The telecom industry is approaching a tipping point.
Average revenue is falling and many telecom providers are experiencing significant reductions in their basic communication service revenues: as much as 30% in SMS messaging, 20% in international voice, and 15% in roaming.
This is a common global trend as social media has opened up a new means of communication.
Experts predict that there will be 28.1 billion devices connected to the Internet by 2020, of which 15 billion will be machine-to-machine (M2M) or consumer electronics.
Over-the-top (OTT) players are the new competitors in the industry. They offer apps and easily accessible content to consumers via the Internet. These businesses have increased their market share in many industries including core telecoms services such as messaging and voice. WhatsApp, Viber, and Apple’s iMessage already claim 80% of all messaging traffic, while Skype alone grabbed more one-third of the international voice traffic market. This digitization that is reshaping the industry brings with it tough times for providers.
Maarten Ectors, Chief Digital Officer – at Legal & General points out 6 problems that have contributed to the industry’s current standstill.
Six main problems faced by telecoms
1. The industry relies too much on revenue from calls and SMS
Telcos like Deutsche Telekom, Telefónica and much more are struggling to counter the trend whereby the prices of voice and data services are crashing fast. The situation is only going to get worse for many sectors within the industry because of its reliance on revenue from calls and SMS.
2. Telecom services are now a commodity
Competitive pressure is building fast in the industry as companies in adjacent industries like technology and media move into the telecom space. Everyone now expects telecoms to work like all other service industries and less focus is placed on the provider.
3. Customer relations is non-existent
OTT players connect with their customers on many different levels. This is part of their appeal. Organizations like Apple, Google, Facebook, and Amazon have developed customer relationship processes that improve products and services based on user feedback. Telecom operators only connect with their customers when they are trying to resolve technical problems.
4. The industry is stagnant and solutions are complex
With a lot of legacy processes in place, the industry offers extremely complex solutions making integration with new technology more difficult.
5. Operators are in denial and act like copycats
The industry players act like copycats by adopting new trends and spending billions on going to market; many times too late.
6. Telecom operators are a necessary evil for DotCom companies
The world has come to a point where telecom companies are impeding the growth of large social networks. In order to be globally compliant, telecom businesses must transform or conform to digitization.
How telecoms can win in the digital revolution
Digitization is not just a threat to telecom companies, it is an opportunity to reconstruct the industry, reinvent business systems, and create ground-breaking offerings for customers.
Many forward-thinking executives consider digitization to be a top priority, but only a few are close to achieving its full potential. An industry transformation can help operators improve their profits by a large margin; considering the rate of decline in recent years.
So how can telecom companies bridge the gap? Below are 3 ways to combat the problems that telecoms currently face.
1. Customer-centric focus
Customers today use multiple channels during their consumer journey. Innovation and new technology can help telecoms reinvent core telecoms services and leverage the use of multi-channels for excellence in every interaction.
E-digital is now the leading channel for many customer-service activities, and because of this customer preference, telecom companies must focus on listening to their customers and just like the OTT’s, develop services around the feedback received.
2. Join forces with innovators
There are many ways to drive innovation for telecoms. Operators can create adjacent services like financial products, IT offerings, media, or utilities and widen the scope of business. Or like Ectors pointed out, they can join forces with innovators to create brand new service and bring their costs under control. These innovators will bring on board specialist knowledge to complement the telcos’ strong user base and telcoms experience.
3. Do nothing approach
You may wonder why any operator will choose to do nothing. And yet this may work out for some who have a large market share and are willing to watch the tide swallow the smaller fish. In this case, they will keep on doing what they are currently doing and watch as others go bankrupt. This is a really risky strategy because the tide could change in their direction without much notice.
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Sources - https://www.strategyand.pwc.com/trend/2017-telecommunications-industry-trends - http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/how-telecom-companies-can-win-in-the-digital-revolution# - http://spectrum.ieee.org/tech-talk/telecom/internet/popular-internet-of-things-forecast-of-50-billion-devices-by-2020-is-outdated