Telco ecosystems: How to make them work

The ecosystem business framework

The success of large businesses such as Microsoft, Amazon and Google as well as digital disrupters like Airbnb and Uber is attributed to their adoption of platform-enabled ecosystem business frameworks. Microsoft, Amazon and Google know how to make ecosystems work. It is their ecosystem approach that helped them to scale quickly, innovate and unlock value in opportunity areas where businesses that are vertically integrated, or have a linear value chain, would have struggled. Internet-enabled digital opportunity areas tend to be unsuited to the traditional business frameworks. These depend on having the time and the ability to anticipate needs, plan and execute accordingly.

As businesses in the telecommunications sector and beyond try to emulate the success of these companies and their ecosystem approach, it is necessary to clarify what is meant by the term “ecosystem” and how it can provide a framework for organising business.

The word “ecosystem” is borrowed from biology. It refers to a community of organisms – of any number of species – living within a defined physical environment.

A biological ecosystem

The components of a biological ecosystem

Source: STL Partners

A business ecosystem can therefore be thought of as a community of stakeholders (of different types) that exist within a defined business environment. The environment of a business ecosystem can be small or large.  This is also true in biology, where both a tree and a rainforest can equally be considered ecosystem environments.

The number of organisms within a biological community is dynamic. They coexist with others and are interdependent within the community and the environment. Environmental resources (i.e. energy and matter) flow through the system efficiently. This is how the ecosystem works.

Companies that adopt an ecosystem business framework identify a community of stakeholders to help them address an opportunity area, or drive business in that space. They then create a business environment (e.g. platforms, rules) to organise economic activity among those communities.  The environment integrates community activities in a complementary way. This model is consistent with STL Partners’ vision for a Coordination Age, where desired outcomes are delivered to customers by multiple parties acting together.

Characteristics of business ecosystems that work

In the case of Google, it adopted an ecosystem approach to tackle the search opportunity. Its search engine platform provides the environment for an external stakeholder community of businesses to reach consumers as they navigate the internet, based on what consumers are looking for.

  • Google does not directly participate in the business-consumer transaction, but its platform reduces friction for participants (providing a good customer experience) and captures information on the exchange.

While Google leverages a technical platform, this is not a requirement for an ecosystem framework. Nespresso built an ecosystem around its patented coffee pod. It needed to establish a user-base for the pods, so it developed a business environment that included licensing arrangements for coffee machine manufacturers.  In addition, it provided support for high-end homeware retailers to supply these machines to end-users. It also created the online Nespresso Club for coffee aficionados to maintain demand for its product (a previous vertically integrated strategy to address this premium coffee-drinking niche had failed).

Ecosystem relevance for telcos

Telcos are exploring new opportunities for revenue. In many of these opportunities, the needs of the customer are evolving or changeable, budgets are tight, and time-to-market is critical. Planning and executing traditional business frameworks can be difficult under these circumstances, so ecosystem business frameworks are understandably of interest.

Traditional business frameworks require companies to match their internal strengths and capabilities to those required to address an opportunity. An ecosystem framework requires companies to consider where those strengths and capabilities are (i.e. external stakeholder communities). An ecosystem orchestrator then creates an environment in which the stakeholders contribute their respective value to meet that end. Additional end-user value may also be derived by supporting stakeholder communities whose products and services use, or are used with, the end-product or service of the ecosystem (e.g. the availability of third party App Store apps add value for end customers and drives demand for high end Apple iPhones). It requires “outside-in” strategic thinking that goes beyond the bounds of the company – or even the industry (i.e. who has the assets and capabilities, who/what will support demand from end-users).

Many companies have rushed to implement ecosystem business frameworks, but have not attained the success of Microsoft, Amazon or Google, or in the telco arena, M-Pesa. Telcos require an understanding of the rationale behind ecosystem business frameworks, what makes them work and how this has played out in other telco ecosystem implementations. As a result, they should be better able to determine whether to leverage this approach more widely.

