Telco 2.0 - Digital Transformation for MNOs: How and Why
2015.09.02   |   35 pages   |   Direction, Strategy and Brand Differentiation

Jon Newman



Sign up to receive our latest insights and reports

Sign up

All traditional (voice and SMS-based) revenues are increasingly at risk from OTT alternatives.  Based on historic Telco performance and competitive response times, there is significant risk that current providers will not react quickly or effectively enough to prevent this loss causing major damage to their own business model.

MNOs have a history of charging for voice and underpricing data connectivity (at least in moderate volumes), considering it a marginal revenue leveraging infrastructure that the voice pays for.  The model has two major flaws  – it relies on a lower cost of servicing the debt incurred to buy licences, spectrum and infrastructure than is the case in today’s Global money market and it relies on a longevity and persistence of voice revenues at an effective rate per minute beyond what may now be expected.

MNOs must decide quickly if they wish to specialise in providing connectivity only, or to enter the digital market, either as leaders or in partnership with others.

This is a decision that will define the MNO of the future and it must be taken actively – wait and see is not an option for any player that wishes to determine its own future. 

  • Being a good connectivity supplier is a valid choice, but the revenues generated by companies that take that approach must be better matched to the real current and future cost of supply – current models where OTT app providers and users do not contribute to the cost of the network will not support the continuation of those networks.
  • Entering the digital space – alone or with partners – requires the MNO to learn and deploy new skills and accept that digital revenues (at least in the early stages) will be both small and diluting of current revenues.  It is not easy to prioritise a business that generates less revenue than it simultaneously removes from the current stream.  A small percentage increase in current ARPUs or reduction in churn will dwarf early digital revenues, and it is a brave management team that will pursue this in the face of shareholder pressure for results this year.

This report examines the options presented by the emerging digital world in the immediate to medium term, to help MNOs make decisions about their own future direction, rather than relying on inertia or an unlikely persistence of old models to save them from extinction.

Companies: Singtel, TeliaSonera, GSMA, Skype, WhatsApp, Facebook, Sony Pictures, Warner Brothers, Globe Telecom, Telstra

Countries: UK, France, Germany, Italy, Japan, Spain, Netherlands, Poland, South Korea, Brazil, Russia, India, China, Nigeria, Sweden, Austria, Finland, Singapore, the Philippines, Australia

Keywords: digital service provider, Transformation, voice, OPEX, digital service enabler, video, Telco 1.0, Capital Intensity, walled garden, S-Curve, repremiumisation, Transition, messaging, partnership, piper, free market, streaming, grand digital convergence, app, digital opportunity, cannibalisation, audio, strategic drift, CAPEX, catastrophe theory, regulation, Cost of Capital, connecitivity service provider, mobile advertising, GDP, smartphone penetration, Traditional Mobile Business Model, entry barriers, Telco 2.0, ARPU, supply limited market, OTT, digital democracy, KPIs, SMS, disruptive competition, IM, VoIP, demand limited market,








Historical Perspective – Market Context



Digital Transformation Pros and Cons



Market Evolution Catalysed by Digital



Roles Available in the New Markets



How to Transform



Conclusions & Recommendations





Related Reports

The Repremiumization Myth: Content & Services - Not Connectivity - Attract Premiums


MNOs must accept that network connectivity is a given and they will struggle to increase its perceived value so that customers will pay more for better quality. Consumers, based on experience, expect the network will provide all they need for a minimal price and if it does not work, they will complain rather than pay more for one that works better. Mobile operators have two realistic opportunities to raise margins - they can bundle their offering with high value content ...

Read more

The Digital Challenge: Transforming From Voice to Data Centricity


Over-The-Top (OTT) services such as WhatsApp and Facebook Messenger have experienced rapid growth on the back of rising international consumer adoption. This growth has resulted in OTT services capturing increasing volumes of text and picture messaging traffic that used to be consolidated on MNO service platforms. OTT services are now expanding beyond messaging to include voice services. In April 2015, Facebook began rolling out voice services to WhatsApp's global base of 800 million monthly active users. The increasing growth of ...

Read more

MNO Telco 2.0 Opportunities Arising From Net Neutrality Legislation


Given the time and energy devoted by US Telcos to lobbying (unsuccessfully) against the Net Neutrality legislation adopted by the Federal Communications Commission (FCC) on 26 February, and the content of their arguments, the implications of that legislation might be taken to be generally negative for network operators and for data consumers. The alternative view is that Net Neutrality regulation will provide the necessary incentive for network operators to modernise their view of the market and how they add value ...

Read more

Our Clients

The EXEC strategy workshops run by MMD were the best I have seen CEO MTN Nigeria
Mobile Market Development 2015