Digital journey of telecom companies
The telecom sector has been experiencing a rapid change around the world. The average revenue per user (ARPU), a long-standing metric for measuring financial performance, has been steadily declining over the last decade. Telecom companies in Bangladesh today are reporting an ARPU of lower than Tk 200 per month. While the revenue from voice services has been declining over the years, there has been steady growth in that from data services. Two factors have prompted this growth: (1) a shift in consumer behaviour, and (2) the implementation of the right strategy for above average growth from data services.
Worldwide, telecom companies are now at the cusp of a disruption where they have to shift their focus to non-voice services to continue growing. Telecom executives had been working hard to protect the financial bottom-lines of their companies by cutting costs, and that appeared to be a logical way to address perpetually declining ARPU in a market of voice services. However, in the near future, growth will be driven by data and the internet services, customer analytics services and new technology-led capabilities. Therefore, it is imperative for telecom companies to invest in building infrastructure for non-voice services and creating a strategic market identity around these growth opportunities.
Globally, telecom companies have started facing competition from non-traditional players such as over-the-top (OTT) service providers. These service providers are leveraging internet connectivity on smartphones to offer voice calls and messaging services. The pace of technological advancements and the magnitude of user benefits derived from OTT services will make them the default choice of customers. As data consumption per user increases steadily, telecom companies stand to gain more revenue from data and internet services. This trend is already visible to the telecom industry in Bangladesh.
In 2016, telecom companies in Bangladesh witnessed a 30 percent to 77 percent increase in their revenues from data services over the previous year. If the telecom companies can sustain this high growth in revenue from data services, they will start earning more revenue from data services than they earn from voice services within the next five years. Moreover, the proliferation of smartphones will continue and the number of data users will keep growing. However, the growth in data services will not last unless telecom companies work towards sustaining it. The companies have to offer high network speed and high throughput to make services more attractive to customers.
Telecom companies also need to invest in upgrading their network operations, such as next generation connectivity, and robust fibre infrastructure. The price of data per unit is going to decline while the appetite for data is going to outpace overall usage. Reliable data connectivity and fewer white spots (areas with no data connectivity) will be important factors to attract customers. Companies that are able to cater to these demands using state-of-the-art infrastructure will be more successful in catering to the evolved customer expectation.
In addition, telecom companies will need to simplify their service offerings. Telecom companies in Bangladesh run multiple promotional offers almost on a daily basis. They offer several prepaid internet packages, with the smallest one having one-day validity. Data service users will increasingly prefer a simplified set of relevant services available on advanced network infrastructure. These users are likely to use digital channels to subscribe to new services and purchase content. Thus, digital interfaces that offer a great user experience will be the key to generating revenue.
The increased use of data services will allow telecom companies to gather more data on users' behaviour. Applying the right kind of analytics tools will help them to monetise behavioural data more effectively. For example, today, telecom companies offer products only for the purpose of communication.
However, analysis of the customer data may help them profile their customers for financial products. In the near future, telecom companies may form alliances with financial services companies to assist them in selling financial products. They can use analytics to create micro-segments for each of these financial products.
They may also use it to define new requirements and co-create new financial products with their alliance partners. Such alliances will generate new revenue streams for telecom companies. The application of analytics is thus set to drive the business strategies of telecom players. In fact, telecom companies might look very different in the coming years depending upon the strategic identity they create for themselves.
Finally, a lot will depend on how companies deploy technology to simplify their business processes and build enterprise workflows. These companies have implemented several software applications. These applications, once integrated, should minimise data redundancy and improve the efficiency of business processes. Moreover, advanced analytics will assist in getting meaningful business insights.
The level of competition in the traditional telecom services landscape is going to get more intense. However, companies that successfully create new identities for themselves and invest in advanced technologies will build their own growth curve and emerge as leaders.
The writer is a partner at PwC. The views expressed here are personal.