Table of Contents

  • Executive Summary
  • The ecosystem business framework
  • Why ecosystem business frameworks?
    • Benefits of ecosystem business frameworks
  • Identifying ecosystem business frameworks
  • Telco experience with ecosystem frameworks
    • AT&T Community
    • Deutsche Telekom Qivicon
    • Telecom Infra Project (TIP)
    • GSMA Mobile Connect
    • Android
    • Lessons from telco experience
  • Criteria for successful ecosystem businesses
    • “Destination” status
    • Strong assets and capabilities to share
    • Dynamic strategy
    • Deep end-user knowledge
    • Participant stakeholder experience excellence
    • Continuous innovation
    • Conclusions
  • Next steps
    • Index

How to build an open source telco – and why?

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Introduction: Why an open source telecom?

Commercial pressures and technological opportunities

For telcos in many markets, declining revenues is a harsh reality. Price competition is placing telcos under pressure to reduce capital spending and operating costs.

At the same time, from a technological point of view, the rise of cloud-based solutions has raised the possibility of re-engineering telco operations to be run with virtualised and open sourced software on low cost, general purpose hardware.

Indeed, rather than pursuing the traditional technological model, i.e. licensing proprietary solutions from the mainstream telecoms vendors (e.g. Ericsson, Huawei, Amdocs, etc.), telcos can increasingly:

  1. Progressively outsource the entire technological infrastructure to a vendor;
  2. Acquire software with programmability and openness features: application programming interfaces(APIs) can make it easier to program telecommunications infrastructure.

The second option promises to enable telcos to achieve their long-standing goals of decreasing the time-to-market of new solutions, while further reducing their dependence on vendors.

Greater adoption of general IT-based tools and solutions also:

  • Allows flexibility in using the existing infrastructure
  • Optimises and reuses the existing resources
  • Enables integration between operations and the network
  • And offers the possibility to make greater use of the data that telcos have traditionally collected for the purpose of providing communications services.


In an increasingly squeezed commercial context, the licensing fees applied by traditional vendors for telecommunication solutions start to seem unrealistic, and the lack of flexibility poses serious issues for operators looking to push towards a more modern infrastructure. Moreover, the potential availability of competitive open source solutions provides an alternative that challenges the traditional model of making large investments in proprietary software, and dependence on a small number of vendors.

Established telecommunications vendors and/or new aggressive ones may also propose new business models (e.g., share of investments, partnership and the like), which could be attractive for some telcos.

In any case, operators should explore and evaluate the possibility of moving forward with a new approach based on the extensive usage of open source software.

This report builds on STL Partners’ 2015 report, The Open Source Telco: Taking Control of Destiny which looked at how widespread use of open source software is an important enabler of agility and innovation in many of the world’s leading internet and IT players. Yet while many telcos then said they crave agility, only a minority use open source to best effect.

In that 2015 report, we examined the barriers and drivers, and outlined six steps for telcos to safely embrace this key enabler of transformation and innovation:

  1. Increase usage of open source software: Overall, operators should look to increase their usage of open source software across their entire organisation due to its numerous strengths. It must, therefore, be consistently and fairly evaluated alongside proprietary alternatives. However, open source software also has disadvantages, dependencies, and hidden costs (such as internally-resourced maintenance and support), so it should not be considered an end in itself.
  2. Increase contributions to open source initiatives: Operators should also look to increase their level of contribution to open source initiatives so that they can both push key industry initiatives forward (e.g. OPNFV and NFV) and have more influence over the direction these take.
  3. Associate open source with wider transformation efforts: Successful open source adoption is both an enabler and symptom of operators’ broader transformation efforts, and should be recognised as such. It is more than simply a ‘technical fix’.
  4. Bring in new skills: To make effective use of open source software, operators need to acquire new software development skills and resources – likely from outside the telecoms industry.
  5. … but bring the whole organisation along too: Employees across numerous functional areas (not just IT) need to have experience with, or an understanding of, open source software – as well as senior management. This should ideally be managed by a dedicated team.
  6. New organisational processes: Specific changes also need to be made in certain functional areas, such as procurement, legal, marketing, compliance and risk management, so that their processes can effectively support increased open source software adoption.

This report goes beyond those recommendations to explore the changing models of IT delivery open to telcos and how they could go about adopting open source solutions. In particular, it outlines the different implementation phases required to build an open source telco, before considering two scenarios – the greenfield model and the brownfield model. The final section of the report draws conclusions and makes recommendations.

