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The Future Business Model of the Telecoms Industry

The telecoms industry is experiencing an accelerating pace of change leading to major disruptions affecting business, politics, and social life explains Mogg et al (2017). 

The traditional Telco business model is being challenged by a range of factors such as:

  • evolving customer behaviour,
  • continually increasing pressure and expectations from new and existing players,
  • declining revenue streams and
  • competitive over-the-top (OTT) players and “tech giants” (Mogg et al., 2017).

Telcos are now faced with a time of transformation, as they are pushed to move away from traditional methods of thinking to become  ”innovation drivers” (Mogg et al., 2017). In order to remain relevant, Telcos worldwide are trying to start this transformative journey by making investments in digital infrastructure and adopting new business models that focus on customer experience and technology explains Firth & Sharma (2020).

According to Firth and Sharma (2020), Telcos can tap into the following potential revenue opportunities available through digitalisation: 

  • Over-the-top (OTT) services
  • Data monetization
  • IoT telecom services 
  • Mobile payment 

In order to seize the above mentioned opportunities, the Telecoms industry will have to adapt its business model to include the following 4 focus areas (Firth & Sharma, 2020):

1. Develop and deliver Value Added Services

Competition between players within the telecoms industry is fueling price reduction, “forcing them to engage in a potentially damaging race to the bottom” (Sewduth, 2021). 

This competition is pushing Telcos to develop additional value-added services in an attempt to lessen the harsh effects of “profit margin erosion” (Firth & Sharma, 2020).  These VAS (Value Added Services) are created by taking advantage of digital technologies and investing in additional capabilities such as gaming etc. that go beyond these Telcos core ICT functions (Firth & Sharma, 2020). These new services will however require new skill sets (Firth & Sharma, 2020).

2. Create an omnichannel customer experience

As Telcos adjust to providing additional digital services, the current digital service providers and OTT  (Over-the-top) players provide a wealth of competition. For Telcos to successfully compete against these new competitors, they must embrace a customer-focused mentality and offer a “36O-degree omnichannel experience to their customers.” (Firth and Sharma, 2020).

According to a study by Aberdeen Group Inc., businesses with strong strategies regarding omnichannel customer engagement retain an average of 89% of their customers, whereas businesses with weaker omnichannel strategies only retain an average of 33% (Why every telco’s CX strategy should include omnichannel self-care, 2021).

With the advancements in technology and customers becoming more ‘tech-savvy’, companies are expected to deliver a digital and interactive means of engagement, explains Levi (2022). Customers expect to be given the option to communicate via their preferred channel, as well as have the ability to seamlessly transition from one channel to another without having to repeat their conversation (Levi, 2022). Improving customer experience is not simply about providing user interfaces across multiple channels, but also about how well integrated these processes are (Saraf, 2018). 

In order to remain ahead of every customer touchpoint, Telcos need to implement AI-powered tools, such as intelligent automation, virtual assistance, and self-service options (Levi, 2022). Embracing an omnichannel customer experience strategy will allow Telcos to provide consistent service across every channel. 

3. Utilise outcome-driven service management

Osborne (2019) describes the driving force behind the traditional service development model of Telcos as one of two factors: it is either driven by what their network or infrastructure can do or by what their competitors are doing. This service development model is outdated and no longer viable in the dynamic digital market. 

Telcos need to invest in a new generation of technical infrastructure that will align their service management processes with their intended outcomes (Firth & Sharma, 2020). According to Osborne (2019), transforming to an “outcomes-driven demand-and-pull model” requires more than simply adding a digital layer to current processes; Telcos need to become digital service providers. 

The vast competition in the industry has put intense cost pressure on Telcos. Through these new investments, Telcos will not only gain the benefits from switching to outcome-driven service management methods, but will also gain the ability to amplify their network agility, streamline their processes and reduce their overall costs, explains Firth & Sharma (2020).

4. Ensure customer trust in data privacy

Cybersecurity and data privacy have become unique challenges with the new age of digital transformation. Factors such as the radical increase in cyber threats since 2019, cybercriminal sophistication and the strengthening of telecoms regulations raise questions about the efficiency of cybersecurity provided by Telcos. According to Firth and Sharma (2020), despite the high investment in cybersecurity by the telecoms service providers, they often find themselves “inadequately protected against cyber attacks targeted at compromising consumer data.”


The telecoms industry needs to gain consumers trust through sophisticated cybersecurity strategies and risk mitigation solutions. In order for Telcos to reap the benefits of their investments, their cybersecurity strategy needs to be aligned with their transformation strategy (Firth & Sharma, 2020).

References:

Alepo Technologies. 2021. Why every telco’s CX strategy should include omnichannel self-care. [online] Available at: <https://alepotech.medium.com/why-every-telcos-cx-strategy-should-include-omnichannel-self-care-c21ff71fc1ec>

Firth, C. and Sharma, S., 2020. Aligning cybersecurity to enable the Telco metamorphosis in a post-COVID-19 era. [ebook] EYGM Limited, pp.2, 6, 7. Available at: <https://assets.ey.com/content/dam/ey-sites/ey-com/en_za/article/ey-aligning-cybersecurity-to-enable-the-telco-metamorphosis.pdf>

Levi, D., 2022. 5 Strategies To Boost Customer Experience in Telecom Industry | TechSee. [online] TechSee. Available at: <https://techsee.me/blog/customer-experience-in-telecom-industry/>

Mogg, A., Bottke, T., Gentner, A., Rodriguez-Ramos, J., Klein, F. and Frühauf, S., 2017. To be or not to be The future of the telco business model. [ebook] Deloitte Touche Tohmatsu Limited, p.8. Available at: <https://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/ZA_To-be-or-not-to-be-the-future-of-the-telco-business-model_150917.PDF>

Osborne, S., 2019. It’s all about outcomes: Redefining the approach to telco services. [online] Nokia. Available at: <https://www.nokia.com/blog/its-all-about-outcomes-redefining-the-approach-to-telco-services/> 

Saraf, V., 2018. Realizing the Omni-Channel Strategy for Telecommunication Companies. [ebook] Infosys Limited, p.2. Available at: <https://www.infosys.com/digital/insights/documents/omni-channel-strategy.pdf>

Sewduth, K., 2021. The future of telcos: Invest in value-added services. [online] Bizcommunity. Available at: https://www.bizcommunity.com/Article/196/663/216438.html

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