Telecoms is still stuck in a rut
As positive news about vaccines spreads increasing cheer in mid-November 2020, by and large, the capital markets have not revalued telecoms in the same way as other sectors.
Figure 1: Telecoms stocks have not rebounded as much as most other sectors
Source: FT.com sector indices
…yet the industry has done well in COVID phase 1
Operators have rightly felt that they have done well during the first stage of the COVID crisis.
For example, they have:
- Adapted to new demands of workforces that have moved to homeworking (e.g. service resilience, reconfiguring channels, new WFH propositions)
- Supported embattled industries like healthcare that have moved at scale into using remote operating models, like virtual consultations.
- Empowered themselves and their people to act faster and be more customer centred.
So why haven’t telco shares rebounded as much as others – even those as heavily blighted by COVID as travel and leisure?
The market is complex, but we think it is fundamentally because telcos (and telecoms more generally) are not broadly seen as progressive and valuable drivers of growth.
So, what do they need to do to change this perception – and more importantly, reinvigorate their strategies towards growth?
Long term growth comes from meeting new needs
STL Partners’ vision of the Coordination Age argues that the world is in a transition to a new phase of development where new technologies (such as 5G, AI, automation, etc.) will serve widespread demands for better management of resources.
Figure 2: How changes in demand and supply create the Coordination Age
Source: STL Partners
We believe that operators and other industry players should start with this idea, build on their strengths (not just ‘the network’), and work through the consequences for their futures.
Intriguingly, in the Coordination Age, local and regional players like telcos are needed to help solve challenges – it will not all be the sole preserve of global IT giants as have the last 20 years of the Information Age.
The problems to be solved are not all weightless, borderless information problems – they span both physical and digital worlds. For now at least, telcos are well placed to span the two compared to most others. For example, see our analysis here about what telcos can learn from Amazon about combining their physical and digital assets into compelling customer propositions.
We see three meta-trends that telcos must address to get out of the rut and move back to growth.
Figure 3: The three steps in context
Source: STL Partners
Looking at each in turn:
- To re-orientate to society as your customer you need to work out how to address changing trends in demand. Examples that we are currently working on include the smart hospital, research on leading home working propositions, and how to discover new customer needs.
- Navigating technology and ecosystem disruptions – means first understanding what they are, how they are generated, and how they are solved and managed by new technologies (like 5G, AI, and Telco Cloud) in new business models (e.g. ecosystems and B2B2X models). We have a new Edge Insights Service, are participating in a free online session on how to couple 5G with AI and analytics, and are running new research on how core systems like BSS must evolve to handle new business models.
- Learn to grow again – how to re-engineer your purpose, culture, organisation models and systems so that your company can evolve fast enough with the market changes. Upcoming research from us in this includes what telcos should really learn from Silicon Valley, how to build a Learning Culture, and how to engineer new organisation models for growth.
How can we help?
We focus on these questions and their many components and variances.
Our research services directly address these themes (see Figure 4) through an interactive, off-the-shelf model, while our consulting team delivers custom projects to clients across the telecoms industry (see Figure 5).
Figure 4: STL Partners’ research services
Figure 5: STL Partners’ consulting services – Develop and execute a winning strategy in the Coordination Age
Get in touch for more information on our research and consulting services.