Five top strategic questions for telcos exploring a healthcare play

Through our healthcare practice, we’ve spoken to many telecoms operators about the potential opportunity for them in the healthcare market. We’ve found that there are a few key strategic questions come up most frequently. The answers depend a lot on what kind of telco you are, and what kind of telecoms and healthcare market structures you operate in, among other factors. But there are also some takeaways that apply broadly, which we’ve outlined here.

Five key strategic questions for telcos exploring the healthcare vertical

5 strategic questions for telcos exploring health

1. Why is healthcare an attractive vertical for telcos?

  • It has national or sub-national economies of scale, where every country or even every state/province/region has different funding structures, investment priorities and levels of maturity. While the underlying technology can cross borders, implementation is highly localised as any new solution must fit into existing systems and workflows. Telcos are therefore much better placed than global technology companies to understand and address local healthcare needs and priorities.
  • As a very large sector accounting for between 5-10% of most countries’ GDP, capturing even a small share of the opportunity could make an impact on telcos’ top line
  • It places a premium on security – both in terms of data privacy and cybersecurity – which telcos, as locally regulated companies and often with strong brand reputations on trust, are well placed to address
  • It is relevant to everyone, so investment into improving healthcare outcomes has the potential to create a strong sense of pride and purpose for a telco’s employees and benefit its relationships with government and society.

Despite the arguments for prioritising healthcare, it may not be the right opportunity for all operators. We identify four key areas of consideration for telcos making decisions about vertical prioritisation:

4 main considerations for telcos investing in health

2. Why is now a good time to enter the healthcare market?

  • COVID has given a $300bn boost to digital health globally across four key application areas. Not only has it forced a change in regulations and acceptance among healthcare workers and patients due to social distancing rules, but it will also be a crucial in enabling healthcare systems to cope with backlogs of patients who deferred treatment throughout the pandemic
  • Meanwhile, the level of digitisation in healthcare is low compared with other industries, so there are still many big problems to solve (and therefore valuable business to develop) for healthcare providers and patients
  • 5G will have a significant impact on enabling a wider range of digital health solutions to work well at scale, so building expertise in healthcare applications could provide a road to monetisation (beyond connectivity) for telcos’ 5G investments

3. Where should telcos play in the value chain?

  • Beyond network as a service, which we believe will be table stakes for any telco addressing advanced enterprise and consumer use cases, telcos could offer application enablement platforms and/or digital health applications themselves
  • Over the long term there is significant opportunity for integration across the healthcare system with secure messaging and data sharing between providers and between providers and patients. This will become more significant as the range and scale digital health applications expands over the coming years.
  • However, to play an integration role, telcos must first gain the trust of healthcare providers and patients, and the digital health software and application players working with them. This may be difficult for telcos to achieve without first-hand experience in developing and launching digital health applications (often through acquisitions or partnerships).

4. What kind of roles are telcos playing in the application enablement / data management layer of the value chain?

As illustrated below, most telcos playing a significant role in the healthcare vertical are playing across all three layers (and occasionally even employing doctors and clinicians).

Telcos presence in the healthcare value chain

  • TELUS: Insurance claims processing through its initial acquisition of Emergis (2008), and the development of a health data exchange platform that powers its EMRs and national e-prescription service, and which is provides to telecoms operators entering their national healthcare market other countries
  • Swisscom: National healthcare data hub that harmonises data between patient records (nationally mandated), healthcare agencies, and physicians’ practices (enabled by Curabill and PortX acquisitions in 2012)
  • Orange: Acquisition of Enovacom (2018) which provides software that helps to secure and manage communications between hospitals and their patients
    • 5K healthcare providers in France, Canada, Switzerland, Belgium, UK
  • KPN: Acquisition of e-Zorg (2016) which manages the vast majority of data transfer between healthcare organisations and ISVs in the Netherlands
  • Telstra: Combination of capabilities across its health IT portfolio in pharmacy, hospitals and care homes to create new specific solutions that link between healthcare players, e.g.:
    • Real-time prescription tracking database
    • National cancer screening contracts

See details of these operators’ strategies in our report on Telcos in health: How to crack the healthcare opportunity

5. Is there a B2C play for telcos in the healthcare sector?

  • This is an extremely tough market because it operates at global economies of scale – Google/Fitbit, Apply, Samsung, Ping An Good Doctor, etc.) can tap into huge existing customer bases, and consumer health accounts for a tiny proportion of their R&D budgets so they can afford to try many more things than a telco could
  • However, there may be pockets of the market where telcos could leverage their physical reach and customer bases to carve out a niche. Assisted living is the standout opportunity, although the experiences of leading telcos in health suggests that building credibility in providing healthcare devices and applications to consumers is not a quick win. Telcos should see this as a B2B (for care institutions) as well as a B2C opportunity.
  • For telcos with reach into their national healthcare market, a mid- to long-term differentiator could be the ability to help integrate the global players’ personal health records into local healthcare providers’ EMR systems.