Key risks for telecom providers
Despite the emergence of the internet of things (IoT) and increasing implementation of the first wave of 5G, the telecom industry is facing an inflection point and remains stuck in a low-growth mode. In fact, the decline in mobile voice services is expected to continue in the foreseeable future, which will largely offset the revenue growth driven by 5G data services. Moreover, the revenue contribution by IoT is still relatively small as revenue per connection remains low, and the trend is likely to fall down further. These constraints on growth pose challenging conditions that need to be overcome by telcos providers.
According to Risk Analysis reports by EY and KPMG, here are some of the most dominant threats that telco companies should consider going forward:
1) Ineffective Digital Growth and Diversification Strategy
According to Digital Transformation for 2020 and Beyond, a global telecommunication survey conducted by EY, digital business models and services remain at the top of the strategic priorities list for telco industry leaders. However, generating growth from these services remains a growing concern that are still unaddressed to date. Most of the early players are operating on adjacent markets such as financial services, thus remaining small-scale, yielding ambiguous results.
As 5G and IoT becomes more prominent in the coming years, telcos will have to maximise their target market. Diversification through M&A and strategic alliances, creating innovative business models, and seizing opportunities for inorganic growth are some of the things that telcos can consider if they want to combat this threat.
2) Failure to Keep Up with the Growing Capex Burden
Many telcos are facing a new wave of network investment which varies from 5G and low-power wide area networks to gigabit fiber. Nonetheless, the investment returns on this capex remain ambivalent as many advanced technologies, such as the IoT-centric 5G use cases, are still in their infancy stage. Moreover, broadband is largely perceived as a household utility, which will certainly pose a major threat to the premium pricing of fiber connectivity. Hence, it is vital for operators to make the right decisions around infrastructure switch-off, spin-off and sharing, especially as they grapple with an increasingly diverse portfolio of network assets.
3) Regulatory and Compliance Risks
As digital trust continues to decline due to growing consumer’s concern regarding the safety of their personal data on the internet, telcos face the growing challenge of ensuring customers that their data and personal information are safe and secure. On the top of that, regulators are shifting their focus towards areas like data privacy and protection, such as the General Data Protection Regulation (GDPR). This will require operators to put security and trust at the core of customer interaction, which can be done in many ways, such as placing “security by design” at the core of their digital transformation strategies.
4) Inability to Attract and Retain Qualified Workforce
As the technology cycle continues to accelerate, it is no surprise that telcos are currently experiencing a shortage of digital skills. However, as evident from EY’s digital transformation survey, this challenge has not been addressed well by many companies. Digital transformation programs still largely prioritize overhauling systems and processes rather than reshaping workforce ability and reskilling workers. In fact, only 3% of companies see growing and retaining talent as a top strategic priority.
In order to overcome this challenge, boost productivity, and avoid organizational silos, companies need to take a different approach into reshaping the workforce. Building employee engagement is extremely important as this provides the foundation for an excellent customer experience.
5) Failure to Scale Digitization Initiatives
Recently, many operators are launching multiyear digital transformation programs as an attempt to create an innovative customer experience, generate new efficiency, and boost organisational agility. However, research has shown these projects are facing significant barriers, namely the burden of legacy IT platforms and the lack of digital skills coming from the previous threat.
New technology cycles may also slow the progress of telcos, given the difficulty of harnessing emerging innovations within an existing enterprise-wide transformation. In order to successfully operate the transformation program, operators need to develop a holistic, joined-up view of emerging technologies whilst ensuring they are not underestimating the continued potential of matured technologies, such as the SDN (Software-Defined Networking).
While challenges abound, VIAVI continues to support the future evolution of networks. We have the 5G network tools and expertise to ease this shift, expedite 5G roadmaps, and help operators ensure that existing users continue to experience optimum service quality through 5G and beyond.
Find out more in our latest whitepaper.
