Midlife Crisis is Hard: What’s Next for Telcos?

Tomas Lamanauskas, Founder and Managing Partner, Envision Associates Ltd Blog

Despite the rush of excitement with all the virtual ribbon-cutting for 5G services, being a telecoms operator these days is not a joyful affair – especially when compared to the glory times of 20 years ago.

Accelerating cycles of investment in ever new Gs, coupled with the thirst of many governments for money from spectrum auctions to fill holes in their stretched budgets, make CAPEX management impossible. Better speeds and quality of service, ironically, increasingly open more opportunities for over-the-top digital players to substitute managed telco services (think IPTV). Raging price wars (think India), largely a self-inflicted pain but also a reflection of supreme commoditization, together with a slowing growth in penetration as industry inches closer to saturation and reduced pricing flexibility through net neutrality policies, put enormous pressure on the top line.

The industry value chain, once largely in the integrated control of powerful operators, is being gradually chipped away at both ends. The drive to increase infrastructure cost efficiency (admittedly, a very rational objective in the current state of affairs) through tower companies and government-supported wholesale networks is pushing from the upstream. Mobile operating systems, device manufacturers and digital platforms are taking over the relationship with customers. 

For many, forays into the promised land of digital failed to deliver an expected salvation. Despite some brave attempts at creating all-singing, all-dancing digital platforms, operators seem to have had to accept that they will never be as good as Facebook, WeChat or even Grab in serving all-encompassing digital user needs. Even partnership with Google has not turned around the fortunes of RCS (never heard of the latter? – exactly!). As if market pressures were not enough, geopolitics throws an additional spanner or two in the works at times, with CTOs spending more and more time with their General Counsel figuring out how to keep their networks running, and some vendors spending more time on the US Department of Commerce than on their clients.

Admittedly, certain operators, especially in some countries in Africa – with Safaricom being a shining example – have managed to capitalize on the opportunity to expand financial inclusion through mobile financial services. However, for many this promise has never translated into more than low single digit percentages in their revenues – especially with the strengthening headwind from cautious central banks. And with such developments as Facebook’s (ok, ok – the association’s) Libra, it seems that the industry might be approaching another WhatsApp moment.

The picture is pretty bleak. If share prices with their negative returns in the recent years are any indication, investors seem to share this view, unchanged by operators’ attempts to entice them with higher dividend pay-outs. However, it clearly cannot be the end of the road – telecoms infrastructure is the backbone for all the digital goodies that we have grown to enjoy. As with that sun that we only miss “when it starts to snow” (© Passenger), the decreasing interest in the industry only shows how much we have got used to being connected.

So what’s next for ageing telcos? What will the role of telecoms operators be in the future digital ecosystem? Can they still try to squeeze into the club of cool digital boys and girls? Or will they have to accept the future of reliable “wise” utilities (more respectful than “dumb pipes”, I gather), underpinning the “smart” infrastructure of future cities, industries and homes?

Will market structure change – possibly with more consolidations or more government stakes, or, to the contrary, with new competitors or private networks further fragmenting the market? Will network slicing in 5G open new opportunities for differentiation and innovative connectivity products? Will operators be able to leverage machine learning and AI to improve management of their networks, as well as to get to know their customers better and use that knowledge for mutual benefit? How will cloud and anything-as-a-service change their operations? Will increasing political and regulatory pressures on global tech giants enable telcos to better leverage their local presence? These are some of the questions that ITU Telecom World 2019 panel debate on “The network operator of 2025”, which I will have the honour of moderating, will aim to explore. I am very much looking forward to it!

About the Author

Tomas Lamanauskas, Founder and Managing Partner, Envision Associates Ltd

Tomas Lamanauskas is Founder and Managing Partner of Envision Associates Ltd., a strategic advisory firm, which supports clients, both public and private sector, in the development of digital and telecommunications public policies and regulatory strategies as well as overcoming government relations challenges and leveraging on opportunities – with a mission to contribute to creating and enhancing sustainable digital opportunities for everyone. He is also currently Sloan Fellow 2019 at London Business School, a leadership and strategy master’s degree programme for senior managers, professionals and entrepreneurs. Immediately prior to this, he was Group Director Public Policy at VEON (formerly VimpelCom), an international communications and technology company, serving more than 210 million customers in 10 emerging markets, where he was responsible for the strategic oversight of government relations and public policy matters across the footprint of the group. His more than 19 years of a professional career in strategy, policy and regulation in the information and communication technologies (ICT) sector include positions as Head of Corporate Strategy at the International Telecommunication Union, the UN specialized agency for ICTs, as well as Deputy General Director, Board Member and CEO of telecommunications regulators in the Caribbean, Middle East and Europe, along with acting as a senior government advisor on ICT policies in the Pacific. He has master’s degrees in Public Administration (Harvard University), Law (Vilnius University), and Telecommunications Regulation and Policy (the University of the West Indies).

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