The evolution of Telcos in today’s changing world

Over the past decade, telecommunications (Telcos) revenues have been under pressure as their traditional value areas have stagnated or declined. They have been challenged by evolving consumer behaviours, increasing pressure from new and existing players and declining revenue streams.

The pandemic accelerated digital transformation across various sectors and the telco industry was a significant beneficiary as they provide the critical infrastructure that supports digital services. Consumers rely now more than ever on digital solutions and businesses have realized that digital transformation is necessary for them to remain relevant.

Telcos are now evolving into technology companies and are changing their business models, processes, and operating culture. Their business model is shifting into one which is customer centric and includes provision of diverse digital services so that they can meet their customers’ demands.

Platform thinking and an investment in modernized infrastructure is helping telcos create modern applications. We have seen telcos adopt Agile methodology to transform their software lifecycle management process and help deliver new and relevant products and services to their customers efficiently. They are also moving from telco legacy to in-house DevOps driven development of scalable platforms.

Telcos are running platform businesses offering apps, streaming, retail platforms, insurance, peer to peer payments, mobile money, savings, loans, remittance, ticket booking, shopping, license applications and pension services amongst others.

Telcos are also using Artificial Intelligence, Machine Learning, Big data analytics to understand their customers behaviors so they can be more proactive in managing churn. They are using predictive analytics to provide tailored services to their customers. Data is also being used to create new strategic streams through partnerships to generate revenue. We are seeing an inclusion of a robust partner ecosystem in their digital transformation strategy. Safaricom’s (East Africa’s largest telco) ecosystem for example includes agents, merchants, banks, developers, banks, microfinances, integrators, aggregators, money transfer businesses, Saccos among others. By leveraging their strategic partnerships, Safaricom can accelerate their customer offerings and monetize their investments.

5G adoption is expected to lead to intelligent connectivity. Edge cloud computing combined with 5G is expected to play a significant role in the advancement of technologies such as Artificial Intelligence, Machine Learning, Augmented Reality/Virtual Reality. This can only happen through high-speed connectivity which 5G provides combined with computing being brought into the network, close to the consumer (Edge computing). This will help telcos create new revenue streams through differentiated offerings.

Notably, we are seeing a focus on ESG strategies by telcos. They are increasingly using ESG measures and reporting to attract investments and to appeal to their customers and employees. Per the GSMA Mobile Net Zero publication 2022, many operators have committed to Net Zero targets by 2050 or earlier. Key initiatives they are adopting includes use of the latest technologies to boost energy efficiency, use of renewable electricity sources and Network equipment supplier engagement.

As telcos continue to evolve and provide relevant services to their customers, they should pay attention to the following:

The success of telcos' evolution hinges on attracting customers and partners to their network, transforming their internal operations, creating new business opportunities, managing emerging risks and creating an IT oriented approach and culture in running their businesses. Telcos should also incorporate ESG measures and reporting to sustain operations and optimize growth in their respective markets.