Telecom in 2019: Connect, Create, Innovate
Telecom firms will have to reinvent their business models beyond connectivity to take on the role of a platform where new technologies converge
The convergence of information, ubiquitous connectivity and technology heralds a new India that is marked by societal and entrepreneurial transformation. Advanced technologies such as Artificial Intelligence (AI), M2M (machine to machine), IoT (Internet of Things) and analytics will most certainly bring India closer to realizing its dream of creating a $1 trillion digital economy by 2022.
KPMG, along with India Mobile Congress, in its recently released report titled New Digital Horizon: Connect, Create And Innovate, highlights the finding of a KPMG Technology Innovations Lab survey, which ranks India as third in the tech leadership charts for countries showing most promise for disruptive technological breakthroughs that will have a global impact. The survey ranked IoT, followed by AI and robotics, as the leading game changers in ushering the digital revolution and highlighted media and entertainment, followed by automotive, retail, FS and education, as likely sectors that are going to be disrupted the most.
As we see technology traversing through different industries, the telecom sector providing global connectivity has a huge role to play. Yet, it has so far not been able to reap benefits from this growth. To ensure that they remain the epicentre of the growth, telcos will have to reinvent their business models beyond connectivity to take on a role of a platform where new technologies converge to create industry-specific solutions.
Several impediments stand in the way of providing broadband to the masses. With a debt pileup of $119 billion and a capital expenditure line up of $17 billion for FY19-20 (excluding the spectrum spend), telcos need to find new monetization models to survive.
The telcos experienced one level of disruption in the recent upsurge in data usage. While data usage is increasing substantially and is expected to reach an average of 7GB per subscriber per month by FY20, the ongoing price war and lack of enough data monetization is also resulting in continuous decline in average data realization, which is expected to reach 12.4 paise per MB by FY20.
Further, data accounts for only 35% of the revenues of Indian telcos despite the spike in volume. That’s in sharp contrast to Chinese players whose data revenue accounts for 60-65% of their total wireless revenue. With an attempt to monetize this shift to a data-centric usage, operators across the globe are expanding their play in content by either partnering or investing in content ecosystems (creation, curation, distribution).
Telcos are also evolving from pure voice providers to triple play or quad play players integrating their voice, data and content offerings. KPMG analysis demonstrates that globally operators who have implemented quad play have succeeded in boosting its fixed/mobile Ebitda by more than 7%, three times improvement in ARPU (average revenue per user) and resulted in 1/6th of churn compared to single-play offerings.
Another proposed game changer is 5G, which will allow operators to move beyond connectivity and collaborate across sectors such as manufacturing, finance, transport, retail and health to deliver new and personalized services. Opportunities related to IoT, M2M, and augmented and virtual reality (AR-VR) will create new revenue streams from business-to-business (B2B) and business-to-government (B2G) segments.
With traditional revenue streams maturing, redesigning business models is the need of the hour. Telcos should leverage the gold mine of data that it has and move up the technology stack by providing platforms and applications to create industry-specific solution using the emerging technologies.
Given the plethora of applications that will be driven by 5G, network and service quality will be of critical importance in the networks of tomorrow. Today, India has significant grounds to cover in terms of speed, latency, and 4G coverage. Some of the critical actions would be to upgrade infrastructure, including backhaul fiberisation and effective placement of cell sites for maximum coverage to demand heavy areas; confluence of networks, virtualization of network architecture, deployment of new technologies, such as carrier aggregation, MIMO (multiple input, multiple output) etc., to raise throughput and adoption of AI and machine learning (ML) technologies to improve network performance.
To conclude, we believe that being the only stakeholder, with an obvious path to full connectivity for the consumer, makes telcos a necessary part of any future consumer proposition, regardless of who owns the platform. The path forward is leveraging this strength while navigating the potholes of regulation, changing technology and consumer dynamics.
K.G. Purushothaman is partner and telecom leader at KPMG in India.
Data mentioned in this article has been taken from the KPMG-India Mobile Congress 2018 report New Digital Horizons.
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