The author of this article, Kashif Haq, Vice President, Technical and Digital Enablement, Apigate will be at Digital Transformation World in May discussing the next steps for transforming into a digital operator by 2025. Join him and 3000+ of you telecoms industry peers from across the world for three immersive days of inspiration, innovation and networking.It’s no secret that core telco revenue streams are declining on a faster trajectory than anticipated, a trend that is expected to continue. While the hype around 5G is projecting a deceptive mirage of immediate success, the reality is that it will take a long time to get payback on 5G investment, and that will only happen if the new revenue streams are discovered on the 5G platform.
However, a large part of 5G is still all about building a fatter, faster, and more efficient pipe. Telcos are on the brink of extinction when it comes to profitability and margins and they won’t be able to succeed by only taking a network centric, connectivity-based approach. They need to find new revenue streams quickly by moving up the value-add stack and getting back to healthy profitability margins.
Open up assets through digitization
Telcos are sitting on a treasure trove of assets. They are, however, locked into silos of operations. These assets are managed and accessed by teams who have no mandate to monetize them, or don’t have the right tools and skills in the organization to do so. Telcos are in a unique position to fill asset gaps for OTT providers – provided they take steps to collect and harness the relevant information and build partnerships to monetize those assets.
Telcos should put an active program together to digitize their assets across the board so they can be shared internally and externally with business partners, to reap business benefits such as reduced cost of development, vendor independence, enhanced customer experience, faster time to market, unlocking of new revenue streams, extending the reach etc. Some assets, in this case - service categories - include:
- Connectivity services
- Product bundling services
- Payment services
- Customer insights
- Security services
Digitization can help to open up these assets to external partners. Any digitization of assets should be prioritized with monetization in mind. This means that digitization is only the first step. Monetization is the real destiny!
Tech provider vs business partner
There are a number of tech companies offering digitization products and services but they have no stake in the success of telcos’ own digitization journeys. They are guaranteed to collect their product licensing and services fees, even if digitization efforts fail to achieve the telco’s business objectives. This puts the entire burden of the risk to innovate on the telcos’ shoulders. Telcos should select partners who they can align their business objectives with, and who can share in the risks and rewards of monetization efforts.
Understanding the digital world
The “frog in a well” thinks the entire universe is what can be seen from his vantage point and is oblivious to the economic activity happening around the well. It is important to understand how the digital world operates (bringing the telco out of the well) to connect with customers, what challenges they overcame and what challenges they are still facing to reach new customers. A good understanding of that will help in creating bridges (new solutions and revenue streams) between the two industries that can benefit both. The telco has three options: build the team who understands this space from scratch, partner with an experienced digital ecosystem builder, or do both. The organization that provides the most experience is a good one to partner and learn from.
Acquiring digital customers
By and large, digital customers are using telco pipes, but telcos rarely (if ever) share any of the subsequent revenue. This because OTT players and other such digital service providers have managed to bypass telcos when targeting their customers. However, joining an ecosystem of digital partners can create a win-win situation where digital partners can greatly increase their customer base and telcos can get their fair share of new revenue streams.
Telcos have three choices: build their own ecosystem of digital partners; use/join a platform that hosts a growing ecosystem of a wide variety of digital partners; or a mix of both. The platform that provides the most flexibility to a business should be the obvious choice for telcos.
Mobile centric customers
Customers are now spending more time on their phones than any other device. Mobile first markets markets are driving the need to offer content, entertainment and financial services new and innovative ways.
With the upcoming technology cycle of much higher wireless speeds, the barriers for opportunities will be lowered one more time. To take advantage of this cycle, telcos should look to offer content, entertainment and gaming products and services to their customers much more dynamically than traditional bundles and give the customers the flexibility to subscribe and consume that content based on their personal needs.
Monetization is the end goal
Telcos need a monetization platform that is focused on creating an ecosystem of digital partners who can help drive true value extraction of the telco assets. For the digital partners, the monetization platform should offer the right service, at the right time, to the right customer. The path to monetization is risky and can be fraught with failures. Factors that could negatively affect profitability include:
- Market differences – mature market vs emerging markets; mobile first markets vs fixed/mobile markets; banked vs unbanked; etc.
- Customer behavior and the propensity to purchase digital services
- Regulatory environment
- Tax rules
Experience in one market does not necessarily mean success in another market. Telcos should partner with platform providers who are enabling and participating in multiple digital ecosystems around the globe.