Telcos risk being left behind in the digital new world

By Nicole Miskelly | 5 May 2015

If telecoms companies cannot keep up with increasing customer demands and disruption by technology groups, then they risk being left behind, reports the Financial Times.

The FT suggests that telecoms companies “want to become much more than providers of basic connections in a digital world in which technology is undermining traditional revenues” and that companies risk being left behind or cast aside as the providers of the mainframe that enables technology groups to make their fortunes.

According to the FT, telecoms groups are rising to the challenge and are gaining higher profits and share prices through better economic conditions and help from regulators who are encouraging industrial growth through consolidation in specific regions such as Europe.

Hans Vestberg, chief executive of Ericsson, told the online newspaper that the biggest risk is not making the right strategy decisions within the fast-moving market. “You need to move now to where you want to play in the future.”

Vestberg says that in the past telecom carriers all made the same moves but now with options such as TV and media, cloud and the internet of things, they have a lot more choice. “Ten years ago, they did all the same things. But now carriers have suddenly got a lot of options – some will go into TV and media, others into cloud services, others the connected car and home.”

Many telcos would like to create a connection to the internet, to become the provider of services and TV and music content. Consumers currently have the ability to choose which screen to watch, play and work from which ranges from tablet, to smartphone and TV. Recent M&A deals such as £12.5bn acquisition of EE by BT demonstrate the desire of telecoms to play out this trend.

According to research from Mobile World, mobile revenues are estimated at nearly $100bn a month and the telecoms market gained nearly $2tn in revenues over the last twelve months, with 61 per cent of this amount generated from mobile services.

Despite the figures, reports suggest that telecoms are going through a period of change and that there are risks involved when setting out business strategies. “It’s a new turf. There will be competitors in the technology industry wanting the same customers,” said Vestburg.

The FT says that the biggest risk at the moment is ignoring what is happening in other sectors, such as the technology sector that looks set to directly compete with telecoms groups in the areas of messaging, internet-based voice and network services. Links with customers, through customer billing, are also being disrupted by the introduction of services such as Google Play, iTunes and Amazon.

The article suggests that network operators are losing control of the customer and according to Laurent-Pierre Baculard, partner of Bain & Company, if telecom groups are to keep up with the changing digital environment, they need to invest in their networks to provide better connectivity and monitoring of sensors and other connected objects and “become enablers of an integrated, premium digital lifestyle, not only entertain and communicate, but as smart and connected homes and cars, security, healthcare and other digital services.”

 

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