A telco’s key asset is no longer its physical network
It is its brand and customer relationships
OVER the past several years, mobile telecommunication companies have been experiencing steep declines in voice and SMS (short messaging service) revenues. It’s no secret that telcos continue to be on a slippery slope where these revenues will continue to be under pressure.
On the one hand, it’s fortunate that they have mobile data and broadband Internet services to supplement or replace this loss of revenue.
But on the other hand, it’s this very offering of mobile data and broadband access services that allows OTT (Over-The-Top) applications to cannibalise telcos’ voice and SMS revenues.
Applications like WhatsApp for messaging has caused a decline in SMS traffic and a drop in revenue for a number of telcos. It remains to be seen if WhatsApp will impact their voice revenue too, given that WhatsApp recently started offering voice calls, and that it can connect its user base that is well on track to reaching 1.1 billion globally in 2015.
Telcos are fast becoming purveyors of dumb pipes, and the ‘traditional’ business model of a telco needs a second and perhaps even a third option.
At same time, we need telcos because we can’t connect to our Facebook, WhatsApp, Google and generally the Internet, out of thin air. The telco infrastructure business will still be a multibillion-dollar industry in Malaysia, but profit margins will rationalise and come down (hopefully not crash!) to earth.
Telcos will need to be efficient machines in offering mobile data and broadband Internet services to their subscribers.
They will, therefore, also need to review what their core strengths and assets are, to turn their pipes into ‘smart pipes’ and leverage on the ‘network effect’ through the people-to-people, people-to-objects and even objects-to-objects connections they provide.
The telcos’ key asset is no longer the physical network of base stations, switches and fibre-optic connections. It is their brand and their customer relationships.
Telcos’ strengths are their billing relationship (in the case of postpaid), the vast reach of their sales and distribution touch points, as well as the fact that most customers have an affinity for, and trust in, their brands.
In a broad sense, telcos are in a unique position to offer Communications, Commerce and Community solutions, to serve their customers and therefore gain a better top-of-mind as well as share of time – which can lead to a larger ‘share of wallet’ from these customers.
So perhaps telcos should become what I call ‘comcos,’ or providers of Communications, Commerce, and Community solutions.
The question is, how does a telco get from being a pure-play telecoms company to being a comco? How does it get there?
Consider the following:
Understand the customer digital lifestyle and user journey
A telco/ comco needs to truly and thoroughly understand the customer digital lifestyle and user journey.
It sounds clichéd but it’s really about gaining an understanding of the customer. The new telco/ comco needs to embrace service design and offer a total customer experience throughout the customer's journey, both online and offline.
Being data-driven, using actionable insights
The rich customer engagement model described above can be achieved by being data-driven, through the implementation of deep customer intelligence analytics and by moving towards actionable insights.
Many telcos still do not know enough about their customers and users, or have simply not used what they know about their customers in full.
Notice how irrelevant advertisements (in terms of language and gender) are still being ‘spammed’ to you using ‘old-school’ SMS. Personalised and contextual relevance is non-existent. Even telco-branded mobile applications have vast room for improvement.
I’ve noticed how a telco-branded mobile application offering rewards has been overzealous in its use of location-based promotions, to the point of sending push notifications to alert you of offers around you, at intervals of every five to 10 kilometres.
This can get irritating when you are driving and get bombarded 10 times while on the highway.
There are a lot of ways telcos can improve by just placing the customer at the heart of the service or solution. Always remember that the service, solution or mobile application is serving a person at the end of it, not the other way around. This makes the customer experience key.
Research has also shown that personalisation and delivering contextually-relevant content has a strong commercial case, with those implementing personalisation reporting a 14% uplift in sales.
It can be achieved, and I look forward to the day when a telco-branded mobile application will be among the top 10 most used applications on our smartphones, to serve our daily needs.
Partnerships for outside-in innovation
For quick wins, telcos need to learn how to partner with other businesses, both online and offline.
And sometimes, these partnerships may be between partners which in the past would have been considered competitors. The new world out there makes for strange bedfellows.
Witness the recent collaboration between Telekom Malaysia (TM) and Digi on ‘HyppTV Everywhere’ as reported by Digital News Asia (DNA).
Though the article asked why TM didn’t partner with Celcom, I was thinking that since TM owns fixed-wireless broadband telco Packet One Networks (P1), and is also about to make a major push to be a significant mobile operator as well as a convergence telco, TM would want to keep HyppTV as a telco-owned OTT service that it can bundle with its own offering when the opportunity presents itself.
So it’s no surprise that TM says this collaboration between HyppTV and Digi is non-exclusive. And it also goes to show that even TM, more so in the case of HyppTV, needs the reach and distribution of another telco … in this case, Digi!
But then again, TM is no stranger to partnerships, given it launched a partnership with Ebizu Sdn Bhd in September 2014 to offer payment and GST-ready point-of-sale (POS) solutions for retailers.
[Disclosure: The writer is a former director at Ebizu]
Outside-in innovation needs to be practised and not paid lip service to only. Processes, people and platforms need to be made available for such partnerships to happen.
Many telcos’ billing systems and customer service are not ready to support such partnerships. Imagine if the many startups which are coming up from the many accelerators and incubators, wished to partner with a telco.
How can the integration between startups’ services and telcos’ billing systems and customer services happen with as little pain as possible? Also consider the turnaround time – can it be done in weeks instead of months (or years)?
It is no wonder that not many startups partner with telcos. For telcos, this issue around processes, people and platforms needs fixing if more services are to be offered to their customers, in their move to become a comco.
If telcos can’t do partnerships, then they will be nothing more than providers of ‘dumb pipes.’
When we can marry ‘being data-driven, using actionable insights’ with ‘partnerships for outside-in innovation,’ then we can give birth to ‘inside-out innovation.’
This is when the connection, network effect and (much talked-about but mostly elusive) data monetisation can occur.
Telcos becoming comcos
Without a doubt, the ‘infra’ part of the telecommunications business will be around for many more years to come, but (perhaps) the business model will be optimised and fine-tuned.
However, as argued above, the new comco business can emerge and be built creating new services and relationships.
Comco essentially means being a provider of solutions for communications, commerce and to serve the community.
Commerce can be electronic and mobile commerce solutions including payment-enablement, especially when integrated with a telco’s existing billing and charging system for either prepaid or postpaid.
Commerce can also include offering a rewards and loyalty platform that links the comco’s business customers with its end-consumers.
Community includes serving our neighbourhoods, from big cities to rural communities, across the country. Healthcare, energy, transportation, education and the environment come to mind.
The emergence of the IoE (Internet of Everything) and IoT (Internet of Things) becomes relevant, where a comco can provide connectivity and knowledge services around the understanding of the data that can be captured from the vast array of IoE and IoT devices and sensors.
This new ‘comco’ can leverage on existing and established connections of the telco to create new businesses and opportunities that will see the rise of entire new industries, especially when partnerships and new connections are made along the way to better enable people to live, learn and play.
Gerard K.M. Lim has over 20 years’ experience in interactive digital media consultancy, e-business, telecommunications, online ads and digital marketing. His most recent work involves digital retail, big data analytics, IoT, and mobile and social commerce.
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