Part 2: Looking back, looking ahead, a new year perspective – Telecoms

Continuing the discussion on key trends, in this blog I share some perspective on the telecoms industry. At F5, we are fortunate to work with some of the biggest and most innovative service providers in the region. They are at the epicentre of enabling us to function during Covid-19. By all accounts, they have risen to the challenge well and as remote work became the new normal, they have also been able to cope with the increased demand for data traffic. The mobile service providers in particular were quite generous in allowing increased complementary amounts of data usage during the initial months of the lockdown as consumers struggled with the new reality of remote working and more than usual idle hours.

Telecoms continue to move forward

Amid and despite all the challenges presented by Covid-19, the industry continued to make progress on many fronts. The developments in the industry can be summed up in four stories:

  • Justifying the 5G business case: The biggest megatrend of the decade for the telecoms industry has gained momentum with many roll outs across the region. South Korea and China have emerged as global leaders, with 5G subscribers now accounting for close to 15% of their total subscriber base*. In a very positive development, both markets have seen incremental revenue growth attributable to 5G consumer adoption. They have been able to introduce new services with applications such as gaming and augmented reality, that provide an opportunity to increase average revenue per user. Some initial successes with enterprise applications have also been registered. The rollout will accelerate despite continued scepticism about the business case.
  • Reducing cost to serve: Three decades of strong profitable growth in the industry have also led to some complacency amongst the industry players. Inefficiencies in operations have crept into the performance of the companies, and this is leading to a point of exploitation by new entrants. The intense pressure on tariffs, due to both the competition and the regulation requires service providers to aggressively manage the capex and opex costs. In the years to come, this will be pursued by many players with a sense of urgency. The more ambitious companies are looking at bringing down the capex to revenue ratio from 30 percent to 20 percent over a period of time.
  • Telco’s transition to becoming technology companies: There is a growing realisation amongst many a telecom provider that they need to own their technology stack. There is a need to integrate IT and the network to build the innovation platform of the future. The level of ownership and integration may vary depending on the operator and the market. Some, like Reliance JIO and Viettel, may extend this to develop their own 5G technology, while others may simply innovate the IT platform alone. Technology will be an integral cog in the machinery of transformation of future telecom companies.
  • Growth through extension to new industry domains: For telecom service providers, true growth lies in its ability to deliver outcomes beyond connectivity. This could take the form of services such as finance, commerce, gaming, entertainment or enterprise services. While there is no doubt that many of these are beyond the current capabilities of the service providers, this is an essential journey to take. SingTel’s partnership with Grab to acquire a banking license and Globe Telecom’s Globe Studio (an initiative to co-produce television and film content) represent important starting points of this diversification trend. By the end of this decade, growth-oriented companies may see as much as 50 percent of their revenues come from beyond connectivity driven services.

As 2020 drew to a close, two outstanding telecom industry leaders handed over the baton of their respective companies to the next generation. Chua Sock Koong of SingTel and Tan Sri Jamaluddin of Axiata contributed immensely to the development of their respective companies and turned them into noteworthy regional players. They have laid a strong foundation for the new CEO’s Kuan Moon Yuen (SingTel) and Mohd Izzaddin Idris (Axiata) to lead their companies into the next decade. Best wishes to both these leaders as they embark on their new journeys.

There are tremendous growth opportunities for this industry and whether the telecom players capitalize on it or give way to the tech giants will largely be determined by the former’s ability to attract the best talent. A partnership driven approach may hold the key to this challenge.

Wishing everyone a very merry Christmas and a happy new year 2021. Look forward to creating a better future together.

*Twimbit, Telecom outlook 2021

Read F5’s perspective on How will open innovation shape the future of telecoms