The future of telcos

Losing steam in their legacy business, telcos are evolving towards new business models that combine, to varying degrees, investment, risk taking, cost cutting and the like. A number of options are still open to them, each reflecting a different vision of what their business should be and, ultimately, resulting in different prospects for the future.

Potentially wide open range of services…

The array of services that telcos may sell in future is potentially very broad, ranging from enhanced connectivity solutions (typically M2M, connected health, autonomous cars, smart home and wearables) to guarantors of high-quality service (notably in security, SLA, CDN, cloud, IT and digital ID) by way of diversification (payment, banking services and TV/video) and monetising data (advertising, analytics). Most telcos already market these services which are far from having reached their full development potential, while others are still only emerging from their cocoon.

… which are shaping telcos’ choices

In the core scenarios that IDATE DigiWorld established (see graphics in the introduction to this chapter), the accent is on some of these new sectors of activity.

  • M2M and IoT services will be the main driving forces behind the ‘Tech’ scenario, with machines and objects communicating with one another on a massive scale. Similarly, smart home devices and appliances will be very well developed.
  • Premium content and services, starting with video, will be central to the ‘Club’ scenario. The markets’ openness and consumers’ appetite for this content will open up very solid prospects for telcos.
  • Security solutions, and high-standard IT platforms in general – which are capable of protecting online transactions (e-commerce payments) and content stored in the cloud – will be the key element in the ‘Shield’ scenario.
  • Finally, sharing and outsourcing solutions that enable cost sharing will undergird the ‘Low Cost’ scenario. Disintermediation services, such as online banking, will also be key.

Digital markets in their sights

It is under the ‘Shield’ scenario that telcos are best able to monetise their business in digital markets and, at the other end of the spectrum, under the ‘Low Cost’ scenario that they will generate the least revenue in these new markets. Between these two extremes, the ‘Club’ scenario is the second most positive for telcos, ahead of the ‘Tech’ scenario. When looking at the cash generation metric, we find a completely reverse order: the deeper telcos move into digital markets, the less money they will make – at least in the medium term.

 
Telcos: potential digital market challengers
Note: Digital markets = Telecom markets + OTT markets
Source: IDATE DigiWorld in "Next Gen telcos"
 
Cloud, M2M, IT and payment: telcos' main sources of diversification
Top 5 digital markets for telcos, in four scenarios
   Tech
1   M2M
2   Payments
3   Cloud
4   Other IT
5   Smart home
   Club
1   Payments
2   Video
3   M2M
4   Cloud
5   Other IT
   Shield
1   Payments
2   M2M
3   Other IT
4   Security
5   Cloud
   Low cost
1   Cloud
2   M2M
3   Payments
4   Banking
5   Other IT
Source: IDATE DigiWorld in ''Next Gen telcos''