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Telecom Operators’ Investment Strategies
in the 4th Revenue Growth Curve
By ALI Saghaeian
Chief Analyst & Consultant
Telecoms, IT, and Media
Saghaeian [at] gmail.com
Objectives
• Understanding the strategies for
Investing in the 4th Curve
• What are the Key digital services
in Mobile World
• What are the 4-Phase Evolution to
Digital Lifestyle Services
• Learning the Business Models for
Future Telecoms Services
• Reviewing a
developed Business
Plan for a VAS (RTS
content)
Exercise
Saghaeian [at] gmail.com
Agenda
• Investing in the 4th Curve
• The Telco Challenge: Data Pipe or Smart Pipe
• STRATEGY #1: Connectivity Provider
• Key digital services in Mobile
• STRATEGY #2: Digital Service Provider
• Telco Digital Services Opportunities
• STRATEGY #3: Digital Service Enabler
• Digital Service Model
• 4-Phase Evolution to Digital Lifestyle Services
• Operators’ Investment in the 4th Curve
• Future Telecoms Service Business Models
Saghaeian [at] gmail.com
Based on the strategy and performance of a given operator on the 4th curve, operators
worldwide will typically fall into three major categories:
o Utility players (access only)
 Typically the tier 2/3 operators whose revenue profile will very much resemble that of utility
players who generate billions of dollars in revenue but their margins are in the range of 8-
12%.
 US Electric Utilities revenues have almost tripled over the last 30 years but margins have
been cut in half. We can expect similar trends for the utility mobile operators or utility
mobile businesses.
o Enablers
 The next category of operators will invest in technologies that help them become effective
enablers of the larger ecosystem.
 They provide a robust network, an extensive set of APIs, and the consumer/network data
that powers the most popular consumer applications and services.
o Digital Lifestyle Solution Providers or Enabler+
 Mobile operators who go beyond just providing access and devices to their customers to
empower consumers and enterprises with solutions and greater benefits from the 4th curve.
 Such operators go beyond just being an enabler of the ecosystem; they actually launch
complete end-to-end solutions in given verticals like AT&T’s digital life in home
automation.
Investing in the 4th Curve
Saghaeian [at] gmail.com
The Telco Challenge: Data Pipe or Smart Pipe
Saghaeian [at] gmail.com
STRATEGY #1: Connectivity Provider
Using core competences to offer
smart connectivity
•Low competitive advantage
•Low level of intimacy with
customer
•Potentially less profitable
•But the “safest” strategy, less
risky
•No complex IT services needed
Negative connotation is not
completely justified
It may be a good choice for some
CSPs, especially the smaller ones
Providing advanced
connectivity offerings for
different types of digital
services e.g.
Rich media
IP communication
Cloud
M2M (QoS monitoring for
different verticals)
E-health (SLA, QoS)
Saghaeian [at] gmail.com
Key digital services in both Fixed and Mobile world
Large number of digital services segments offers significant revenue potential
for both fixed and mobile service providers
* Priority of services based on a discussion with 20 leading Service Providers in APAC Saghaeian [at] gmail.com
(Telco) connectivity will only be a small part of the total
IoT market
Saghaeian [at] gmail.com
STRATEGY #2: Digital Service Provider
Offering digital services directly to customers
•New generation IT services needed
•High risk involved
•Direct competition with OTTs
•Experience in customer engagement is needed
•Needs acquisitions on retail market
AT&T to acquire Direct TV, Orange acquired Daily Motion, and many others
•Potentially high competitive advantage
•Very strong intimacy with customer
•High profit potential
•Can be considered for enterprise customers
Product customization, managed services, SLAs, Closer relationship
with customer, consultative selling, MCC
Saghaeian [at] gmail.com
Telco Digital Services Opportunities
Saghaeian [at] gmail.com
Service Providers Transition
Saghaeian [at] gmail.com