Why choose to build an open source telecom now?

Since STL Partners published its first report on open source software in telecoms in 2015, the case for embracing open source software has strengthened further. There are three broad trends that are creating a favourable market context for open source software.

Digitisation – the transition to providing products and services via digital channels and media. This may sometimes involve the delivery of the product, such as music, movies and books, in a digital form, rather than a physical form.

Virtualisation – executing software on virtualised platforms running on general-purpose hardware located in the cloud, rather than purpose-built hardware on premises. Virtualisation allows a better reuse of large servers by decoupling the relationship of one service to one server. Moreover, cloudification of these services means they can be made available to any connected device on a full-time basis.

Softwarisation – the redefinition of products and services though software. This is an extension of digitisation, i.e., the digitisation of music has allowed the creation of new services and propositions (e.g. Spotify). The same goes for the movie industry (e.g. Netflix) or the transformation of the book industry (e.g. ebooks) and newspapers. This paradigm is based on:

  • The ability to digitise the information (transformation of the analogue into a digital signal).
  • Availability of large software platforms offering relevant processing, storage and communications capabilities.
  • The definition of open and reusable application programming interfaces (APIs) which allow processes formerly ‘trapped’ within proprietary systems to be managed or enhanced with other information and by other systems.

These three features have started a revolution that is transforming other industries, e.g. travel agencies (e.g. Booking.com), large hotel chains (e.g. Airbnb), and taxis (e.g. Uber). Softwarisation is also now impacting other traditional industries, such as manufacturing (e.g., Industry 4.0) and, for sure, telecommunications.

Softwarisation in telecommunications amounts to the use of virtualisation, cloud computing, open APIs and programmable communication resources to transform the current network architecture. Software is playing a key role in enabling new services and functions, better customer experience, leaner and faster processes, faster introduction of innovation, and usually lower costs and prices. The softwarisation trend is very apparent in the widespread interest in two emerging technologies: network function virtualization (NFV) and software defined networking (SDN).

The likely impact of this technological transformation is huge: flexibility in service delivery, cost reduction, quicker time to market, higher personalisation of services and solutions, differentiation from competition and more. We have outlined some key telco NFV/SDN strategies in the report Telco NFV & SDN Deployment Strategies: Six Emerging Segments.

What is open source software?

A generally accepted open source definition is difficult to achieve because of different perspectives and some philosophical differences within the open source community.

One of the most high-profile definitions is that of the Open Source Initiative, which states the need to have access to the source code, the possibility to modify and redistribute it, and non-discriminatory clauses against persons, groups or ‘fields of endeavour’ (for instance, usage for commercial versus academic purposes) and others.

For the purpose of this report, STL defines open source software as follows:

▪ Open source software is a specific type of software for which the original source code is made freely available and may be redistributed and modified. This software is usually made available and maintained by specialised communities of developers that support new versions and ensure some form of backward compatibility.

Open source can help to enable softwarisation. As an example, it has greatly helped in moving from proprietary solutions in the web server sector to a common software platform (named LAMP) based on the Linux operating system, the Apache Http server, Mysql server, PhP programming language. All these components are made available as open source. This essentially means that people can freely acquire the source code, modify it and use it. Modifications and improvements are to be returned to the development community.

One of the earliest and most high profile examples of open source software was the Linux operating system, a Unix-like operating system developed under the model of free and open source software development and distribution.

Open source for telecoms: Benefits and barriers

The benefits of using open source for telecoms

As discussed in our earlier report, The Open Source Telco: Taking Control of Destiny, the adoption and usage of open source solutions are being driven by business and technological needs. Ideally, the adoption and exploitation of open source will be part of a broader transformation programme designed to deliver the specific operator’s strategic goals.

Operators implementing open source solutions today tend to do so in conjunction with the deployment of network function virtualization (NFV) and software defined networking (SDN), which will play an important role for the definition and consolidation of the future 5G architectures.

However, as Figure 1 shows, transformation programmes can face formidable obstacles, particularly where a cultural change and new skills are required.

