Telco 2020 â How Telcos transform for the ... - Roland Berger

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2 Telco 2020 – How Telcos transform for the "Smartphone Society" Management summary A battle of giants is brewing in the world of telecommunications. Traditional telcos, with their five billion customers worldwide, are getting ready to take on new Internet-focused rivals offering communication platforms, services and content via smartphones, tablets and Internet-enabled TVs. Right now, the strongest of these are the "fab(ulous) five": Amazon, Apple, Facebook, Google and Microsoft, who serve over three billion customers between them. Traditional telcos and their modern rivals each have a total market capitalization of round about EUR 800 billion. Current public opinion favors the fab five with their superior innovative capabilities, breathtaking growth rates and large cash reserves. But will that be enough to threaten the traditional telcos? The fab five certainly enjoy a number of advantages, including daily "branded contact" with customers, close customer bonds with their easy-to-use, personalized service ecosystems and, increasingly, a willingness on the part of customers to pay for such services. Pureplay broadband access – the mainstay of traditional telcos' business today – will remain the cornerstone of digital communication in the future for both landlines and mobile communication. While usage and associated data volumes continue to grow exponentially , however, telcos are under the price pressure that inevitably accompanies commoditization while the industry so far has failed to monetize volume growth. So what can telcos do in their battle with the giants? This is the question answered by our global study "Telco 2020 – How telcos transform for the Smartphone Society". Our talks with more than 25 top decision-makers representing the entire spectrum of telecommunications revealed that the "right" strategic orientation for each telco will depend on five key levers: 1) Personalization of service ecosystem and the customer experience; 2) staunch defense of relationships with end customers; 3) cost-efficient broadband network build-up; 4) the realignment and radical streamlining of operating models; 5) the financial resources to drive digital transformation and consolidation. Three realistic scenarios emerge from this finding. In extreme cases, telcos will do no more than engage in what can be termed "Access Minus" business, primarily providing network infrastructure as wholesale service providers that have all but been cut off from their relationship with the end customers. Companies with better strategic positions and deeper pockets will develop their own access-centric services and selective over-the-top (OTT) offerings, positioning themselves as "Access Plus" providers. Only a handful of regional telco groups will, through acquisitions, establish themselves as "OTT service groups" capable of competing with the fab five in the complex "OTT Game".
Competence Center InfoCom 3 None of these three strategies is inherently right or wrong. Provided they make a convincing job of executing the strategy, even companies that back the Access Minus horse can develop successfully and stimulate hopes of value growth on the stock market. We believe that virtually all telcos can manage this approach, even if some incumbent players currently appear overvalued. Ultimately, though, five golden rules will separate the winners from the losers: 1) Get the core access business right – Converged broadband access, personalized service suites, experience-based; 2) Make targeted, realistic "bets" with regard to growth and differentiation (in the case of Access Plus strategies and forward-looking OTT investments); 3) Transform into lean telcos with de-layered operating models and only half of today's workforce; 4) Convince capital markets by presenting them with attractive consolidation and streamlining stories, abandoning secondary activities and committing to cooperative ventures; and finally… 5) Act quickly and resolutely. Only then can the industry resume its pattern of value growth and begin offering shareholders attractive returns again – despite the erosion of its core business and the best efforts of global rivals such as Apple and Google. Welcome to the "Smartphone Society" – a glimpse of the future Snapping your fingers is all it takes to silence the smartphone alarm, getting digital assistant Siri to answer your mails before you even get out of bed, commenting on the first Facebook postings of the day while brushing your teeth and switching on the espresso machine. A doppio, if you don't mind. Since your girlfriend is still away on business, you will have to make do with the hologram projected onto the table by your mobile for small talk over coffee. Five minutes later, your phone opens the car door. As you climb in, you tell the voice control the name of the business partner in Korea who you want to talk to on the way to work – both of you speaking your own language, interpreted simultaneously and appearing on the headup video display. In short, the digital transformation is turning our day-to-day lives upside down.
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