Digital Revenue as a percentage of Total Revenue
Many telcos have set up new divisions to capture opportunities in adjacent
markets…with mixed success
Saghaeian [at] gmail.com
European telcos are generating 3-4% of total revenues
from “digital” businesses
Saghaeian [at] gmail.com
STRATEGY #3: Digital Service Enabler
Cooperate with OTTs, offer existing capabilities “as a service“
• The experiences from
M2M and Cloud areas
show that in lean CSP
organizations it is
possible to profit from
value-added services
provided on top of
connectivity, in
cooperation with various
partners
• Needs separation of
access and services layer
Saghaeian [at] gmail.com
Cooperation in the Ecosystem
Saghaeian [at] gmail.com
Digital Service Model (1/4)
Saghaeian [at] gmail.com
Digital Service Model (2/4)
Saghaeian [at] gmail.com
Digital Service Model (3/4)
Saghaeian [at] gmail.com
Digital Service Model (4/4)
Saghaeian [at] gmail.com
4-Phase Evolution to Digital Lifestyle Services
Saghaeian [at] gmail.com
Operators have to move up the value chain
Saghaeian [at] gmail.com
 For some of the services, the operator might just focus on enabling the
ecosystem while for others they might actively participate in bringing the
service to the market.
 For example, AT&T is deeply entrenched in the Health space with several
key initiatives in mHealth, TeleHealth, Cloud-based Healthcare, etc. while
some of its European counterparts are more focused on enablement of the
health ecosystem.
 Deutsche Telekom works closely with BMW for auto services while its US
counterpart is less involved with companies directly but is more focused on
getting the developer ecosystem to take advantage of its network platform.
 Operators like Verizon are spending billions of dollars on acquisitions and
on beefing up their offerings on the 4th curve.
Operators’ Investment in the 4th Curve
Saghaeian [at] gmail.com
Future Telecoms Service Business Models
3 types of Revenue Categories in Communications
Saghaeian [at] gmail.com
EXAMPLES OF LEVERAGING A COMMUNICATION PLATFORM FOR EARNING
INDIRECT REVENUE
Examples for Business Models
Saghaeian [at] gmail.com
Opportunity Nature of Service Business
Model
Synergies with existing
capabilities and
products
Key Challenges
Network Services • Analysis, configuration, monitoring and
management of the customers network
infrastructure (e.g. LAN,WAN)
• Pay per service
• Pay per use
• Synergy with current core
offering:
- Communication services
and internet access
- Data transport solutions
(e.g. content delivery
network solutions, ...)
• Construct a clear and standardized
offering for each segment
Infastructure
Services
• Data Centre services: offer capacity on
proprietary servers (hosting) or data centre
space for the clients servers (housing)
• HW and OS management: maintenance
service (traditional and/or web based)
• IT infrastructure management:
- Security
- Disaster recovery and business continuity
- Storage and back up
- Desktop Mgmt
• Pay per service
• Pay per use
• Leverage infrastructure
management competencies
present in a Telco
• Exploit existing infrastructure
in terms of Data Centres,
Storage capabilities, …
• Construct a clear and standardized
offering for the each segment
• Further develop IT competencies
Application
Services
• Remote management of standard
applications (e.g. mail, antivirus, …)
• Application maintenance
• Software as a service solutions (e.g.
accounting, CRM, …)
• Pay per service
• Pay per use
• Develop IT competencies
• Partner with IT solution providers
• Build an offering of standard or semi
custom SaaS solutions for segment
Business Process
outsourcing
• Externalised management of company
processes (e.g. billing, administration,
payroll, …)
• Unified communication offerings
• Pay per service • Develop competencies
• Develop a standardized or semi
custom offering for the SME market
• Design custom offerings for large
enterprises
1
2
3
4
Each new opportunity for Telco has specific proposition,
business model and related challenges
Saghaeian [at] gmail.com
Famous Business Models in Mobile OTT
Saghaeian [at] gmail.com
Any Questions?
