding decrease in the price they can charge customers for carrying each bit of data.”
The introduction of the smart phone is an excellent example as it is beginning to rival the computer as a communication tool. Consumers routinely use these devices to view digital content. This capability, coupled with the dramatic rise of social networking, has fundamentally changed mobile communications and is accelerating the migration to digital by providing access to digital content anywhere and anytime.