Telecoms operators globally are attempting to transition their business model towards a “technology company” centric approach, as they seek to grow revenues and change the foundation their network is built on. This report incorporates insights from primary research to uncover key lessons to accelerate this evolution.
What does telco transformation look like in 2022?
5G is a trigger for change from telco to techco
Over the past 10 to 15 years, the telco business model has come under pressure as infrastructure and services have become increasingly disaggregated. We propose that telcos consider adopting a techco business model.
Globally, telcos are at an inflection point due to:
- Heavy investment in (further) 5G development and deployment, now demanding a return on investment;
- Innovation in the networks – particularly in moving towards software-defined, cloud-native network and IT;
- Threat of hyperscalers whose presence and interest in telecoms is growing;
- Commoditisation of voice, messaging and data services consumer market and diminishing returns on network innovation;
- Potential growth of B2B enterprise services due to 5G, edge computing and private networking.
The investment in 5G is providing the telecoms industry with a catalyst for change, as it forces change across businesses, while presenting opportunities for revenue growth. However, the pressure for telecoms operators to deliver on this is also significant.
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Telcos are looking to transition to techcos
The traditional telco model has historically resulted in a close relationship with the NEPs and the outsourcing of services innovation to third-party ISVs who manage the creation of new applications that make use of the underlying connectivity infrastructure.
STL Partners defines a “techco” as an agile and open organisation that leverages software technologies to create a modular foundation to innovate on top of. Its operating model is underpinned by a flexible, horizontal workforce and an ecosystem of partners to dynamically develop new products and services for their customers. The “techco” formula is based on lessons from the most disruptive telecommunications organisations on how they have achieved success in transforming their model, with an eye to the internet players and hyperscalers and their internal measures of success. Moving away from traditional KPIs towards the measurement of speed and agility ensures the organisation is adaptable – the hallmark of a strong technology company.
We have identified a framework articulating the key areas telcos must focus on as they look to transition to a techco:
Telco to techco factors
Source: STL Partners
This report leverages findings from an extensive research programme conducted in APAC, including interviews with 8 different CSPs and a survey with 66 responses from CSPs across the region. The research explored the digital transformation achievements and ambitions of CSPs in the APAC region.
Regional spread of survey responses
Source: Survey conducted by STL Partners, n=66
The following operators were included at the time of writing this report:
- Singapore: SingTel
- Thailand: True Telecom, DTAC, AIS
- Malaysia: Digi, Celcom Axiata, Telekom Malaysia, Maxis
- Indonesia: Telkomsel
- Philippines: Globe Telecom, PLDT
- Australia: Telstra, Optus Mobile
- New Zealand: Spark New Zealand, Vodafone New Zealand, Two Degrees
- South Korea: KT Corp, SK Telecom, LG UPlus
- India: Bharti Airtel, Vodafone Idea, Reliance Jio
- Japan: KDDI (au), NTT Docomo, Rakuten, Softbank Corp
- China: China Mobile, China Telecom
- Hong Kong: PCCW Hong Kong (HKT)
- Brunei: DST
Table of contents
- Executive Summary
- What does telco transformation look like in 2022?
- 5G is a trigger for transformational change
- Telcos are looking to transition to techcos
- APAC is a heterogeneous region, but CSPs have similar goals
- APAC transformation: state of play today
- Five priorities in building a “techco” business
- Telcos must set clear end-goals to define their transformational objectives
- Operations & organisation: Removing legacy siloes, building software skills, and shifting to dynamic product development
- Ecosystem: Building partnerships in new industries
- Technology: Moving to cloud-native and operationalising multi-vendor stacks
- Changing your KPIs: Moving to the new world
- Conclusion: Next steps for telcos in APAC
- What can telcos learn from Silicon Valley?
- DataSpark: Lessons on building a new telco (data) business
- SK Telecom: Lessons in 5G, AI, and adjacent market growth