27
ALI Saghaeian | saghaeian@gmail.com

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Telecom Operators’ Investment Strategies in the 4th Revenue Growth Curve

  • 1. Telecom Operators’ Investment Strategies in the 4th Revenue Growth Curve By ALI Saghaeian Chief Analyst & Consultant Telecoms, IT, and Media Saghaeian [at] gmail.com
  • 2. Objectives • Understanding the strategies for Investing in the 4th Curve • What are the Key digital services in Mobile World • What are the 4-Phase Evolution to Digital Lifestyle Services • Learning the Business Models for Future Telecoms Services • Reviewing a developed Business Plan for a VAS (RTS content) Exercise Saghaeian [at] gmail.com
  • 3. Agenda • Investing in the 4th Curve • The Telco Challenge: Data Pipe or Smart Pipe • STRATEGY #1: Connectivity Provider • Key digital services in Mobile • STRATEGY #2: Digital Service Provider • Telco Digital Services Opportunities • STRATEGY #3: Digital Service Enabler • Digital Service Model • 4-Phase Evolution to Digital Lifestyle Services • Operators’ Investment in the 4th Curve • Future Telecoms Service Business Models Saghaeian [at] gmail.com
  • 4. Based on the strategy and performance of a given operator on the 4th curve, operators worldwide will typically fall into three major categories: o Utility players (access only)  Typically the tier 2/3 operators whose revenue profile will very much resemble that of utility players who generate billions of dollars in revenue but their margins are in the range of 8- 12%.  US Electric Utilities revenues have almost tripled over the last 30 years but margins have been cut in half. We can expect similar trends for the utility mobile operators or utility mobile businesses. o Enablers  The next category of operators will invest in technologies that help them become effective enablers of the larger ecosystem.  They provide a robust network, an extensive set of APIs, and the consumer/network data that powers the most popular consumer applications and services. o Digital Lifestyle Solution Providers or Enabler+  Mobile operators who go beyond just providing access and devices to their customers to empower consumers and enterprises with solutions and greater benefits from the 4th curve.  Such operators go beyond just being an enabler of the ecosystem; they actually launch complete end-to-end solutions in given verticals like AT&T’s digital life in home automation. Investing in the 4th Curve Saghaeian [at] gmail.com
  • 5. The Telco Challenge: Data Pipe or Smart Pipe Saghaeian [at] gmail.com
  • 6. STRATEGY #1: Connectivity Provider Using core competences to offer smart connectivity •Low competitive advantage •Low level of intimacy with customer •Potentially less profitable •But the “safest” strategy, less risky •No complex IT services needed Negative connotation is not completely justified It may be a good choice for some CSPs, especially the smaller ones Providing advanced connectivity offerings for different types of digital services e.g. Rich media IP communication Cloud M2M (QoS monitoring for different verticals) E-health (SLA, QoS) Saghaeian [at] gmail.com
  • 7. Key digital services in both Fixed and Mobile world Large number of digital services segments offers significant revenue potential for both fixed and mobile service providers * Priority of services based on a discussion with 20 leading Service Providers in APAC Saghaeian [at] gmail.com
  • 8. (Telco) connectivity will only be a small part of the total IoT market Saghaeian [at] gmail.com
  • 9. STRATEGY #2: Digital Service Provider Offering digital services directly to customers •New generation IT services needed •High risk involved •Direct competition with OTTs •Experience in customer engagement is needed •Needs acquisitions on retail market AT&T to acquire Direct TV, Orange acquired Daily Motion, and many others •Potentially high competitive advantage •Very strong intimacy with customer •High profit potential •Can be considered for enterprise customers Product customization, managed services, SLAs, Closer relationship with customer, consultative selling, MCC Saghaeian [at] gmail.com
  • 10. Telco Digital Services Opportunities Saghaeian [at] gmail.com
  • 12. Digital Revenue as a percentage of Total Revenue Many telcos have set up new divisions to capture opportunities in adjacent markets…with mixed success Saghaeian [at] gmail.com
  • 13. European telcos are generating 3-4% of total revenues from “digital” businesses Saghaeian [at] gmail.com
  • 14. STRATEGY #3: Digital Service Enabler Cooperate with OTTs, offer existing capabilities “as a service“ • The experiences from M2M and Cloud areas show that in lean CSP organizations it is possible to profit from value-added services provided on top of connectivity, in cooperation with various partners • Needs separation of access and services layer Saghaeian [at] gmail.com
  • 15. Cooperation in the Ecosystem Saghaeian [at] gmail.com
  • 16. Digital Service Model (1/4) Saghaeian [at] gmail.com
  • 17. Digital Service Model (2/4) Saghaeian [at] gmail.com
  • 18. Digital Service Model (3/4) Saghaeian [at] gmail.com
  • 19. Digital Service Model (4/4) Saghaeian [at] gmail.com
  • 20. 4-Phase Evolution to Digital Lifestyle Services Saghaeian [at] gmail.com
  • 21. Operators have to move up the value chain Saghaeian [at] gmail.com
  • 22.  For some of the services, the operator might just focus on enabling the ecosystem while for others they might actively participate in bringing the service to the market.  For example, AT&T is deeply entrenched in the Health space with several key initiatives in mHealth, TeleHealth, Cloud-based Healthcare, etc. while some of its European counterparts are more focused on enablement of the health ecosystem.  Deutsche Telekom works closely with BMW for auto services while its US counterpart is less involved with companies directly but is more focused on getting the developer ecosystem to take advantage of its network platform.  Operators like Verizon are spending billions of dollars on acquisitions and on beefing up their offerings on the 4th curve. Operators’ Investment in the 4th Curve Saghaeian [at] gmail.com
  • 23. Future Telecoms Service Business Models 3 types of Revenue Categories in Communications Saghaeian [at] gmail.com
  • 24. EXAMPLES OF LEVERAGING A COMMUNICATION PLATFORM FOR EARNING INDIRECT REVENUE Examples for Business Models Saghaeian [at] gmail.com
  • 25. Opportunity Nature of Service Business Model Synergies with existing capabilities and products Key Challenges Network Services • Analysis, configuration, monitoring and management of the customers network infrastructure (e.g. LAN,WAN) • Pay per service • Pay per use • Synergy with current core offering: - Communication services and internet access - Data transport solutions (e.g. content delivery network solutions, ...) • Construct a clear and standardized offering for each segment Infastructure Services • Data Centre services: offer capacity on proprietary servers (hosting) or data centre space for the clients servers (housing) • HW and OS management: maintenance service (traditional and/or web based) • IT infrastructure management: - Security - Disaster recovery and business continuity - Storage and back up - Desktop Mgmt • Pay per service • Pay per use • Leverage infrastructure management competencies present in a Telco • Exploit existing infrastructure in terms of Data Centres, Storage capabilities, … • Construct a clear and standardized offering for the each segment • Further develop IT competencies Application Services • Remote management of standard applications (e.g. mail, antivirus, …) • Application maintenance • Software as a service solutions (e.g. accounting, CRM, …) • Pay per service • Pay per use • Develop IT competencies • Partner with IT solution providers • Build an offering of standard or semi custom SaaS solutions for segment Business Process outsourcing • Externalised management of company processes (e.g. billing, administration, payroll, …) • Unified communication offerings • Pay per service • Develop competencies • Develop a standardized or semi custom offering for the SME market • Design custom offerings for large enterprises 1 2 3 4 Each new opportunity for Telco has specific proposition, business model and related challenges Saghaeian [at] gmail.com
  • 26. Famous Business Models in Mobile OTT Saghaeian [at] gmail.com
  • 27. Any Questions? 27 ALI Saghaeian | saghaeian@gmail.com