Problem: Telecoms technology inhibits operator business model change (Part 1)

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The last few years have seen attempts by many leading telecoms operators to refresh their business model and generate new sources of growth and value. Now many digital initiatives are being scaled back. Telefonica and Telenor, two companies in the vanguard of the ‘drive to digital’ have both disbanded their digital organisations. In the first of two reports, STL Partners explores why efforts to yoke platform and product innovation businesses to a traditional infrastructure business have proved so difficult. The financial and operational constraints associated with traditional telecoms – particularly the need for long investment cycles in ‘one-function’ infrastructure – have made achieving the switch to ‘agile digital innovation’ all but impossible. But all that may be about to change and the future could be a little brighter.


Format: PDF filePages: 10 pagesCharts: 03Author: Chris BarracloughPublication Date: January 2016

Table of Contents

  • : Introduction
  • Everyone loves to moan about telcos
  • A structural problem
  • So should we give up?
  • Customer satisfaction is proving elusive in mature markets
  • Telecoms operators perform materially worst on customer service than other players in the US and UK
  • Poor customer services scores are a lead indicator for poor financial performance
  • ‘One-function’ telecommunications technology stymies innovation and growth
  • Telecoms has always been an ‘infrastructure play’
  • …which means inflexibility and lack of innovation is hard-wired into the operating model
  • Why ‘Telco 2.0’ is so important for operators
  • Telco 2.0 aspirations remain thwarted
  • Technology can truly ‘change the game’ for operators

Table of Figures

  • Figure 1: Customers are generally dissatisfied with telecoms companies
  • Figure 2: Historically, capital deployment has driven telecoms revenue
  • Figure 3: Financial & operational metrics for Infrastructure player (Vodafone) vs Platform (Google) & Product Innovator (Unilever)

Technologies and industry terms referenced include: 4G, 5G, Amazon, apple, AT&T, Business Model, Cost model, Deutsche Telekom, digital, google, infrastructure, Innovation, Netflix, Network Functions Virtualisation (NFV), Orange, Organisation change, Platform, Software-defined Networking (SDN), Sprint, T-Mobile, Telco 2.0, Telefonica, telenor, transformation, Unilever, Verizon, Vodafone