MWC 2022: Sensing the winds of change

What did STL’s analysts find at MWC 2022?

This report is a collection of our analyst’s views of what they saw at the 2022 Mobile World Congress (MWC 2022). It comprises our analysts’ perspectives on its major themes:

  • How the industry is changing overall
  • The impact of the metaverse
  • New enterprise and consumer propositions
  • Progress towards telco cloud
  • Application of AI, automation and analytics (A3)

We would like to thank our partners at the GSMA for a good job done well. The GSMA say that there were 60,000 attendees this year, which is down from the 80-100k of 2019 but more than credible given the ongoing COVID-19 situation. It was nonetheless a vibrant and valuable event, and a great opportunity to see many wonderful people again face to face, and indeed, meet some great new ones.

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MWC 2022 in context of its time

It is impossible to write about MWC 2022 without putting it context of its time. It has taken place three days after the Russian invasion of Ukraine started on February 24th, 2022.

Speakers made numerous direct and indirect mentions of the war, and it was clear that a sense of sadness was felt by everyone we spoke to. This slightly offset the enthusiasm and warmth that we and many others felt on being back together in person, with our clients and the industry.

Broad support for the Ukraine was visible among many delegates and there was no Russian delegation. While totally appropriate, the Fira was a little poorer for that as one of the joys of MWC is its truly global embodiment of a vibrant industry.

We all hope for a speedy and peaceful resolution to that situation, and to see our Russian and Ukrainian colleagues again in peace soon. Sadly, as we write from and just after Barcelona, bombs and shells are falling on civilians on the same continent and the route to peace is not yet evident.

As this new and shocking war has come in Europe while COVID is still in a pandemic phase it is a reminder that change and challenge never ends. The telecoms industry responded well to COVID, and now it must again for this and all the challenges it will face in the future, which include further geopolitical risks and shocks and many more opportunities too.

The biggest opportunity for telecoms, and telcos in particular, is to build on the momentum of change rather than rest on its laurels. The threat is that it will settle for a low risk but ultimately lower value path of sticking to the same old same.  We look at the evidence for telcos successfully changing their mindset in New enterprise business: Opening, if not yet changed mindsets.

Connecting technologies

This is my 11th MWC. I came looking for what’s changed and what it means. This is what I found. Andrew Collinson, Managing Director, STL Partners Research.

Cross-dressing and role play

Trying to leave the war at the door, what else did we find at the Fira? One of the mind-bending tasks of walking through the cacophony of sights and sounds of a huge industry ecosystem on display is trying to make sense of what is going on. Who is here, and what are they trying to tell me?

First impressions count. The simple things about how companies present themselves initially mean a great deal. They often show the identity they are trying to project – who or what they are trying to be seen as more than all the detail put together. The first impression I got at MWC 2022 was that almost everyone was trying to dress like someone else.

Microsoft showed photos of cell towers on its stand while all the telco CEOs talked about the “new tech order” and becoming techcos. McKinsey talked about its ‘old friends’ in the telecoms industry and talked about sustainability on its hard-edged stand, while AWS had an advert on the frontage of the Fira and a stand in the “Four Years from Now” zone.

We’re all telcos / techcos now

We're all telcos techcos now

Source: STL Partners, AWS, Microsoft, McKinsey

It’s all about “connecting technologies”

Regular readers of STL’s material will have heard of the Coordination Age: our concept that there is a universal need for better use of resources which will be met in part by the application of connecting technologies (e.g. fibre, mobile, 5G, AI, automation, etc.).

Once upon a time, it was simply people that needed to be connected to each other. Now a huge variety of stuff needs connecting: e.g., devices, computer applications, business processes, business assets and people.

A big question in all this is whether operators have really understood how outdated their traditional operator centric view of the world has become as the industry has changed. Sure, new telecoms networks still need to be built and extended. But it isn’t just operators using licensed technologies that can do this anymore, and the value has increasingly moved to the players that can make all the stuff work: systems integrators and other technology and software players. We’ll cover operators’ mindsets more in the section titled New enterprise business: Opening, if not yet changed mindsets.

Private matters

Private networks was also a big area of focus at MWC 2022, and understandably so too as there is a lot of interest in the concept in various sectors, especially in ports and airports, mining, and manufacturing. Much of the interest for this comes from the hype around 5G which has attracted other industries to look at the technology. However, while there are some interesting developments in practice (for example Huawei and others at Shenzen port in China), many of the applications are at least as well served, and in some cases, better served by other connectivity technologies, e.g. Wi-Fi, wired connections, narrow-band IoT, and 3G / 4G, edge computing and combinations thereof. So 5G is far from the only horse in the race, and we will be looking closely at the boundary conditions and successful use cases for Private 5G in our future research.

Would you pay for “unexpected benefits”?

One great stumbling block for telcos and other business used to traditional business thinking has been “how do you make a business case for new technology?”

