Although the B2B market could deliver significant revenue growth, most telcos' enterprise businesses are not delivering their full potential. In this report we analyse the reasons why and outline how telcos can build a successful B2B strategy.
The telecom industry’s growth profile over the last few years is a sobering sight. As we have shown in our recent report Which operator growth strategies will remain viable in 2017 and beyond?, yearly revenue growth rates have been clearly slowing down globally since 2009 (see Figure 1). In three major regions (North America, Europe, Middle East) compound annual growth rates have even been behind GDP growth.
Figure 1: Telcos’ growth performance is flattening out (Sample of sixty-eight operators)
Source: Company accounts; STL Partners analysis
To break out of this decline telcos are constantly searching for new sources of revenue, for example, by expanding into adjacent, digital service areas which are largely placed within mass consumer markets (e.g. content, advertising, commerce).
However, in our ongoing conversations with telecoms operators, we increasingly come across the notion that a large part of future growth potential might actually lie in B2B (business-to-business) markets and that this customer segment will have an increasing impact of overall revenue growth.
This report investigates the rationale behind this thinking in detail and tries to answer the following key questions:
- What is the current state of telco’s B2B business?
- Where are the telco growth opportunities in the wider enterprise ICT arena?
- What makes an enterprise ICT growth strategy difficult for telcos to execute?
- What are the pillars of a successful strategy for future B2B growth?
- Executive Summary
- Telcos may have different B2B strategies, but suffer similar problems
- Finding growth opportunities within the wider enterprise ICT arena could help
- Three complications for revenue growth in enterprise ICT
- Complication 1: Despite their potential, telcos struggle to marshal their capabilities effectively
- Complication 2: Telcos are not alone in targeting enterprise ICT for growth
- Complication 3: Telcos’ core services are being disrupted by OTT players – this time in B2B
- STL Partners’ recommendations: strategic pillars for future B2B growth
- Figure 1: Telcos’ growth performance is flattening out (Sample of sixty-eight operators)
- Figure 2: Telcos’ B2B businesses vary significantly by scale and performance (selected operators)
- Figure 3: High-level structure of the telecom industry’s revenue pool (2015) – the consumer segment dominates
- Figure 4: Orange aims to expand the share of “IT & integration services” in OBS’s revenue mix
- Figure 5: Global enterprise ICT expenditures are projected to growth 7% p.a.
- Figure 6: Telcos and Microsoft are moving in opposite directions
- Figure 7: SD-WAN value chain
- Figure 8: Within AT&T Business Solutions’ revenue mix, growth in fixed strategic services cannot yet offset the decline in legacy services