Benefits of transformation and related obstacles

The following strategic forces are driving interest in open source approaches among telecoms operators:

Reduce infrastructure costs. Telcos naturally want to minimise investment in new technologies and reduce infrastructure maintenance costs. Open source solutions seem to provide a way to do this by reducing license fees paid to solution vendors under the traditional software procurement model. As open source software usually runs on general-purpose hardware, it could also cut the capital and maintenance costs of the telco’s computing infrastructure. In addition, the current trend towards virtualisation and SDN should enable a shift to more programmable and flexible communications platforms. Today, open source solutions are primarily addressing the core network (e.g., virtualisation of evolved packet core), which accounts for a fraction of the investment made in the access infrastructure (fibre deployment, antenna installation, and so forth). However, in time open source solutions could also play a major role in the access network (e.g., open base stations and others): an agile and well-formed software architecture should make it possible to progressively introduce new software-based solutions into access infrastructure.

Mitigate vendor lock-in. Major vendors have been the traditional enablers of new services and new network deployments. Moreover, to minimise risks, telco managers tend to prefer to adopt consolidated solutions from a single vendor. This approach has several consequences:

  • Telcos don’t tend to introduce innovative new solutions developed in-house.
  • As a result, the network is not fully leveraged as a differentiator, and can become the full care and responsibility of a vendor.
  • The internal innovation capabilities of a telco have effectively been displaced in favour of those of the vendor.

This has led to the “ossification” of much telecoms infrastructure and the inability to deliver differentiated offerings that can’t easily be replicated by competitors. Introducing open source solutions could be a means to lessen telcos’ dependence on specific vendors and increase internal innovation capabilities.

Enabling new services. The new services telcos introduce in their networks are essentially the same across many operators because the developers of these new services and features are a small set of consolidated vendors that offer the same portfolio to all the industry. However, a programmable platform could enable a telco to govern and orchestrate their network resources and become the “master of the service”, i.e., the operator could quickly create, customise and personalise new functions and services in an independent way and offer them to their customers. This capability could help telcos enter adjacent markets, such as entertainment and financial services, as well as defend their core communications and connectivity markets. In essence, employing an open source platform could give a telco a competitive advantage.

Faster innovation cycles. Depending on a vendor makes the telco dependent on its roadmap and schedule, and on the obsolescence and substitution of existing technologies. The use of out-dated technologies has a huge impact on a telco’s ability to offer new solutions in a timely fashion. An open source approach offers the possibility to upgrade and improve the existing platform (or to move to totally new technologies) without too many constraints posed by the “reference vendor”. This ability could be essential to acquiring and maintaining a technological advantage over competitors. Telcos need to clearly identify the benefits of this change, which represent the reasons, the “why”, for the softwarisation.

Complete contents of how to build an open source telecom report:

  • Executive Summary
  • Introduction: why open source?
  • Commercial pressures and technological opportunities
  • Open Source: Why Now?
  • What is open source software?
  • Open source: benefits and barriers
  • The benefits of using open source
  • Overcoming the barriers to using open source
  • Choosing the right path to open source
  • Selecting the right IT delivery model
  • Choosing the right model for the right scenario
  • Weighing the cost of open source
  • Which telcos are using open source today?
  • How can you build an open source telco?
  • Greenfield model
  • Brownfield model
  • Conclusions and recommendations
  • Controversial and challenging, yet often compelling
  • Recommendations for different kinds of telcos

Figures:

  • Figure 1: Illustrative open source costs versus a proprietary approach
  • Figure 2: Benefits of transformation and the related obstacles
  • Figure 3: The key barriers in the path of a shift to open source
  • Figure 4: Shaping an initial strategy for the adoption of open source solutions
  • Figure 5: A new open source component in an existing infrastructure
  • Figure 6: Different kinds of telcos need to select different delivery models
  • Figure 7: Illustrative estimate of Open Source costs versus a proprietary approach

Disruptive Strategy: ‘Uncarrier’ T-Mobile vs. AT&T, VZW, and Free.fr

Introduction

Ever since the original Softbank bid for Sprint-Nextel, the industry has been awaiting a wave of price disruption in the United States, the world’s biggest and richest mobile market, and one which is still very much dominated by the dynamic duo, Verizon Wireless and AT&T Mobility.

