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Telecom Business Review | Friday, June 11, 2021
Telco companies now have the chance to begin regaining growth by launching new ventures beyond connectivity, despite barriers that once hindered them.
FREMONT, CA: The process of building new businesses, however, is not easy. Some of these businesses are newer than others. Although half of the new businesses showed healthy profits, one quarter said the initiatives were not yet profitable, while another quarter showed a net profit. With research and industry analysis, there are ways to improve the odds of success. The objective is to help operators select the archetype that will confer a maximum competitive advantage by understanding the factors that make different business archetypes successful. It is also essential to choose the right approach to building a new business to help ensure that it flourishes and achieves success.
Growth imperatives
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With the introduction of 3G and then 4G technology, telco operators providing the connectivity upon which other industry participants rely lost ground more and more. The operators have invested a lot of capital in keeping up with successive waves of new technology, but their core business has become commoditized, and the growth rate has slowed. As a result, most of the value in the industry is captured by edge players like handset manufacturers, app developers, infrastructure builders, and streaming services providers. When measured by revenue, earnings, or market capitalization, the performance gap between the big streaming and digital service companies is particularly wide.
Creating opportunities
Telcos are expanding into new business areas beyond connectivity due to two shifts in the industry.
Market structure: Global reach has been a key advantage of tech companies. Due to the necessary infrastructure and investment required for operators to reach their markets, their market reach has been more limited. In today's digital market, as the digital services mature, however, more and more companies are emerging that offer services that are either complementary or alternative to the ones offered by the global giants, catering to the tastes and preferences of the local population. Global reach is no longer a prerequisite for a telco looking to expand beyond connectivity.
Technological know-how: Leading tech players have access to the top technical talent required to build innovative solutions, which leaves telcos catching up regarding their tech capabilities. New digital businesses should not be hindered by technological know-how. The demand for outstanding talent remains high, as does cutting-edge innovation. Despite not being ubiquitous, more general tech skills are becoming more available. The tools and software of today make developing digital services much more accessible. Several developers can build and release an app in months instead of requiring larger teams.
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