The classic telecoms route is to dig around for a cost-saving and revenue enhancement case and then try to bend the CFO’s ear until they give you some money to do your thing. This is fair enough, to a point.

The challenge is, what do you do when you don’t know what you are going to find and/or you can’t prove it? Or worse still, you can only prove it after everybody else in the market has proven it for you and you are then at a competitive disadvantage.

One story I saw and see elsewhere repeated endlessly is that of “unexpected benefits”. This was a phrase that Alison Kirkby, CEO Telia, used to describe what happened when the value of its population movement data was recognised by the Swedish Government during the COVID crisis. It had pulled together the data for one set of reasons, and suddenly this very compelling use came to light.

Another I heard from Qualcomm, which told of putting IoT driven shelf price signs in retail. Originally it was developed to help rapid repricing for consumers in store, then COVID struck a few weeks after installation. This meant people switched to online shopping and the stores were then mainly used by  pickers assembling orders for delivery. The retailer found that by using the signs to help the pickers assemble their loads faster they could make the process about a third more productive. That’s a lot in retail.

This is the reality of transformational business models and technologies. It is incredibly hard to foresee what is really going to work, and how. Even after some time with a new way of working new uses continue to emerge. That’s not to say that you can’t narrow it down a bit – and this is something we spend a lot of our time working on. However, a new thing I will be asking our analysts to help figure out is “how can you tell when and where there are likely to be unexpected benefits?”

 

Table of Contents

  • Executive Summary
  • Introduction
    • MWC 2022 in context of its time
  • MWC 2022: Connecting technologies
    • Cross-dressing and role play
    • Would you pay for “unexpected benefits”?
    • Getting physical, getting heavy
    • Glasses are sexy (again)
    • Europe enviously eyes eastwards
  • New enterprise business: Opening, if not yet changed mindsets
    • Customer centricity: Starting to emerge
    • Becoming better partners: Talking the talk
    • New business models: Not quite there
  • The Metaverse: Does it really matter?
    • Can the Metaverse be trusted?
    • Exploding supply, uncertain quality
    • The non-fungible flexibility paradox
    • A coordinating role for telcos?
    • Don’t write it off, give it a go
  • Consumers: XR, sustainability and smarthome
    • Operators: Aiming for smart and sustainable
    • Vendors and techcos: Would you like AI with that?
    • More Metaverse, VR and AR
    • Other interesting finds: Commerce, identity, video
  • Telco Cloud: The painful gap between theory and practice
    • Brownfield operators are still on their virtualisation journey
    • Greenfield operators: Cloud native and automated from day one
    • Telcos on public could: Shall I, shant I?
  • AI and automation: Becoming adaptive
    • Looking out for good A3 use cases / case studies
    • Evidence of a maturing market?
    • Welcome signs of progress towards the Coordination Age

 

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Telefónica’s 10 steps to sustainable telecoms

Telefónica’s sustainability: A 20-year journey

Sustainability in the Coordination Age

As part of STL Partners’ research on the opportunities for telecoms operators and the wider industry in the Coordination Age, where the ultimate goal for operators, their customers, and society at large is to make better use of the world’s resources, we have explored how telcos can integrate sustainability into their activities. Previous research on this topic includes:

During the course of this research, we have identified Telefónica as one of the most proactive operators in sustainability. Through our interactions with Telefónica’s sustainability team, we have also found the team to be seriously committed, organised and successful in achieving buy-in to their vision from both the executive leadership team and several business units and opcos. This is a highly impressive achievement for such a large operator.

With the support of Telefónica’s sustainability team, through candid interviews with the team and their colleagues across the business, we have created this case study on their experiences in embedding sustainability across the business. We believe this will help other telcos intent on following a similar trajectory to understand how they can embed sustainability into their corporate strategies and day-to-day activities.

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How Telefónica got to where it is today

Since the creation of Telefónica’s first sustainability team in 2001, the operator has gradually built up its sustainability activities into a company-wide approach with cross team participation over the last twenty years. The first move in this direction came with the creation of the Climate Change Office in 2007, which included senior representatives from Operations, Procurement and Social Responsibility.

Over the last ten years Telefónica has implemented more than 1,400 energy efficiency projects and has carried an annual Energy and Climate Change Workshop with more than 30 vendors for 12 consecutive years, to exchange challenges and solutions to reduce their energy consumption and carbon emissions.

It has three main climate targets: energy efficiency and reducing energy consumption; utilising renewable energy; and reducing its carbon footprint to achieve net-zero emissions in 2040, including its value chain. Figure 2 outlines Telefónica’s sustainability journey and key inflection points through the years.

Key activities and inflection points in Telefónica’s

Telefónica's sustainability

Achieving buy-in across the organisation

Embedding sustainability into Telefónica has been a grassroots effort on the part of the small but hardworking Global Sustainability Department (hereafter known as the environmental team in this report) to find the proof points necessary to convince Telefónica’s senior management to build sustainability into the corporate strategy. The team has used a mixture of bottom-up and top-down approaches, with management support at crucial moments, which will be explored later in the report.