Figure 1: The US, a rich and high-spending market

The US a rich and high-spending market

Source: Onavo, Ofcom, CMT, BNETZA, TIA, KCC, Telco accounts, STL Partners

However, the Sprint-Softbank deal saga delayed any aggressive move by Sprint for some time, and in the meantime T-Mobile USA stole a march, implemented its own very similar ‘uncarrier’ proposition strategy, and achieved a dramatic turnaround of their customer numbers.

As Figure 2 shows, the duopoly marches on, with Verizon in the lead, although the gap with AT&T has closed a little lately. Sprint, meanwhile, looks moribund, while T-Mobile has closed half the gap with the duopolists in an astonishingly short period of time.

Figure 2: The duopolists hold a lead, but a new challenger arises…

The duopolists hold a lead but a new challenger arises
Source: STL Partners

Now, a Sprint-T-Mobile merger is seriously on the cards. Again, Softbank CEO Masayoshi Son is on record as promising to launch a price war. But to what extent is a Free Mobile-like disruption event already happening? And what strategies are carriers adopting?

For more STL analysis of the US cellular market, read the original Sprint-Softbank EB , the Telco 2.0 Transformation Index sections on Verizon  and AT&T , and our Self-Disruption: How Sprint Blew It EB . Additional coverage of the fixed domain can be found in the Triple-Play in the USA: Infrastructure Pays Off EB  and the Telco 2.0 Index sections mentioned above

The US Market is Changing

In our previous analysis Self-Disruption: How Sprint Blew It, we used the following chart, Figure 3, under the title “…And ARPU is Holding Up”. Updating it with the latest data, it becomes clear that ARPU – and in this case pricing – is no longer holding up so well. Rather than across-the-board deflation, though, we are instead seeing increasingly diverse strategies.

Figure 3: US carriers are pursuing diverse pricing strategies, faced with change

US carriers are pursuing diverse pricing strategies, faced with change

Source: STL Partners

AT&T’s ARPU is being very gradually eroded (it’s come down by $5 since Q1 2011), while Sprint’s plunged sharply with the shutdown of Nextel (see report referenced above for more detail). Since then, AT&T and Sprint have been close to parity, a situation AT&T management surely can’t be satisfied with. T-Mobile USA has slashed prices so much that the “uncarrier” has given up $10 of monthly ARPU since the beginning of 2012. And Verizon Wireless has added almost as much monthly ARPU in the same timeframe.

Each carrier has adopted a different approach in this period:

  • T-Mobile has gone hell-for-leather after net adds at any price.
  • AT&T has tried to compete with T-Mobile’s price slashing by offering more hardware and bigger bundles and matching T-Mobile’s eye-catching initiatives, while trying to hold the line on headline pricing, perhaps hoping to limit the damage and wait for Deutsche Telekom to tire of the spending. For example, AT&T recently increased its device activation fee by $4, citing the increased number of smartphone activations under its early-upgrade plan. This does not appear in service-ARPU or in headline pricing, but it most certainly does contribute to revenue, and even more so, to margin.
  • Verizon Wireless has declined to get involved in the price war, and has concentrated on maintaining its status as a premium brand, selling on coverage, speed, and capacity. As the above chart shows, this effort to achieve network differentiation has met with a considerable degree of success.
  • Sprint, meanwhile, is responding tactically with initiatives like its “Framily” tariff, while sorting out the network, but is mostly just suffering. The sharp drop in mid-2012 is a signature of high-value SMB customers fleeing the shutdown of Nextel, as discussed in Self-Disruption: How Sprint Blew It.

