I was reading around and came across an interesting report by TM Forum titled – Telco revenue growth: time for operators to place new bets. It is quite an interesting read and we shall talk about some of the nuggets nestled within.
If the title is unclear to you, it’s about what the future holds for telcos like Econet, NetOne and Telecel. How has revenue grown globally (spoiler: stunted) and what are telcos trying to do to rectify that?
In Zimbabwe, where the operating environment is challenging, we know that in for a while now, especially in the last five or so years, operating cost growth has been outpacing revenue growth. Here are a couple of recent headlines:
- Econet, NetOne, Telecel still seeing operating costs outpace revenues, IAPs have solved the puzzle
- Operating costs growing faster than revenues across the telecoms and postal sector
As it happens, this is not a uniquely Zimbabwean problem. Telcos across the world have been struggling to grow their revenue.
We do know that telcos are reaching saturation when it comes to internet access provision. Sadly, this is also the case in Africa where a significant number of people still aren’t connected. That is because most of those people cannot afford either the devices or the subscriptions.
Underwhelming 5G
The report talks about how 5G was supposed to bring about new use-cases and drive a new demand surge and revenues to boot. However, 5G has been underwhelming so far. The report says telcos and their partners:
had been pinning their hopes on 5G to deliver growth both in connectivity revenues and new services and value propositions. But it has so far failed to deliver, with the exception of 5G fixed wireless access services…
…its failure to make an impact so far has taken the wind out of the sails of the telecoms industry. CSPs have become circumspect about being too bullish about the potential of new services and market segments.
In other words, telcos are toning down their wild hopes that 5G will fundamentally change how we use the internet.
This makes sense to me, most of the cited benefits of 5G technology do not present any meaningful improvement to the day-to-day uses of ordinary people who already have access to fast LTE.
In Zimbabwe, we have Econet still testing out their 5G network and I think if they had seen a fundamental change in internet use and a surge in demand in the areas they have deployed so far, the rollout of 5G would have been fast-tracked by now.
The need for telcos to reinvent
As I mentioned above, this is a global problem.
Diminishing revenues, a growing consumer demand for digital services, and shifting customer expectations and growing investment requirements have meant that traditional telcos can no longer afford to be merely connectivity providers and the dawn of a new era for telcos has been forced to emerge.
Tell me that doesn’t sound like what we talk about in Zimbabwe. The growing investment requirement problem is serious, especially when tech like 5G doesn’t immediately lead to growth in demand and revenues.
This discussion is being had, even at the Mobile World Congress 2024 (MWS24). The advise these experts give is that telcos need to reinvent themselves to survive. They need to diversify and explore new and novel avenues.
I think Zimbabwean telcos have been doing this for years to some extent. They all now dabble in fintech, Econet is currently failing at ride-hailing but is still huffing and puffing in insurance, still has some agritech ambitions but would rather forget about Pay-TV (RIP Kwese) and various other stuff with varying degrees of success.
That’s more of what telcos need to do to survive because they “cannot afford to be merely connectivity providers.” Which makes one wonder if that’s why Econet decided to reabsorb the fintech company they had spun off into a separate entity.
The discussion at MWS24 is on how the sector has undoubtedly played a crucial role in enabling global connectivity, but now faces stagnant growth and fierce competition from players in other tech spheres.
To thrive, telcos must evolve into comprehensive technology solution providers, offering customers curated applications and services that cater to their specific needs.
Identifying those needs is apparently a challenge in Zimbabwe where most solutions, if we’re being honest, are just copy-pasted from other markets.
Globally, platform development, cybersecurity solutions, and data privacy management – are areas where customer demand is rapidly growing. The likes of Liquid Intelligent Technologies have been on a cybersecurity mission for the past few years and are obviously motivated by this trend.
Why telcos are struggling right now
The following quote clearly captures what we all witnessed,
During the recent period in which the telco industry flourished, it missed the chance to capitalize on its position and become more relevant through additional customer commitment and entirely dominate the Business-to-Consumer (B2C) ecosystem.
This failure was not on account of effort – on the contrary, the industry became well-versed in ‘bundle deals’ to attract and retain the consumer.
However, spiraling capex costs, … regulations and Over-The-Top services [like WhatsApp] combined to strain telecom revenue and a steep decline in the willingness to pay for services caused margins to come under greater pressure, ultimately leading many telcos to realise the solution lies beyond a siloed infrastructure focus but in the digital transition, ensuring connectivity is the bedrock of change and not the primary focus.
Hanzi ensuring connectivity allows for change but is not the primary focus. Profound. Easier said than done, but profound nonetheless.
Techcos
Telcos (telecommunications companies) are now moving towards becoming techcos (technology companies) as they ensure connectivity is not their primary focus.
There are 3 main categories that telcos are falling into as they transition, as per the MWS,
- Service Techcos focus on developing and delivering solutions (either horizontal or vertical) to end customers using the resources available from the network. Service Techcos are known for their agility in adopting emerging technologies, engaging both B2C and B2B customers in co-creation and leading the charge in delivering cutting-edge technology services.
- Network Techcos focus on implementing and delivering cloud-based networks and API commercialisation platforms that enable developers to embed Network-as-a-Service into their digital solutions. Network Techcos prioritise scalability, efficiency and process automation to stay at the forefront of technological innovation, enhance service delivery, and maintain a competitive edge in the rapidly evolving digital landscape.
- Dominant Techcos combine both service techco and network techco capabilities to set industry trends and innovate around cutting-edge solutions that help them solidify their market-leading position.
We shall see how our Zimbabwean telcos transition. It is going to be a fun but wild ride, I bet. Econet has already said it is transitioning from a Communications Services Provider to a Digital Services Provider. Or maybe the transition is already complete.
Their focus will be on “Artificial Intelligence, Big Data Analytics and machine learning, among other areas of digital transformation”.
We shall see the tangible fruits of all this. Even as we wait to see how NetOne and Telecel will reinvent themselves.
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