Telecoms operators are facing headwinds: here’s how to change course

Telecoms operators should be flying high.

Over the past 20 months they have been a linchpin of societies and economies, keeping businesses going, families talking and us all hooked to Netflix. And yet, from February to December 2020, telcos created less value for shareholders than nearly every other sector, according to Bain & Company.

This raises the question: why? Why is a sector that seems so vital and so timely struggling to deliver?

Battling headwinds

The answer is that telcos are battling multiple, aggressive headwinds, which are hampering their growth. Firstly, they’re facing cost pressures, stemming from the need to constantly maintain and upgrade network infrastructure.

They’re also contending with new customer expectations of experience. Digital leaders, including Amazon, Netflix and Deliveroo, have raised the bar when it comes to fast, seamless self-service, and people are now looking for every B2C interaction to be just as slick. This customer need is also paving the way for new market entrants, ratcheting up competition, which is already high due to the tough regulatory environment.

At the same time telcos, like all organizations, are having to deal with the operational fallout from COVID-19, and the transition to new working models.

Within this context, organizations need to be agile and flex to meet new consumer and employee needs. But this in itself is a challenge for telos, which are often large organizations with established business models and legacy technology infrastructures.        

Against this backdrop, it’s clear that powering on in the same direction will be futile – so how can telcos change course and adapt to their new environment?

Look for inspiration

Digital disruption is happening across sectors. Telecoms may be late to the party, but this gives leaders the opportunity to look to other industries for inspiration on how to deal with change. And the finance sector is a rich source of food for thought.

Over the past decade, an explosion of fintechs has transformed the financial services landscape. These have increased competition, but also enabled incumbents to be better. By partnering with fintechs, they have been able to improve efficiency, speed up digital transformation and upgrade their customer experiences.

We’re now seeing a similar phenomenon in the telco space. Here, a new breed of ‘teltechs’ are providing bespoke and off-the-shelf technology solutions to help telcos tackle the same pain points.

Collaborate effectively

Telcos are used to collaborating. The expense of rolling out new infrastructures (first 4G and now 5G), and the opportunity to improve network quality has encouraged operators to join forces and play nicely. However, partnering with a peer is very different to partnering with a technology start-up.

Historically, telcos have under-indexed on external collaboration, and this has contributed to a lack of innovation in the sector. Now, there is a real opportunity for organizations to rectify this and steal a march on the competition by partnering with start-ups and challengers. However, such partnerships will only deliver on their promises if both parties see each other as equals and a proper plan is put in place to integrate the start-up partner.   

Self-disrupt

Over the recent years, a new wave of digital telcos has emerged, focused on providing targeted offerings to specific groups of customers. Now, we’re seeing savvy operators look to emulate their success through self-made challengers, such as giffgaff and VOXI, sub-brands of O2 and Vodafone respectively.

These digital spin-offs can reduce time to market for new propositions and help drive change from within. However, they need to be given the freedom to operate independently. This doesn’t just mean having standalone Product and Tech teams; organizations need to invest in separate Marketing and Sales functions that know how to promote new, innovative solutions. They also need to scrap revenue as a measure of brand success and think more in terms of customers happiness and retention.

Find your niche

Banks have learnt a lot from fintechs, particularly when it comes to creating a great customer experience. However, one thing they have failed to do is choose their niche. Most are still trying to be one-stop-shops for everything, while fintech challengers strive to be the best in one area – be that mortgages, consumer loans or stock trading.

Telco operators need to decide what they want to be known for and really focus on that. The rise of digital telcos is pushing large operators into the infrastructure space. This isn’t a bad thing if they want to be there and work hard at it. But end there by default, and they’re doomed to failure. Equally, if they want to beat the challengers, they need to pick their battle – be that customer service, contract flexibility or coverage – and go into it laser-focused.

Telcos are facing tough challenges, but these come hand-in-hand with opportunities. Those organizations able to look beyond their own four walls and embrace new technologies and partnerships as a means to improve their offering will be best placed to grasp these.