Figure 4: Something went wrong at Sprint in mid-2012

Something went wrong at Sprint in mid-2012

Source: STL Partners, Sprint filings

 

  • Executive Summary
  • Contents
  • Introduction
  • The US Market is Changing
  • Where are the Customers Coming From?
  • Free Mobile: A Warning from History?
  • T-Mobile, the Expensive Disruptor
  • Handset subsidy: it’s not going anywhere
  • Summarising change in the US and French cellular markets
  • Conclusions

 

  • Figure 1: The US, a rich and high-spending market
  • Figure 2: The duopolists hold a lead, but a new challenger arises…
  • Figure 3: US carriers are pursuing diverse pricing strategies, faced with change
  • Figure 4: Something went wrong at Sprint in mid-2012
  • Figure 5: US subscriber net-adds by source
  • Figure 6: The impact of disruption – prices fall across the board
  • Figure 7: Free’s spectacular growth in subscribers – but who was losing out?
  • Figure 8: The main force of Free Mobile’s disruption didn’t fall on the carriers
  • Figure 9: Disruption in France primarily manifested itself in subscriber growth, falling ARPU, and the death of the MVNOs
  • Figure 10: T-Mobile has so far extended $3bn of credit to its smartphone customers
  • Figure 11: T-Mobile’s losses on device sales are large and increasing, driven by smartphone volumes
  • Figure 12: Size and profitability still go together in US mobile – although this conceals a lot of change below the surface
  • Figure 13: Fully-developed disruption, in France
  • Figure 14: Quality beats quantity. Sprint repeatedly outspent VZW on its network

Are Telefonica, AT&T, Ooredoo, SingTel, and Verizon aiming for the right goals?

The importance of setting Telco 2.0 goals…

Communications Service Providers (CSPs) in all markets are now embracing new Telco 2.0 business models in earnest.  However, this remains a period of exploration and experimentation and a clear Telco 2.0 goal has not yet emerged for most players. At the most basic level, senior managers and strategists face a fundamental question:

What is an appropriate Telco 2.0 goal given my organisation’s current performance and market conditions?

This note introduces a framework based on analysis undertaken for the Telco 2.0 Transformation Index and offers some initial thoughts on how to start addressing this question [1] by exploring 5 CSPs in the context of the markets in which they operate and their current business model transformation performances.

Establishing the right Telco 2.0 goal for the organisation is an important first-step for senior management in the telecoms industry because:

  • Setting a Telco 2.0 goal that is unrealistically bold will quickly result in a sense of failure and a loss of morale among employees;
  • Conversely, a lack of ambition will see the organisation squeezed slowly and remorselessly into a smaller and smaller addressable market as a utility pipe provider.

Striking the right balance is critical to avoid these two unattractive outcomes.

…and the shortcomings of traditional frameworks

Senior management teams and strategists within the telecoms industry already have tools and approaches for managing investments and setting corporate goals.  So why is a fresh approach needed?  Put simply, the telecoms market is in the process of being irreversibly disrupted.  As we show in the first part of this note, traditional thinking and frameworks offer a view of the ‘as-is’ world but one which is changing fast because CSPs’ core communications services are being substituted by alternate offerings from new competitors.  The game is changing before our eyes and managers must think (and act) differently.  The framework outlined in summary here and covered in detail in the Telco 2.0 Transformation Index is designed to facilitate this fresh thinking.

Traditional strategic frameworks are useful to assess the ‘Telco 1.0’ situation

Understanding CSP groups’ ‘Telco 1.0’ strategic positioning: Ooredoo in a position of strength

Although they lack the detailed information and deep knowledge of the telecoms industry, investors have the benefit of an impartial view of different CSPs.  Unlike CSP management teams, they generally carry little personal ‘baggage’ and instead take a cold arm’s length approach to evaluating companies.  Their investment decisions obviously take into account future profit prospects and the current share price for each company to determine whether a stock is good value or not.  Leaving aside share prices, how might an investor sensibly appraise the ‘traditional’ Telco 1.0 telecoms market?

One classic framework plots competitive position against market attractiveness.  STL Partners has conducted this for 5 CSP groups in different markets as part of the analysis undertaken for the Telco 2.0 Transformation Index (see Figure 1).  According to the data collected, Ooredoo appears to be in the strongest position and, therefore, the most attractive potential investment vehicle.  Telefonica and SingTel appear to be moderately attractive and, surprisingly to many, Verizon and AT&T least attractive.