Through our many conversations with Telefónica’s environmental team, perseverance stood out as the most important characteristic within the team. When they recruit new employees, their priority is to find people with the ability to come up with innovative ideas for meeting sustainability targets, resilience, and perseverance.

This determined and visionary approach means that the environmental team works intuitively and pre-empts other departments’ needs. By the time colleagues from other departments approach the environmental team with their requirements for sustainability-related projects (for example the finance team’s interest in launching a Green Bond), the team is already armed with a range of data, materials and resources needed to put together a business case for the activity. As a result of this preparation, the environmental team has been able to quickly support and capitalise on new opportunities as they have arisen, ensuring they can keep the momentum going whenever it builds.

However, the process of embedding sustainability into company strategy has not come without challenges and difficulties. In conversations with STL Partners, the environmental team said that one of the challenges of working with different teams has been picking the right moment to approach them with ideas. Telefónica also stressed the importance of finding strategic alliances and internal champions on other teams. Through strategic, considered and strong relationship building, the environmental team has found internal champions in their Spanish core network operations, finance, procurement, enterprise, and sales teams, who are fully on board with the Telefónica sustainability vision and strategy.

Although the environmental team is currently working with the marketing team to ensure its sustainability message and efforts is more present in its brands, the environmental team cited this as one of its top priorities in 2022. Aside from needing to build stronger relationships and buy-in, part of the challenge is working with the marketing team on how to accurately and effectively market sustainability, without appearing to be ‘greenwashing’.

Another challenge is adapting to the different ways in which the other teams operate when implementing sustainability initiatives across the company. For example, the sales team generally work towards quick deadlines with short-term results, hence it may be harder to create an aligned dialogue with this team. Having a strong insight into the way Telefónica works as an organisation, by working directly within other teams e.g., helping the sales team to complete RFPs, helps this challenge.

By embedding sustainability into the company in these ways, all departments see the benefit and engage with the process. Telefónica told STL Partners that its employees believe in sustainability on a personal level as well as seeing the business benefit and commercial opportunity. Employees are genuinely engaging with sustainability issues themselves and want Telefónica to work towards sustainability goals as a company. As one employee said to us, “you don’t have to work in the environmental team to want to protect the environment”.

Ultimately, this rigorous, patient, committed and collaborative approach to sustainability has enabled the team to achieve broad buy-in across Telefónica’s business units and international opcos. Throughout the report we will explore how it has done this in:

  • Core network operations
  • Finance
  • Enterprise services
  • International opcos.

Table of contents

  • Executive Summary
    • What makes Telefónica different to other telcos?
    • Next steps
  • Table of Figures
  • Telefónica’s 20-year sustainability journey
    • Sustainability in the Coordination Age
    • How Telefónica got to where it is today
    • Achieving buy-in across the organisation
  • Why Telefónica stands out among telcos
    • High level overview of achievements so far
    • How Telefónica compares with other telcos
    • How Telefónica collaborates with its peers
  • Network operations: The first step to embedding sustainability in Telefónica
  • Sustainable financing: A pioneer in telecoms
    • How the first Green Bond came to life
    • Subsequent green and sustainable bonds
    • Challenges and benefits
  • Eco Smart label and consulting services: Expanding from networks to services
    • How the idea came to life
    • Consulting services through Telefónica Tech
    • Eco Smart label in 5G services
    • Sustainability as a core component of digital transformation
  • Implementing sustainability across a global footprint
    • Aligning goals with individual market dynamics
  • Conclusion
    • Ten takeaways from Telefónica’s holistic approach
  • Index

 

 

 

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The Future of Work: How AI can help telcos keep up

What will the Future of Work look like?

The Future of Work is a complex mix of external and internal drivers which will exert pressure on the telco to change – both immediately and into the long-term. Drivers include government policy, general changes in cultural attitudes and new types of technology. For example, intelligent tools will see humans and machines working more closely together. AI and automation will be major drivers of change, but they are also tools to address the impact of this change.

AI and automation both drive and solve Future of Work challenges

Futuore of work AI automation analytics

Source: STL Partners

This report leverages secondary research from a variety of consultancies, research houses and academic institutions. It also builds on STL Partners’ previous research around the use of A3 and future new technologies in telecoms, as well as organisational learning to increase telco ability to absorb change and thrive in dynamic environments:

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The Future of Work

We begin by summarising secondary research around the Future of Work. Key topics we explore are:

Components of the Future of Work

Future of work equation

Source: STL Partners

  1. The term Fourth Industrial Revolution is often used interchangeably with the technologies involved in Industry 4.0. However, this report uses a broader definition (quoted from Salesforce):
    • “The blurring of boundaries between the physical, digital, and biological worlds. It’s a fusion of advances in artificial intelligence (AI), robotics, the Internet of Things (IoT), 3D printing, genetic engineering, quantum computing, and other technologies.” 
  2. Societal and cultural change includes changes in government and public attitude, particularly around climate change and issues of equality. It also includes changing attitudes of employees towards work.
  3. Business environment change encompasses a variety of topics around competitive dynamics (e.g. national versus global economies of scale) and changing market conditions, in particular with relation to changing corporate structures (hierarchies, team structures, employees versus contractors).
  4. Pandemic-related change: The move towards homeworking and hastening of some existing/new trends (e.g. automation, ecommerce).

Content

  • Executive Summary
  • Introduction
  • The Future of Work
    1. The Fourth Industrial Revolution
    2. Societal and cultural change
    3. Business environment change
    4. Pandemic-related change
  • How will FoW trends impact telcos in the next 5 to 10 years?
    • Expected market conditions
    • Implications for telcos’ strategic direction
    • Workforce and cultural change
  • Telco responses to FoW trends and how A3 can help
    • Strategic direction
    • Skills development
    • Organisational and cultural change
  • Appendix 1
  • Index

Related Research

 

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Stakeholder model: Turn growth killers into growth makers

Introduction: The stakeholder model

Telecoms operators’ attempts to build new sources of revenue have been a core focus of STL Partners’ research activities over the years. We’ve looked at many telecoms case studies, adjacent market examples, new business models and technologies and other routes to explore how operators might succeed. We believe the STL stakeholder model usefully and holistically describes telcos’ main stakeholder groups and the ideal relationships that telcos need to establish with each group to achieve valuable growth. It should be used in conjunction with other elements of STL’s portfolio which examine strategies needed within specific markets and industries (e.g., healthcare) and telcos’ operational areas (e.g., telco cloud, edge, leadership and culture).

This report outlines the stakeholder model at a high level, identifying seven groups and three factors within each group that summarise the ideal relationship. These stakeholder and influencer groups include:

  1. Management
  2. People
  3. Customer propositions
  4. Partner and technology ecosystems
  5. Investors
  6. Government and regulators
  7. Society

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1. Management

Growth may not always start at the top of an organisation, but to be successful, top management will be championing growth, have the capabilities to lead it, and aligning and protecting the resources needed to foster it. This is true in any organisation but especially so in those where there is a strong established business already in place, such as telecoms. The critical balance to be maintained is that the existing business must continue to succeed, and the new growth businesses be given the space, time, skills and support they need to grow. It sounds straightforward, but there are many challenges and pitfalls to making it work in practice.

For example, a minor wobble in the performance of a multi-billion-dollar business can easily eclipse the total value of a new business, so it is often tempting to switch resources back to the existing business and starve the fledgling growth. Equally, perceptions of how current businesses need to be run can wrongly influence what should happen in the new ones. Unsuitable choices of existing channels to market, familiar but ill-fitting technologies, or other business model prejudices are classic bias-led errors (see Telco innovation: Why it’s broken and how to fix it).

To be successful, we believe that management needs to exhibit three broad behaviours and capabilities.

  1. Stable and committed long term vision for growth aligned with the Coordination Age.
  2. Suitable knowledge, experience and openness.
  3. Effective two-way engagement with stakeholders. (N.B. We cover the board and most senior management in this group. Other management is covered in the People stakeholder group.)

Management: Key management enablers of growth

management-leadership-vision-growth-indicators

Source: STL Partners

Stable and committed long-term vision for growth

The companies that STL has seen making more successful growth plays typically exhibit a long-term commitment to growth and importantly, learning too.

Two examples we have studied closely are TELUS and Elisa. In both cases, the CEO has held tenure in the long-term, and the company has demonstrated a clear and well managed commitment to growth.

In TELUS’s case, the primary area of growth targeted has been healthcare, and the company now generates somewhere close to 10% of its revenue from the new areas (it does not publish a number). It has been working in healthcare for over 10 years, and Darren Entwistle, its CEO, has championed this cause with all stakeholders throughout.

In Elisa’s case, the innovation has been developed in a number of areas. For example, how it couples all you can use data plans and a flat sales/capex ratio; a new network automation business selling to other telcos; and an industrial IoT automation business.

Again, CEO Veli-Matti Mattila has a long tenure, and has championed the principle of Elisa’s competitive advantage being in its ability to learn and leverage its existing IP.

…aligned with the Coordination Age

STL argues that the future growth for telcos will come by addressing the needs of the Coordination Age, and this in turn is being accelerated by both the COVID-19 pandemic and growing realisation of climate change.

Why COVID-19 and Climate change are accelerating the Coordination Age

COVID-19-and-Climate-change-Coordination-Age-STL

 

Source: STL Partners

The Coordination Age is based on the insight that most stakeholder needs are driven by a global need to make better use of resources, whether in distribution (delivery of resources when and where needed), efficiency (return on resources, e.g. productivity), and sustainability (conservation and protection of resources, e.g. climate change).

This need will be served through multi-party business models, which use new technologies (e.g. better connectivity, AI, and automation) to deliver outcomes to their customers and business ecosystems.

We argue that both TELUS and Elisa are early innovators and pathfinders within these trends.

Suitable knowledge, experience and openness

Having the right experience, character and composition in the leadership team is an area of constant development by companies and experts of many types.

The dynamics of the leadership team matter too. There needs to be leadership and direction setting, but the team must be able to properly challenge itself and particularly its leader’s strongest opinions in a healthy way. There will of course be times when a CEO of any business unit needs to take the helm, but if the CEO or one of the C-team is overly attached to an idea or course of action and will not hear or truly consider alternatives this can be extremely risky.

AT&T / Time Warner – a salutary tale?

AT&T’s much discussed venture into entertainment with its acquisitions of DirecTV and Time Warner is an interesting case in point here. One of the conclusions of our recent analysis of this multi-billion-dollar acquisition plan was that AT&T’s management appeared to take a very telco-centric view throughout. It saw the media businesses primarily as a way to add value to its telecoms business, rather than as valuable business assets that needed to be nurtured in their own right.

Regardless of media executives leaving and other expert commentary suggesting it should not neglect the development of its wider distribution strategy for the content powerhouse for example, AT&T ploughed on with an approach that limited the value of its new assets. Given the high stakes, and the personalised descriptions of how the deal arose through the CEOs of the companies at the time, it is hard to escape the conclusion that there was a significant bias in the management team. We were struck by the observation that it seemed like “AT&T knew best”.

To be clear, there can be little doubt that AT&T is a formidable telecoms operator. Many of its strategies and approaches are world leading, for example in change management and Telco Cloud, as we also highlight in this report.

However, at the time those deals were done AT&T’s board did not hold significant entertainment expertise, and whoever else they spoke with from that industry did not manage to carry them to a more balanced position. So it appears to us that a key contributing factor to the significant loss of momentum and market value that the media deals ultimately inflicted on AT&T was that they did not engineer the dynamics or character in their board to properly challenge and validate their strategy.

It is to the board’s credit that they have now recognised this and made plans for a change. Yet it is also notable that AT&T has not given any visible signal that it made a systemic error of judgement. Perhaps the huge amounts involved and highly litigious nature of the US market are behind this, and behind closed doors there is major change afoot. Yet the conveyed image is still that “AT&T knows best”. Hopefully, this external confidence is now balanced with more internal questioning and openness to external thoughts.

What capabilities should a management team possess?

In terms of telcos wishing to drive and nurture growth, STL believes there are criteria that are likely to signal that a company has a better chance of success. For example:

  • Insight into the realistic and differentiating capabilities of new and relevant markets, fields, applications and technologies is a valuable asset. The useful insight may exist in the form of experience (e.g. tenure in a relevant adjacent industry such as healthcare, or delivery of automation initiatives, working in relevant geographies, etc.), qualification (e.g. education in a relevant specialism such as AI), or longer term insight (which may be indicated by engagement with Research and Development or academic activities)

[The full range of management capabilities can be viewed in the report…..] 

 

2. People…

 

Table of Contents

  • Executive Summary
  • Introduction
  • Management
    • Stable and committed long-term vision for growth
    • …aligned with the Coordination Age
    • Suitable knowledge, experience and openness
    • Two-way engagement with stakeholders
  • People
    • Does the company have a suitable culture to enable growth?
    • Does the company have enough of the new skills and abilities needed?
    • Is the company’s general management collaborative, close to customers, and diverse?
  • Customer propositions
    • Nature of the current customer relationship
    • How far beyond telecoms the company has ventured
    • Investment in new sectors and needs
  • Partner and technology ecosystems
    • Successful adoption of disruptive technologies and business models
    • More resilient economics of scale in the core business
    • Technology and partners as an enabler of change
  • Investors
    • The stability of the investor base
    • Has the investor base been happy?
    • Current and forecast returns
  • Government and regulators
    • The tone of the government and regulatory environment
    • Current status of the regulatory situation
    • The company’s approach to government and regulatory relationships
  • Society
    • Brand presence, engagement and image
    • Company alignment with societal priorities
    • Media portrayal

Related research

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Telco roadmap to net-zero carbon emissions: Why, when and how

Telcos’ role in reducing carbon emissions

There are over eighty telecoms operators globally that turn over $1 billion or more in revenues every year. As major companies, service providers (SPs) have a role to play in reducing global carbon emissions. So far, they have been behind the curve. In the Corporate Knights Global 100 of the world’s most sustainable corporations, only five of them are telcos (BT, KPN, Cogeco, Telus and StarHub) and none of them are in the top 30.

In this report, we explore the aims, visions and priorities of SPs in their journey to become more sustainable companies. More specifically, we have sought to understand the practical steps they are undertaking to reduce their carbon footprints. This includes discovering how they define, prioritise and drive initiatives as well as the governance and reporting used to determine their progress to ‘net-zero’.

Each SP’s journey is unique; we’ve explored how regional and market influences affect their journey and how different personas and influencers within the SP approach this topic. To do this, we have spoken to 40 individuals at SPs globally. Interviewees have varied, from corporate and social responsibility (CSR) representatives, to those responsible for the SP’s technology and enterprise strategies. This report reflects the strategies and ambitions we learnt about during these conversations.

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This report is informed by interviews from SPs globallytelcos carbon emissions

What do we mean by scope 1, 2 and 3?

Before diving in further, it’s important to align on the key terminology that all major SPs are drawing on to evaluate and report their sustainability efforts: in particular, how they disclose and commit to reducing their greenhouse gas emissions.

SPs divide their carbon emissions into scope 1, 2 and 3 – scope 3 is by far the most significant

For most SPs, scope 1 (e.g. emissions from the fleet of vehicles used to install equipment or perform maintenance tasks on base stations) and scope 2 (e.g. the electricity they purchase to run their networks) makes up less than 20% of their overall footprint. These emissions can be recorded and reported on accurately and there are established methodologies for doing so.

Scope 3, however, is where 80%+ of SP carbon emissions come from. This is because it captures the impact of the SP’s whole supply chain, e.g. the carbon emissions released from manufacturing the network equipment that they deploy. It also includes the carbon emissions arising from supplying customers with products and services that an SP sells, e.g. from shipping and de-commissioning consumer handsets or servers provided to enterprise customers.

Table of Contents

  • Executive Summary
  • Table of Figures
  • Introduction
    • What do we mean by scope 1, 2 and 3?
    • Where are SPs in their sustainability journey?
    • How does this differ by region?
    • What’s covered in the rest of the report?
  • Procurement and sustainable supply chain
    • Scope 1, 2 and 3: Where are procurement teams focused
    • Current priorities
    • Regional nuances
    • Best and next practices
  • Networking
  • IT and facilities
  • Enterprise products and services
  • Key recommendations and conclusion

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Sustainability: Why it’s good for business

Introduction

In the last year, businesses all around the world underwent unprecedented changes and had to adapt to the most challenging of circumstances. Priorities shifted for all stakeholders with telcos operating in an increasingly complex world and having to rethink how they do business.

The world is connected digitally now more than ever. With office closures and working from home, Zoom calls with loved ones having been the only way to socialise and to carry out online schooling, telecoms and technology have become even more relied upon industries in the last 18 months.

The idea that a strong corporate social responsibility and sustainability strategy is good for business has been around for decades. This report outlines how telcos can evolve their purpose beyond just being profit driven by aligning core strategy with sustainability initiatives and a sustainability policy, and in doing so benefit their business and add ‘society’ or ‘the world’ to their stakeholders.

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Scope of Research

The modern concept of ‘sustainability’ is composed of three components: economic, environmental and social. This is also sometimes called the ‘triple bottom line’ of business – stating that businesses should commit to measuring social and environmental impact, as well as financial performance, rather than focusing solely on profit. The ‘triple bottom line’ theory states that businesses should focus on the “three Ps”: people, profit and planet.

The three components of sustainability

three-components-to-sustainability-stl-partners

Source: STL Partners

Modern discussions of ‘sustainability’ refer to the economic, environmental and social effect an organisation has on the societies or markets in which it operates. It is an umbrella term that covers issues such as diversity and inclusion, energy usage, human rights and supply chain management.

Through this research we sought to understand if there is a business value to incorporating sustainability into a telecoms operator’s purpose and strategy. Speaking to seven operators across the world, some of whom are named in this report (Telstra, Globe and Orange), we wanted to know how telcos are thinking about sustainability, and to learn more about the following:

  • Telcos’ perception of the impact of sustainability initiatives in wider stakeholder groups e.g. employees, customers, shareholders, society
  • Which sustainability issues telcos are focusing on
  • The business benefits of sustainability initiatives
  • Case studies of companies that have incorporated sustainability into their company strategy
  • The effect the markets in which a telco operates in has on its sustainability initiatives (e.g. developed vs developing)

To gain an idea of how sustainability affects all aspects of the business, we interviewed employees in telcos’ sustainability and CSR teams, as well as in corporate strategy and product management.

All interviewees were asked largely the same questions, covering topics including: the initial motivations for engaging with sustainability; the effect of sustainability on multiple stakeholders (including customers and employees); if being sustainable puts telcos at a competitive advantage; important sustainability issues and solutions; successes and challenges of different sustainability initiatives; adapting sustainability strategies in different regions and the selection of their term for what we are calling ‘sustainability’.

Notably, some of the telcos we reached out to were not willing to participate in interviews because they were in the process of revising, changing, or updating their position on sustainability. In itself, this tells us that sustainability is an important and topical issue that many are still figuring out how to “get right” and how to incorporate it into their company strategy.

Sustainability is a cornerstone of the Coordination Age

As we outlined in The Coordination Age: A third age of telecoms, we believe that the telecoms and the wider digital economy is in its third age, ‘The Coordination Age’, which builds on ‘The Communications Age’ and ‘The Information Age’.

The three ages of telecoms

coordination-age-basic-stl-partners

 

Source: STL Partners

The Coordination Age is a result of the changing needs and demands of the world’s people, businesses, and governments, evolving technological solutions and possibilities, and the need to preserve the most habitable possible future environment for the world’s population.

To create major growth and advance as a telco, operators need to help solve some of the world’s biggest problems. We believe some of those major problems are:

  • A desire for greater business efficiency and productivity
  • The distribution and availability of human resources and services such as healthcare, education, employment, and entertainment
  • Mitigating climate change and minimising its effects
  • Reducing the amount of waste and harmful by-products polluting the environment
  • Concerns over employment due to automation and global economic changes

These major problems can and are starting to be addressed through sustainability initiatives set out by companies in their agendas and policies.

In addition, telcos have important and unique assets, as well as specific resources and capabilities, such as access to data, technology and their prevalence in the everyday lives of their customers, that can enable them to contribute to tackling some of the world’s problems and ‘help make our world run better’. A specific common problem is to help companies and people coordinate their resources in or near to real-time.

For example, a major problem in delivering sustainable energy is ensuring that the variable demand of populations is coordinated with supply. Wind turbines and solar panels cannot be relied on to produce at peak capacity at exactly half-time in sporting events, when the audience goes to make a cup of tea by boiling their electric kettles. As such, supply needs to be very flexibly managed in relation to demand.

This means sharing information about those resources and demands effectively, which in turn takes modern communications in some shape or form (although connections may not always need to run through a telco network, for example Bluetooth, WiFi, etc.) Given his common need, telcos are well-equipped to help enable sustainability.

The motivating value of a compelling purpose

Protecting the future of the planet and society is a compelling purpose, and one which is progressively becoming part of our daily lives.

Our research on sustainability found that that there are a number of benefits for different stakeholders when telcos incorporate sustainability into company strategy, including increasing employee engagement. Sharing a mutual goal or purpose unites a team and creates value, which is important for business performance, and thus a business benefit of sustainability.

How a unifying purpose helps create value

unifying-purpose-CSR-stl-partners

Source: STL Partners

A clear unifying purpose applied successfully creates a virtuous cycle:

1. Clarity of direction: A clear purpose can provide direction for people at all levels. E.g. incorporating the UN Sustainable Development Goals, such as Goal 7 – Affordable and Clean Energy, into company strategy and developing processes around it that involve employeesat all levels.

2. Energising work: Most people work for money, to a greater or lesser extent, and a range of other drivers: status, socialcontact, etc. However, work with a clear purpose is much more energising, especially if (like sustainability) it has some broader merit or meaning. It can make work ‘worth getting up for’. All the telcos we spoke to said that their employees are motivated by the sustainability work their company does.

3. Switched on people: If a telco is full of people that care about what they are doing, and know what they are trying to do, it will be a much more enjoyable and attractive place to work for everyone. Telcos we spoke to also said that sustainabilityis beneficial for talent attraction and retention, as employees want to work for a company that they feel is making a positive impact on the world

4. and 5 – Compelling offer and support, and attracts and satisfies customers: The combination of engaged people in the company and a compelling offer will be attractive to customers. Telcos we spoke to also referenced the need to be attractive to and satisfy different types of customers through their sustainabilitywork, such as the socially conscious Generation Z, and the older generation who can be engaged through digital inclusion

6. Feeds the business: The combination of internal clarity and alignment, motivation, and external attractiveness creates a virtuous circle that benefits telcos and drive business growth.

We think that engaging with sustainability and incorporating it into company strategy is a crucial part of operating in the context of the Coordination Age, and fundamental to operating in this way successfully. To support our hypothesis that having a clear and motivating purpose (in this case sustainability) can help to enhance currant performance, engage its employees, and find and nurture new areas of growth, we interviewed telcos to better understand how they define and measure the benefits of sustainability for their business. The research conducted for this report further validates our belief that commitment to sustainability is crucial to telcos’ success and growth in the Coordination Age.

Table of Contents

  • Executive Summary
    • Context
    • Key findings from research
    • Recommendations
    • Next steps for research
  • Introduction
    • Scope of research
    • Sustainability is a cornerstone of the Coordination Age
    • The motivating value of a compelling purpose
  • Defining and contextualising sustainability
    • ‘Corporate social responsibility’ vs. ‘sustainability’
    • The United Nations Sustainable Development Goals
    • Where are telcos focusing their efforts?
  • What are the business benefits of sustainability?
    • Employee benefits
    • Customers and government
    • Shareholder benefits
    • Challenges of sustainability
  • Conclusion
    • To what degree are telcos taking a holistic approach to CSR and sustainability?

STL Partners’ telecom sustainability hub:

Related Research:

Telecoms priorities: Ready for the crunch?

