The growth of mobile streaming services and connected devices is opening new business opportunities for telcos globally. The exponential growth of video streaming –projected at 74 % of global mobile network traffic by 2024 by Ericsson–has inspired telcos to invest in new technologies, such as 5G and AI. With almost 40 billion connected devices (as of end 2022) globally, the opportunities for telcos to offer high performance services continues to soar.
This demand brings huge opportunities but some complexities too. Consequently, telcos are expected to rapidly invest in new infrastructure to keep up with the customer demand and compete with the large tech firms, such as Google, Meta, Netflix, Apple, Amazon, and Microsoft. To grow and generate returns, telcos are looking at newer ways of offering high performance and attracting new customers whilst driving new net growth.
The consumer versus enterprise revenue growth
High quality on-demand consumer services will continue to generate new revenues for telcos. This can lead to an adjustment in consumer pricing, which has been hard to achieve historically. In addition, some cloud companies could consider offering Mobile Virtual Network Operator (MVNO) services, which could potentially impact telcos’ consumer revenues.
Growth of telco revenues from serving enterprises is expected to significantly accelerate from 2023 onwards, as telcos roll out 5G aggressively. Analysys Mason projects that the mobile segment will continue to be the largest area of spending for telcos since that is where most of their revenue comes from. For this, hundreds of billions of dollars are estimated to improve telecom networks to enhance them for the enterprise services. While there is a push in Europe for large tech companies to bear a slice of the cost of telecoms networks and their improvements, this investment could take time. Until then, telcos are looking at creating value for every dollar spent.
Justifying Spend and Creating Value
Telco spend is dependent on ARPU (Average Revenue Per User), subscriber numbers, subscriber churn rates, the use of different technologies (3G/4G/5G) in a network and the kind of services consumed. There is a growing need to justify spend at every step of the investment in networks and services.
As a way forward, here are some strategies to create value from investments made in the networks and their operations:
Consolidation of assets
There’s a growing need for investments to be shared through consolidation of telco infra, especially in Asia and Europe. In line with this, we suggest a consolidation of telcos’ operational support systems. This could drive opex/capex efficiencies and clear out the legacy systems.
Based on our experience in a telco of 50+ million subscribers, consolidation of Service Assurance systems can bring up to 25% capex benefits. A typical consolidation of 15 Service Assurance tools can bring up to 6+ million dollars of savings per year for a Tier 1 telco.
Cloudification of operations support platforms
Tier 1 telcos’ use of public cloud infrastructure for 5G is expected to rise from 10% in 2022 to 50% by 2025 (Gartner), and SaaS will account for 15.6% of telco spending on Service Assurance by 2025 (Analysys Mason). Monetizing new revenue streams by adopting cloud native technologies is crucial to delivery of services at lower costs. Based on an AWS study, companies migrating infra to AWS cloud could benefit from an average 20% savings in infra costs. And telcos that move their Service Assurance systems to the cloud are expected to have 20-30% capex savings and up to 10-20% opex savings.
As an example, the cloudification of Service Assurance in a telco of over 50 million subscribers brought infra savings of 20% and up to half a million dollars of savings per year.
Automation of operational processes
From our experience introducing automation in telco operation centres, significant value has been realised. Problems are solved faster, and several hundreds of man hours are saved each day. Other than higher accuracy and acceleration, an automated Service Assurance system can automate 80-100% of operations, translating into millions of dollars of savings.
As an example, at a Tier 1 telco of 50+ million subscribers, up to 52K manhours can be automated per year. As a result, turnaround time can improve by as high as 99.9%. The reduced truck rolls can save the telco over 45 million dollars annually. Automation can improve operational efficiency by 40% and up to 5 million dollars of savings per year in operational expenses.
Aggressive use of AI for prediction of problems
Forecasting when and where to spend in the network is in huge demand. Through use of AI, a telco’s operations costs can be typically reduced by 20-30%. Our experience with varied profiles of telcos has shown that capex savings in network infra of between 5-10% can be achieved through intelligent capacity planning. Use of AI for predictive reporting on network and service performances could bring up to 10% capex benefits. A sample study (conducted by MYCOM OSI) showed that by avoiding investments in new assets, up to half a million dollars could be saved annually for a telco of 50+ million subscribers. This number will only increase as AI gains momentum.
To sum up, as modern telco networks transform, value needs to be realised for every dollar spent on network expansion and operations. By monetising operations support systems (aka Service Assurance), telcos could maximise the value of their investments as well as reduce costs. In a tough economic climate, a collaborative approach between software vendors and telcos for a value realisation program could lead to the optimisation of spend.
Author: Andrew Coll, CEO, MYCOM OSI
This blog was first posted on Financial Times on 25th Sep 2023: https://www.ft.com/partnercontent/mycom-osi/creating-value-for-telcos-in-tough-economic-climate.html