Figure 1: Strategic positioning framework for 5 CSP groups
Strategic Positioning Framework March 2014

Source: STL Partners’ Telco 2.0 Transformation Index, February 2014

Determining a CSP’s Telco 1.0 competitive position: Ooredoo enjoying life in the least competitive markets

As with all analytical tools, the value of the framework in Figure 1 is dependent upon the nature of the data collected and the methodology for converting it into comparable scores.  The full data set, methodology, and scoring tables for this and other analyses are available in the Telco 2.0 Transformation Index Benchmarking Report.  In this report, we will explore a small part of the data which drives part of the vertical axis scores in Figure 1 – Competitive Position (we exclude Customer Engagement in this report for simplicity).  In the Index methodology, there are 7 factors that determine ‘Competitive Position’ which are split into 2 categories:

  • Market competition, a consolidated score driven by:
  • Herfindahl score.  A standard economic indicator of competitiveness, reflecting the state of development of the underlying market structure, with more consolidated markets being less competitive and scoring more highly on the Herfindahl score.
  • Mobile revenue growth.  The compound annual growth of mobile revenues over a 2-year period.  Growing markets generally display less competition as individual players need to fight less hard to achieve growth.
  • Facebook penetration.  A proxy for the strength of internet and other ‘OTT’ players in the market.
  • CSP market positioning, driven by:
  • CSP total subscribers. The overall size of the CSP across all its markets.
  • CSP monthly ARPU as % of GDP per capita. The ability of the CSP to provide value to consumers relative to their income – essentially the CSP’s share of consumer wallet.
  • CSP market share. Self-explanatory – the relative share of subscribers.
  • CSP market share gain/loss. The degree to which the CSP is winning or losing subscribers relative to its peers.

If we look at the first 3 factors – those that drive fundamental market competition – it is clear why Ooredoo scores highly:

  • Its markets are substantially more consolidated than those of the other players (Figure 2).  Surprisingly, given the regular accusations of the US market being a duopoly, Verizon and AT&T have the most fragmented and competitive markets in the US.  For the fixed market, this latter point may be overstated since the US, for consumer and SME segments at least, is effectively carved up into regional areas where major fixed operators like Verizon and AT&T often do not compete head-to-head.
  • Its markets enjoy the strongest mobile revenue growth at 8.1% per annum between 2010 and 2012 versus 4.6% in Telefonica’s markets (fast in Latin America and negative in Europe), 5% in the US, and an annual decline (-1.7% ) for SingTel (Figure 3).
  • Facebook and the other internet players are much weaker in Ooredoo’s Middle Eastern markets than in Asia Pacific and Australia (SingTel), Europe and Latin America (Telefonica) and particularly the US (Verizon and AT&T) – see Figure 4.

 Figure 2: Herfindahl Score – Ooredoo enjoys the least competitive markets

Market Herfindahl Score March 2014

Note: Verizon and AT&T have slightly different scores owing the different business mixes between fixed and mobile within the US market

Source: STL Partners’ Telco 2.0 Transformation Index, February 2014

Figure 3: Ooredoo enjoying the strongest mobile market growth
Mobile Market Revenue Growth 2010-2012 March 2014

Source: STL Partners’ Telco 2.0 Transformation Index, February 2014

Ooredoo also operates in markets that have less competition from new players. For example, social network penetration is 56% in North America where AT&T and Verizon operate, 44% in Europe and South America where Telefonica operates, 58% in Singapore but only 34% in Qatar (Ooredoo’s main market) and 24% in the Middle East on average.

 

  • Identifying an individual CSP’s Telco 1.0 strategy: Telefonica Group in ‘harvest’ mode in most markets – holding prices, sacrificing share, generating cash
  • Frameworks used in the Telco 2.0 Transformation Index help identify evolving goals and strategies for CSPs
  • Traditional frameworks fail to account for new competitors, new services, new business models…
  • …but understanding how well each CSP is transforming to a new business model uncovers the optimum Telco 2.0 goal
  • STL Partners and the Telco 2.0™ Initiative

 

  • Figure 1: Strategic positioning framework for 5 CSP groups
  • Figure 2: Herfindahl Score – Ooredoo enjoys the least competitive markets
  • Figure 3: Ooredoo enjoying the strongest mobile market growth
  • Figure 4: Telefonica in harvest mode – milking companies for cash
  • Figure 5: Telco 2.0 Transformation Index strategic goals framework