The traditional telco business model is under threat. Why? The market is becoming saturated, and the average revenues per user—for both fixed and mobile networks—are declining in many markets. At the same time, capital requirements remain high, and usage, especially in mobile video, is increasing dramatically. Long-term value creation in this environment can be difficult.
In the past, telcos have relied on reducing costs, expanding infrastructure, and maintaining or improving margins to ensure reliable growth. But clearly there is a limit to this strategy.
To generate long-term value for shareholders, operators can turn their attention to new growth areas, such as:
The challenge is that the emerging services arenas—cloud computing, mobile payments, messaging, digital, advertising, e-commerce, the Internet of Things, and more—are already heavily contested. Staying competitive depends on being selective about which opportunities to pursue.
Digital services, in particular, present an enormous opportunity for telcos. This industry—which covers 13 service areas from eHealth and smart metering to messaging, music, and video—is expected to grow to $948 billion globally by the end of 2015.
Telcos have several opportunities to capture a portion of that business: