Jonatan Matsson, Partner at Kearney writes that while Covid-19 has been damaging, it's created an opportunity for telcos to diversify, enhance and refine their portfolios.
This is easier said than done. Turning opportunity into action requires companies to be bold in their decision making and to change product delivery as much as the product itself.
This means refocusing services to deliver what the consumer wants, rather than simply offering bulk, whether that be in the number of physical stores or with large, often outmoded product portfolios. If telcos are going to seize upon the opportunity, they must get leaner as much as they get smarter.
Looking back to look forward
The national shutdowns brought the workplace, school and our social lives into our homes, which as a consequence has led to an increased reliance on connectivity on a global scale.
Operators are under more pressure than ever to be innovative and unique, as well as reliable. But this must be seen more as an accelerator for real transformation rather than a push backwards.
Customer experience was already happening online. The pandemic has accelerated this trend, giving consumers the time and inclination to test their connectivity and digital service offerings.
At the height of the UK lockdown, Ofcom’s Online Nation report for 2020 showed that internet use was at its highest recorded in the country, and apps like Zoom reported a 2,000% increase in users.
Much of this usage is accounted for by work and social activity, as both switched to home overnight, but usage continued to rise as significantly as parts of education and health sectors have since moved online too.
As a result, consumers are demanding faster and more resilient services that can facilitate our shift to the digital realm.
Navigating a sea change
A consequence of this sea change is that telcos are now redefining their position in the physical space too. In October last year, Vodafone announced it was closing 1,000 stores to focus on driving 40% of its sales online and the pandemic has led to more announcements in the same vein.
Tele2, for example, has announced the closure of many of its physical stores in Sweden. At the same time, Russia's Tele2 wants to deploy 25,000 5G-ready base stations in Russia. It’s really now or never for telcos looking to claim their share of the connected consumer and they must seize this opportunity to turbocharge the switch to digital.
New world, new opportunities
So far, telecoms players have embraced this new role by stepping into initiatives that have helped mitigate the impact of the pandemic. These include supporting e-learning providers and educational institutions, where telcos have offered subsidised data packages to students studying from home.
In the health sector too, they have enabled the development of e-health services and the implementation of contact tracing technology.
This approach has paid off by not only advancing commercial business interests, but also enhancing corporate social responsibility.
There’s no better way to build customer loyalty than to provide help during a crisis, and it’s undeniable that telcos have played a critical part in this process. Firms in this sector have provided new infrastructure solutions in record time, and have also supported a number of highly-valued public institutions as they grapple with digital service delivery.
Now telcos must be bold and capitalise. There’s no reason why these new markets should be considered temporary and telcos shouldn’t be afraid of turning the markets considered “bottom line” pre-COVID, into “top line” priorities in the post-COVID world.
Pursuing new opportunities does not mean drifting away from core offerings quite yet. There is still opportunity to grow in central markets if businesses define targets and diversify offerings.
Kearney's analysis shows that in Western Europe, there is room to grow revenues by 25% in traditional areas. Yet, this will only sustain revenues in the short-term, and competition elsewhere is growing rapidly.
Kearney’s NextGen 2020 study shows that half (48%) of all global consumers can imagine buying their connectivity from digital players, such as media companies like Netflix or device manufacturers like Apple.
This represents a serious threat, and telcos must be bold if they are to mount a challenge. What this means is a rapid expansion into the connected markets, especially in places where usage is at its highest.
Right now, this is in Asia Pacific, where the potential to grow revenue in the connected device market is 363%. To put this into context, in Western Europe, it is 51%, still substantial but significantly less.
Ultimately, the pandemic has shown that whether it is work, health, education or just chatting to friends, connectivity is essential.
The steep rise in people moving out of areas like London and Silicon Valley to rural, less expensive areas since the lockdown shows coverage must be bolstered.
For example, UK property sales have recently hit record highs, with remote areas like Devon and Cornwall experiencing unprecedented demand and rent prices in London down by 8% in lockdown.
This is an opportunity for telcos to stretch the limits of connectivity. To achieve this goal, however, 5G and fibre rollouts will need to be delivered in the fastest possible timeframe.
Willingness to think
This is no easy task, and the future of telcos lies in the willingness to think radically and to diversify by entering a burgeoning tech industry which is rich in M&A potential.
Telco businesses have already played a critical role in helping their customers weather the pandemic by adopting a customer-centric approach. Firms will need to take action to maintain this improved credibility, however, and continue to enhance, expand and diversify their services.
*Jonatan Matsson is Partner and European Lead in the Communications, Media Technology Practice at Kearney