Have you ever taken the time to read the annual reports and accounts of different telecoms operators? It may not be the most exciting way to spend an afternoon, but if you work in telecoms it’s well worth the effort as it provides a view on KPIs and how operators define and measure success and what their strategic objectives are. Reading the KPIs of some operators is like time travel. All of a sudden, you’re back in 2000 as how some operators measure their success hasn’t changed much in almost a quarter of a century. KPIs include mobile post-paid connections, pre-paid connections, post-paid ARPU, pre-paid ARPU and that’s it. The only difference is changing ‘fixed line connections’ to ‘fixed broadband connections’. It’s little wonder that some operators are struggling as how they report and measure success, which drives the business strategies they implement, haven’t changed to reflect the need for change in the telecoms industry.
However, it’s not all doom and gloom. There are many operators who are successfully transforming to become digital service providers. Reading their reports and accounts and having a look at their KPIs provides an insight into where this industry can go. They report KPIs like Monthly Active Users of digital services, percentage of revenue from non-telco services and growth of multi-play customers. One noticeable difference in the accounts of these operators is that they are reporting healthy double-digit revenue growth.
So, will we see an emergence of a two-tier operator market? On one hand there are digital service providers selling a wide range of services to their customers and who report on digital usage and digital service revenues. On the other hand, there are traditional telcos whose reports are focused on number of connections and APRUs. At present the vast majority are selling unlimited data services and are being dragged into the downward spiral of price and cost cutting in order to survive, with an annual inflationary price hike providing the major boost to any potential for ARPU growth.
Most operators want to change to become digital service providers. There’s lots of reasons why some operators don’t increase their portfolios to sell a wider range of digital services. One of them is cultural, but the main one is related to legacy systems. Many operators still have some complex legacy systems that are just too expensive and difficult to replace which is hindering innovation and automation. While at the same they are under increasing pressure to grow revenues by selling a wider range of digital services.
The question facing operators is how to accelerate transformation to become a digital service provider and open up new revenue streams for non-telco services without having to enter a multi-year transformation project to replace all legacy systems including BSS. Typically, BSS transformation has involved either a greenfield or a big-bang approach. There is now a new option, which is faster, more cost effective and much lower risk than the traditional big-bang approach. This involves taking a digital overlay approach to transformation that involves keeping the hard to remove legacy BSS stacks.
One strategic goal of a digital overlay transformation is to enable an operator to increase revenues by selling and manage a wide range of connectivity and beyond connectivity products and services. It needs to enable this without the incurring the high costs of ripping and replacing legacy BSS stacks. A digital overlay layer sits between the end-users, channels and legacy stacks. It aggregates and orchestrates data between the end user and the legacy stacks. In order to find out the details of how a digital overlay layer works, click here to download the Qvantel white paper.
By taking a digital overlay approach to transformation, operators can respond to the pressure of increasing revenues by selling a wider range of digital services. At the same time, they don’t have the multi-year big-bang transformation projects. This may well provide the solution needed so we see less reporting on traditional telco KPIs and more on new digital KPIs.
Download the Qvantel white paper "Taking a Digital Overlay Approach to Transformation" below:
Jukka Heiska
CMO, Qvantel