Telecom disruption, this is just the beginning


5 March, 2018


4YFN, Conferences, Disruption, Start-ups, Telecom


The world of mobile has exploded. Since 2000 we’ve seen internet users grow from 400 million to 3.2 billion, and mobile users 800 million to 5 billion. Everything is now mobile, media is consumed on-the-go, communication is online, mobile videos are our new TV.

The result?

Software is swallowing telecom companies…

Now, we communicate through apps – Facebook and Whatsapp have 2.2bn and 1.5bn users respectively and still have the potential to grow. There are still BILLIONS of potential new internet users in the world, tucked away in enormous untapped markets. But, it’s not game-over for the traditional telecom operator. They have the cash to compete.

Telecom operators face increasingly tough times as digitisation reshapes the industry landscape. In fact, telecoms come second only to media in the ranks of sectors expecting moderate or massive digital disruption over the next 12 months, according to a 2015 cross-industry survey of senior industry leaders.

In the past five years, the telecom business has entered a period of slow decline, with revenue growth down from 4.5 percent to 4 percent, EBITDA (Earnings before interest, taxes, depreciation, and amortization) margins down from 25 percent to 17 percent, and cash-flow margins down from 15.6 percent to 8 percent.

Competitive boundaries are shifting as core voice and messaging businesses continue to shrink, partly under regulatory pressures, but also because social media is opening up new communications channels.

Among US telecom companies, for instance, landline and mobile voice now account for less than a third of total access, down from 55 percent in 2010, while data revenue has risen from 25 percent of total revenues in 2010 to 65 percent today.

Infographic US telecom 4yfn

But digitization is not just a threat; it also offers telecom companies an opportunity to rebuild their market positions, reimagine their business systems, and create innovative offerings for customers. Not surprisingly, most executives consider digitization to be one of their top priorities, but few companies are close to capturing its full potential. We calculate that digitization could enable telecom operators to improve their profits by as much as 35 percent, yet the average improvement achieved is just 9 percent.

Telecom companies already have the key ingredients to change the game written into their DNA. They have:

• Efficient marketing
• Strong local anchorage
• A substantial client base
• The (financial) capacity to scale

So, what direction do they take to move forwards?

There represents four strategic paths for telecom operators:

1. Reinvent the core – look for innovative ways to improve key services like network coverage and quality
2. Revamp customer care – use real-time, 360 degree data on individual customers for better customer care, especially online
3. Leverage major technological changes – welcome and strive for network evolutions like 5G
4. Embrace adjacencies – leverage the customer base and its marketing and distribution power, such as through content, or look at new areas like mobile banking or healthcare

So how do the major carriers innovate and reclaim their space? We can see an example of this through Orange, the French telecom operator. Orange Bank was launched in November 2017, now with 100,000 clients, they have generated 73 million euros of revenue in 2017 with only 2 months of activity. You can send money by text, consult your transactions in real-time, block and unblock your bank card from the mobile app and simplify your account opening.

At OneRagtime, we believe that Venture and M&A are the new R&D. Start-ups are leading innovation, and their acquisition into corporates helps fuel new activities, acquires tech talent, optimises the company through technological breakthroughs and has the potential to transform the culture of the company.


This article was produced from a presentation given by Stéphanie on the Banco Sabadell stage at 4YFN on Monday 26th February, 2018.