Telcos face squeezed margins – digital transformation will help but it’s not the only answer
Analysts and consultants have identified key transformation tactics to help improve squeezed margins but focusing on the big picture neglects other opportunities for growth. While efficiency is critical, there are simple, incremental steps that can be taken to help business customers and to grow revenue efficiently.
Despite significant ongoing investment in networks, driven by 4G and VoLTE, telco revenues have continued to decline. McKinsey and Company, in a recent article, showed that, on average, the annual revenue of telecoms operators has dropped by 6% each year since 2010. At the same time, expenditure has remained high, which means margins have been squeezed. Although customers are consuming more data, they aren’t paying for it, which places telcos in a difficult situation. And, with most users turning to alternative providers for the online services they actually pay for, telcos have to act to change things.
Of course, increased use of data analytics to guide investment, among other approaches, will help telcos spend more wisely but that doesn’t change the fact that, to many customers, they are merely a means by which other services can be accessed. Telcos need to be able to offer services for which users will pay, as well as to ensure that they optimise their operations and networks efficiently.
The question is, what can they offer? In consumer markets, it’s clear that content, on-demand television and video matter, but even so, competition is fierce and exclusivity means that consumers will forge relationships with multiple providers to obtain the content they seek.
In contrast, business markets remain less well served and their interests are not served through content offers. Although many corporates and the largest organisations have long been attractive targets for telcos, the growth of mobility and changing work practices mean that business needs are changing, creating new opportunities. Telcos should be positioning to address this market as well as seeking to optimise their investments and reducing costs. Of course, the question is, how?
Well, it’s not by taking a one-size-fits-all approach. Business users need more than connectivity and telcos can exploit this by offering services that complement and enhance existing offers. That means enriching communications by providing mobile optimised services that help build better collaboration, better call delivery and which lead to enhanced productivity. It also means delivering services that are adapted to the needs of different segments – corporates, SMEs, SoHos and so on, as well as different industries. And, there will be common needs across segments and verticals, as well as unique needs that relate to specific segments.
It’s easy to focus on transformational change but even simple thing can make a real impact. For example, reducing the amount of missed calls to a business helps productivity and has a real value – telcos are starting to realise this and investing in solutions to solve real business problems. Just look at what Kcell has been doing recently. In this case, Kcell sought to reduce the number of missed calls to companies by up to 30%, simply by providing a unified infrastructure that united devices into teams and groups. That’s a significant benefit, but many overlook this kind of opportunity.
The big picture for telcos remains challenging and there are clearly significant transformations ahead. These will yield benefits but there will also be costs involved along the way. While McKinsey and others are pointing to major and profound changes, simple actions shouldn’t be ignored. This means that telcos should be taking a close look at what business customers want and then taking steps to meet these needs.
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