Why telcos must diversify their offerings to ensure future survival
Telecommunications requires significant capital outlay to build networks, that also need to be managed and maintained. Telcos in South Africa, and around the world, need to be able to monetise this investment, but traditional revenue streams such as calls and data are simply not profitable anymore.
New tech companies and communication platforms are also entering the mix, further eroding margins, and patterns of consumption are always changing. These are all challenges faced by telcos on a global scale, but they are also opportunities. Telcos need to innovate and diversify their offering to bring in new revenue streams to ensure their future profitability and survival.
No money in the traditional
The reality is that there is no money in traditional revenue streams like phone calls and data anymore, and for the most part, telcos already have all the customers they are going to get. Diversifying the offering has become essential, and Fintech is one area where telcos can add significant value. One reason for this is the fact that many more people have smartphones than bank accounts, especially in developing countries like South Africa.
Telcos therefore already have the customer penetration that banks, particularly Fintechs, are searching for. They also have access to a younger market, as typically people will have a mobile phone at a much younger age than they will a bank account, enabling telcos to get in at ground level.
There is also a wealth of customer data at their fingertips, which is ripe for analysis and could provide significant customer insight if used correctly, and many opportunities for cross selling. For example, most telcos already have full on ecommerce platforms - you can easily take out a mobile phone contract online or buy a phone and a range of accessories.
Telcos could leverage these platforms for a more diverse offering, either by selling a wider range of products themselves or by becoming more of an aggregator marketplace for other sellers. Then there is the element of pure financial services in the form of, for example, mobile phone insurance. There are numerous opportunities for telcos to branch out for additional streams of revenue.
A bird in the hand
There is a saying that a bird in the hand is worth two in the bush – this is true of customers as well. A customer you already have is far more profitable than one that you could potentially obtain. Telcos particularly need to retain their customers and minimise churn, because market penetration is effectively saturated. This means that they need enticing points of differentiation, on top of being able to provide the best service to ensure that customers do not change providers.
This is where the power of analytics comes into play. Telcos have access to massive amounts of customer data that can be mined to deliver better customer insight, as well as monetised to provide additional revenue streams. Customer insights from telcos can be used by both Fintechs and ecommerce providers to better understand traffic patterns, spending patterns and other trends that could deliver enormous value in driving better customer service. Converting data into meaningful insight has become a currency of its own in a digital world, and telcos are poised to capitalise on this opportunity.
Technology foundations and partnerships
Technology platforms lie at the heart of data analytics, but an effective transformation strategy is the key to successfully leveraging technology for innovation and diversification. A System Integrator (SI) partner can be invaluable in assisting with this process from end to end, from developing the strategy to providing insight and global experience into how technology can change ways of working and offer new opportunities for monetising. In addition, an SI can help telcos to increase the efficiency of current operations, to streamline existing processes and applications, from the back end to billing, CRM to activations and cancellations. This in turn will enhance profitability.
The customer is the key. Telcos need to adapt to new technology, innovate to deliver new products, services and streams of revenue, and become more agile and flexible to maintain their current customer base.
An SI partner can bring in the expertise needed to ensure that current investment can be enhanced, while helping them to embrace innovation and transformation and move to the next level of maturity.