Should telecoms operators stick to airtime provision, honing their networks and eking out business, or should they reinvent themselves with 5G as content and services providers for a new digital age?
This was the start point for The Great Telco Debate in London, presenting a number of panel sessions over the course of a single day that sought to get to the heart of both the market’s dark malaise and its rich promise.
Jean Yves Charlier, former chief executive at Veon, kicked off the session, presenting both arguments. The telecoms market is unravelling, he said. Operators are out of touch, swapping customers between themselves, and failing to modernise; customers are out of love with telcos.
The situation is desperate, he said. Churn rates are through the ceiling, and satisfaction scores are through the floor .“Most telecoms brands are no longer relevant to consumers… There is no brand or customer loyalty, and the industry has been slow to digitalise,” he said, pointing to its stubborn reliance at large on legacy systems.
Worst, there is nothing left in the tank, as data traffic spirals upwards, subscription pricing has stalled over the course of a decade, and revenue growth has flat-lined, in mature markets, at least. “Growth has eluded this industry, particularly in Europe. This is a no-growth industry. A lack of engagement with consumers is at the heart of the problem.”
New competitors from the internet industry have pulled up alongside, and swarmed the track. The telecoms industry’s share of the comms pie, he said, is shrinking. Meanwhile, its return on capital has deteriorated, with the rollout of LTE and fibre. Telecoms stocks have performed the worst of any industry segment in Europe, in recent years.
“So it’s not just consumers; investors are also voting with their feet.”
The advent of 5G affords the community a unique opportunity to reinvent itself. “That’s where the debate starts about branching out from its core business.” But should it, or should it just stick to what it knows, and refine its connectivity offer? The evidence suggests the telecoms industry will struggle to capture those opportunities anyway.
“Let’s not forget, billions have been poured into LTE and fibre,” said Charlier. The point was operators, notably in Europe, are not making any money from its latest infrastructure.
Enter Japanese operator Softbank, in the shape of Akira Tada, the company’s executive business strategist. Tada detailed Softbank’s ‘beyond carrier’ programme to expand its customer base and services portfolio via acquisitions, investments and partnerships. Its deals with the likes of Arm and Nvidia are best known, but Softbank has around 70 agreements on its books with forward-looking brands in various domains, near and far.
Softbank is eyeing opportunities in fintech, robotics, sharing economy, security, AI, IoT, and the cloud, explained Tada. Its strategy is simple: to evolve, rather than stay still. Softbank’s founder, Masayoshi Son, put it to the business originally.
“Do you want to be a bacteria or not?,” said Tada, re-presenting Son’s question to staff. “If you’re just bacteria, and keep self-propagating, billions of years later, you will still just be a bacteria.”
Softbank’s direction is just to keep moving. The destination is unclear, admitted Tada, except that AI is a guiding star; the discipline is really just to stay on a forward track. “We don’t yet know what will happen, who will win. But this is a big question of transformation, and this AI thing is to help people, human beings, to transform and barriers. So this is what we are doing.”
Google rounded out the early debate. Mike Blanche, the company’s head of telecoms strategic relationships in EMEA, sounded rather like a new boxing champ giving a hand to an opponent, momentarily floored. It was not meant that way, but the narrative made it appear so.
“Why does Google care?,” he said. “We fundamentally depend on each other. Telcos provide the access for us to reach users… and without us, they look at blank screens. This is not a zero sum game.”
Telecoms operators have great strengths, said Blanche, even beyond their network infrastructure. He listed them: retail shops, billing relationships, engineers in the field. “These are all strengths beyond the network.”
Blanche talked about Hive, as well, the smart thermostat platform by Centrica, owner of British Gas. The parallel was the transformation of an old familiar, from a laggard to a progressive. Centrica gave Hive the room to work as a startup, except via its own customer channels. It also decided to target the broader energy retail market, mindful it would cannibalise it own revenues by bringing closer scrutiny of energy usage.
The company has half a million customers, noted Blanche, and an eye on launching in continental Europe and the US. “It is a good example of a traditional industry expanding into new areas.”
He talked about the opportunity for operators to strike partnerships with the companies stealing their business. They should play the game, he implied.
Bundle content and access, he recommended. Netflix was mentioned. Combine with peers to share infrastructure and costs, and to make customer services king. Work with the likes of Google to install all of their gadgetry in homes. “Google and others are virtual. We have no presence,” he said. It sounds complementary, but the over-the-tops are still happier with their lots.
In the end, Softbank’s was the most encouraging message from the session.
