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

Author:
Jon Newman


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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,

1

Overview

4

2

Introduction

6

3

Historical Perspective – Market Context

9

4

Digital Transformation Pros and Cons

13

 

Market Evolution Catalysed by Digital

14

 

Roles Available in the New Markets

19

5

How to Transform

20

6

Conclusions & Recommendations

32

A

Appendix

35

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Our Clients

A valuable program, differentiated by its best practice case study approach. Many external providers supply regular updates on MNO KPIs, but it's how operators are approaching these issues we want to know about Orange Group
Mobile Market Development 2015