Analysis of Digital Transformation in the Telecommunications Market

Transcription

1 Analysis of Digital Transformation in the Telecommunications Market Renato Pasquini Research & Consulting Director Latin America June

2 Value Proposition: Future of Your Company & Career Our 4 Services Drive Each Level of Relative Client Value 2

3 Global Perspective 40+ Offices Monitoring for Opportunities and Challenges 3

4 Industry Convergence Comprehensive Industry Coverage Sparks Innovation Opportunities Automotive & Transportation Aerospace & Defense Measurement & Instrumentation Consumer Technologies Information & Communication Technologies Automotive Transportation & Logistics Energy & Power Systems Environment & Building Technologies Healthcare Minerals & Mining Chemicals, Materials & Food Electronics & Security Industrial Automation & Process Control 4

5 The revenue of several relevant Telcos declined in 2015, being the exception those that became more agile to deal with changes in market dynamics Telefonica(1) Total Revenue of EMEA Telcos (in billion Euros, otherwise noted) Vodafone(2) Telecom Italia British Telecom(2) Deutsche Telekom(3) Orange Altice Group Swisscom(4) Vimpelcom( 5) ,08 42,23 21,57 17,85 40,30 40,28 17,52 11,70 13, ,94 40,97 19,72 18,91 40,30 40,24 17,50 11,68 9,63 Growth 4,0% -3,0% -8,6% 5,9% 0,0% -0,1% -0,1% -0,2% -28,8% 10,0% 0,0% -10,0% -20,0% -30,0% -40,0% Vimpelcom is now investing US$1 billion in its IT transformation Total Revenue of North American Telcos (in billion US Dollars) Verizon AT&T Sprint T-Mobile US ,10 132,45 34,53 29, ,60 146,80 32,18 32,05 Growth 3,5% 10,8% -6,8% 8,4% 15,0% 0,0% -15,0% Notes: (1)Telefonica s organic growth was 4% YoY (2)GBP, FY ended March 2016 (3)Deutsche Telekom does not include T-Mobile US. (4)CHF (5)USD 5

6 Disruptive competition is the key concern of Telcos, not only over traditional services (voice/sms), but also over pay TV and data communications services Most significant challenges operators face (top three responses)* Other Poor rates of innovation Global economic uncertainty Poor ecosystems relationships Shortening technology cycles Changing customer need and attitudes Lack of return on investment 3% 9% 9% 15% 18% 24% 39% Lack of organizational agility 45% Uncertain regulatory environment 64% Disruptive competition 73% 0% 10% 20% 30% 40% 50% 60% 70% 80% *EY 2015 Global Telecommunications Study 6

7 OTT providers are considered to be the largest threat, and their size in active users show the adherence to customer demand Types of competitor most likely to alter customer demand scenarios in the future (top two responses)* Telco new entrants 3% Technology specialists 3% MVNOs 6% Cable/satellite operators 18% Web and e-commerce giants 30% Device manufacturers 48% OTT app providers 91% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% OTT monthly active users (in millions)** Kakaotalk Telegram BlackBerry Messenger LINE Viber Skype WeChat QQ Mobile Facebook WhatsApp *EY 2015 Global Telecommunications Study **Statista and Frost & Sullivan analysis 7

8 In messaging and voice OTT, Telcos lost the battle, but begin to catch on unified communications apps Telco's offer are moving towards unified communications, while maintaining the traditional services (eg.: SMS), which compete directly with OTTs. Traditional Over-the-top Unified Over-the-top TU Me: multiplatform application (similar to WhatsApp / Viber). It was closed in September 2013 after ~ 1 year with 600,000 users. Development began in 2008, but was released only in Was available in 20 countries in Focus on ecosystem with devices manufacturers and solution integrators involved to differentiate the service. SmartTalk Solution provides a specific number, voic , SMS to any mobile phone, through application or by the traditional way. Other facilities include: Platform: ios, Android and PC Login on multiple devices Free or cheap Voice and video integrated Functions on 3G, 4G, Wi-Fi 8

9 Where does a Telco differ from an OTT? 1) Presence inside the household and enterprise 2) Customer Care / Relationship 3) Billing expertise. Telcos need to leverage business models around it. Telecom operators should leverage their key assets to enable cross industry services and become a business partner for customers in different industries. 9

10 Strategic and Tactical Initiatives for Digital Transformation Business Model Workforce Empowerment Innovation Supply Chain Management Reducing Cost Cost Operational Excellence Customer Experience Partnership Service Excellence Risk Management Digital Products and Services Strategic Focal Points Tactical Focal Points 10

11 Current State of Digital Transformation for CSPs Business Difficulty crossing the chasm Fragmented ecosystem Cost opt biz model Ecosystem of partners No one size fits all biz model Selling Connectivity Technological Selling Solutions & Services Challenges are organizational Data mgt Security & privacy Big Data framework Managed security Interoperability Standardization 11