The goal of this research is to understand how telecoms operators’ investment priorities and investments are likely to change as the COVID-19 crisis recedes.  To do this, we collected 144 survey responses from participants in telecoms operators, telecoms vendors, and analysts and consultants and other groups. All responses are treated in strict personal and company confidence. Take the survey here.

This research builds on our previous content on the impact of the pandemic to the telecoms industry: COVID-19: Now, next and after (March 2020), COVID-19: Impact on telco priorities (May 2020), based on a survey undertaken in April and early May 2020 and Recovering from COVID: 5G to stimulate growth and drive productivity (August 2020).  STL Partners has also hosted three webinar on the topic (March to July 2020).

This deck summarises the findings of our industry research on telecoms priorities at the start of 2021.

We explored the research in our webinar,  State of the Industry: 2021 Priorities (click on the link to view the recording).

Background to the telecoms priorities survey – January 2021

The respondents were fairly evenly split between telcos, vendors, and ‘others’ (mainly analysts and consultants). This sample contained a higher proportion of European and American respondents than industry average, so is not fully globally representative. The split of company types and geography was broadly similar to the May 2020 survey, with the exception of the MENA region, where there were less than half the prior respondents – a total of 7. However those respondents were senior and well known to STL.

Who took the survey?

telco industry breakdown

Source: STL telecoms priorities survey, 144 respondents, 31st January 2021

48% of respondents were C-Level/VP/SVP/Director level. Functionally, most respondents work in senior HQ and operational management areas. Compared to May 2020, there were proportionally slightly more senior respondents, and slightly less in product and strategy roles.

What are their roles?

Senior participants

Source: STL telecoms priorities survey, 144 respondents, 31st January 2021

How respondents perceive priorities, as the COVID threat recedes

There were increases in respondent confidence in almost every category we surveyed from May 2020 to Jan 2021.

  • Telecoms automation and agility remain top priorities across the industry – and transformation has moved up the agenda.
  • Appetite for 5G investments increased the most of all areas surveyed in the last 8 months.
  • The ‘consumerisation’ of enterprise continues, although security and work from home (WFH) services have overtaken conferencing and VPNs in priority.
  • Healthcare remains the most accelerated vertical / application opportunity of all those impacted in the current crisis.
  • The priority of consumer services has significantly increased yet confidence in making any additional money in the sector is low.
  • Leadership and transformation: COVID 19 has empowered an industry-wide belief that change is possible.
  • Transformation and innovation are high priorities, and appetite for sustainability and recruitment has returned, but there are doubts about some telco leaders’ commitment and ability to grasp and invest in new opportunities.

STL Partners assesses the telecoms industry to be at a crunch point: COVID has injected further pace to the rapid evolution of the world economy. Telcos that have been focused on responding to immediate pandemic-induced challenges, will emerge from the crisis faced with an urgency to respond to this evolution – key choices that telcos might have had 5-10 years to ponder are being crunched into the next 0-3 years.

Our findings suggest that most telcos are only partly ready for this disruptive opportunity.

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Notes on interpreting the research findings

  • The way research respondents perceive any given question is generally dependent on their current situation and knowledge. To get relevant answers, we asked all respondents if they were interested or involved in specific areas of interest (e.g. ‘consumer services’), and to not answer questions they couldn’t (e.g. for confidentiality reasons) or simply didn’t know or have a clear opinion.
  • We saw no evidence that respondents were ‘gaming’ the results to be favourable to their interests.
  • Results need to be seen in the context that telcos themselves vary widely in size, profitability and market outlook. For example, for some, 5G seems like a valid investment, whereas for others the conditions are currently much less promising. COVID-19 has clearly had some impact on these dynamics, and our analysis attempts to reflect this impact on the overall balance of opinions as well as some of the specific situations to bring greater nuance.
  • In December 2020 / January 2021, the worldwide impact of COVID-19 is increasingly well understood and less of a shock than was the case in May / June 2020. Vaccines are beginning to be rolled out but it is an early stage in the process, and new variants of COVID-19 have evolved in the UK, South Africa and Brazil (and possibly elsewhere). There are geo-political wrangles on vaccine distribution, and varying views on effectiveness and the most appropriate responses. Nonetheless, respondents appear overall more optimistic, although there is still considerable uncertainty.
  • We’ve interpreted the results as best we can given our knowledge of the respondents and what they told us, and added in our own insights where relevant.
  • Inevitably, this is a subjective exercise, albeit based on 144 industry respondents’ views.
  • Nonetheless, we hope that it brings you additional insights to the many that you already possess through your own experiences and access to data.
  • Finally, things continue to change fast. We will continue to track them.

Table of contents

  • Executive summary: Opportunities are in overdrive, but can telcos catch them?
  • High-level findings
  • Research background
  • Technology impacts: Automation, cloud and edge come of age
  • Network impacts: 5G is back
  • Enterprise sector impacts: Healthcare still leads
  • Consumer sector impacts: Mojo aplenty, money – not so much
  • Leadership impacts: good talking, but enough walking?

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