Telecommunications, one of the fast-paced industries, has witnessed overnight drastic changes due to technology breakthroughs. As the end of this decade approaches, it is expected that the year 2020 will carry new challenges as well as vast opportunities for the telecommunications industry. According to a GSMA report, the global telecom industry will be massive in size and scale by 2020, with approximately 5.6 billion unique subscribers, 5.8 billion smartphones and operator revenues increased to $ 1.2 trillion from $ 1.1 trillion in 2015. These forecasts promise a higher number of mobile network connections and increased smartphone adoption in the future, but there is more to these numbers than that. These forecasts require telecom operators to plan and expand their operations and bring infrastructural changes to solve challenges that come with technology advancements.
One of the biggest challenges facing the telecommunications industry nowadays is the rising need of capital expenditure. In a survey conducted by EY, Telecom operators (Telcos) were asked to rank what they thought was a prominent issue relating to their business operations. A whopping majority of them pointed towards the growing capex requirement as the main issue followed by the need to improve margins and stringent regulatory requirements.
This requirement stems from a noticeable trend: the increasing preference of mobile subscribers for data services over traditional ones like voice and SMS. Services that previously utilized cellular network are being replaced by mobile applications running on data for example WhatsApp, used to send messages instead of sending a plain SMS. This trend is expected to persist in the future. According to forecasts, the year 2020 will witness an explosive growth in data traffic and bandwidth requirement around the globe.
This requires operators to invest more in infrastructure and broadband facilities that can support increased data traffic and provide high quality data services to customers. In addition, operators can introduce data bundle packages for video streaming or IP messaging to encourage data usage and to compensate for the dwindling revenues from voice and SMS services. For example, MTN introduced data bundles that allows subscribers “unlimited chatting on WhatsApp” at low price (Source: MTN WhatsApp GoodyBag). Such promotions encourage use of data services.
The operators not only have to find ways to raise additional revenues, but they also have to take measures to reduce costs to be sustainable and optimize business operations. Using managed services is another option that can help operators achieve cost efficiencies and improve the quality of the services provided to mobile subscribers. They can outsource operations of some of their business units like sales, customer service and billing or they can rely on another company for their entire hardware and infrastructure needs. For example, companies like Seamless Distribution Systems (SDS) help Telcos keep their businesses up and running by providing end to end system maintenance, monitoring and management. This allows them to focus their attention on their core functionalities while SDS makes sure that their system runs at optimal capacity.
Another challenge that the telecommunication companies will have to face in the future is the saturation of mobile penetration levels in developed markets. This requires a shift of efforts from the developed markets and calls for a change in approach to target developing markets where the population has lower purchasing power, the political conditions are relatively unstable and there is a great margin for expansion of mobile network connections. In order to benefit from this situation, Telcos need to make use of innovative strategies like “digitization of industries” and efforts aimed at promoting financial inclusion must be deployed. For example, a telecom operator in India collaborated with the State Bank to develop apps that provide banking services to the unbanked population living in remote areas of the country (Source: 2015 Telecommunications Trends). Such services not only lead to an increase in mobile network connections, they can also contribute towards economic and social development in developing nations.
Lastly, the phenomenon of Internet of Things is a new territory that can prove to be a challenge as well as an opportunity for telecommunication companies and mobile operators in the future. For customers to become a part of an environment where multiple devices and humans are heavily interconnected, they depend on telecommunication companies to provide them with reliable and high speed internet connection. Telcos can capitalize on this dependency by collaborating with companies driving the IoT phenomenon. For example, AT&T has partnered with companies like Cisco, Ericsson, GE, IBM, Intel and Deloitte for their “Smart Cities” initiative. The aim of this initiative is to let city officials monitor different aspects related to infrastructure, public safety and transportation remotely from their devices and take actions in real-time (Source: AT&T Launches Smart Cities Framework). Such creative ideas can help Telcos take control of the future.
With these challenges facing the industry, telecommunication companies can be expected to form partnerships through mergers and acquisitions, roll out projects that provide high speed network access, adopt cost efficient strategies like outsourcing managed operations and make smart investment decisions in advanced infrastructure and technology. These strategies lie at the heart of providing an enhanced and wholistic service to consumers.