12 As the market matures, investment in technology and simplification of portfolio, channels and automation can reduce complexity and increase value for Telcos *AT Kearney IT in the Telecom Industry 12

13 Considerations in Deploying New Business Model Capabilities are the biggest challenge faced. They are critical for value creation. Are capabilities for adjacent market or entering a new market? Vertical versus horizontal integration. Strengthen position across value chain Partnership is the most common form in acquiring capabilities but lacks control. Capabilities may not be applicable across all target markets. Capabilities Competitors are not confined to the existing pool of players. Disruptors are typically new entrants such as Google that have financial strength to disrupt. Can companies disrupt rather than be disrupted by new competitors? Barriers of entry are low. New business models can be easily copied by competitors. Competitive advantage may not sustain for long. Competitors Cost Typically low-cost model and volumebased business are the strongest value proposition in new business model, but they will put pressure on profit margins in the initial period. Reaping economies of scale may be challenging for startups. Sustainability may be affected. Startups have low bargaining power and limited commercial concessions. It is hard to justify ROI in low-cost locations. 13

14 Evolution from Traditional OSS/BSS to a Virtual Environment 14

15 CSPs Have Many Routes to the Customer 15

16 CSP Business, Operations, and Customer Experience Data Analysis Processes 16

17 The Evolution of Managed CSP Operations Services 17

18 Telcos Segmentation and Digital Maturity AT&T Deutsche BT Verizon Vodafone Orange Telstra MTN Airtel Idea T-Mobile Telenor Reliance Jio Established Transformers Maturing Builders Builders Oldest operators in the market Carrying extensive assets and legacy systems Large complex organizations with multiple LoBs Usually incumbents challenges in the market Medium to large organization with agility in their DNA Fairly high innovation in technology and business design Often regional or national players in growth markets Battling increased complexity and competition Focused on growing reach and connecting with customers Giffgaff Yoigo Free Mobile Play Pioneers *EY Global Telecoms Digital Playbook Market disruptive players New and path breaking business/operating models Customer: centric organizations heavily dependent on P2P 18

19 Pioneer Telco Example Giffgaff using community to build an entirely new kind of company giffgaff is a sim card-only mobile virtual network operator based in the UK They do things differently to the big mobile networks. They re run by their members Members get rewarded for running parts of the business like answering questions in the community, getting new members, or helping to promote the company This means giffgaff keeps its costs low and passes the savings back to members Members have asked over 130,000 questions in the Help forums in 2010 ƒthe community has responded with over 1 million replies ƒ100% of the questions were answered by the community ƒaverage response time for questions is within just three minutes (24/7) An amazing 95% of queries were answered within 60 minutes ƒover 40% of the customer base got involved in the first six months and received Payback cash in return ƒthe top earning giffgaffer earned over 13,000, and is using that to pay his way through University * 19

20 Pioneer Telco Example Veek will launch its services in Brazil until the end of 2016 MVNO focused on younger audience (social class C) Multi-level marketing (person earns R$ for new members of the community, 2,5% of the recharge of direct invitees and 1% of other invitees, limited to 4 th level) TIM s Network Surf Telecom s Billing System Simple Portfolio Single tariff for voice minutes (fixed or mobile, local or long distance) Single tariff per Megabyte and SMS Prepaid plans Value-added services *Mobile Time 20

21 Transformer Telco Example Orange self service Prepaid Balance Postpaid Usage Campaign Management Invoice History Promotion Packages Self-Support Functions *Ericsson 21

22 Transformer Telco Example - Vodafone 22

23 Transformer Telco Example Vodafone - Automotive Vertical 23

24 Established Telco Example - AT&T Get Connected AT&T M2M/IoT connectivity solution helps its clients solve their business challenges. Tesla leveraged AT&T network to provide over-the-air fix for its software bugs and performance issues, resulting in cost savings for the company and intangible benefits for end users in the form of incovenience reduction. 24

25 Established Telco Example - AT&T Digital Life Platform Through M2M connectivity and network connectivity, these providers aggregate varios solutions and offer as connected living solutions on a unified platform. 25

26 Established Telco Example - Deutsche Telekom Platform as a Service Deutsche Telekom has a platform-based approach that brings together leading companies like Samsung and EbBW to offer services through Qivicon s platform, spanning areas like energy and home automation. 26

27 Conclusion New revenue streams (expand horizontally or into new verticals) New ways to monetize network investment Ability to serve OEM / IoT with low cost of ownership Ability to cooperate with other telcos for global coverage 27

28 Renato Pasquini, Research & Consulting Director Frost & Sullivan Connect with me on social 28