In 2017, the 54 telecom companies on the Forbes Global 2000 list generated nearly $1.5 trillion in revenue. But look closer and you’ll see that 20 of the 25 biggest telecom firms actually sank in the rankings from the previous year. That’s an especially alarming trend in an industry with profit margins that average between 1% and 2%.
What will determine long-term leaders from laggards? Many believe it will come down to how fast and how effectively emerging technologies such as 5G, artificial intelligence (AI) and the Internet of Things (IoT) can lead many of these companies to new services and revenue streams, happier and more loyal customers, and solid competitive advantage for years to come.
What’s holding them back? Few companies have a clear technology roadmap to guide them. Seventy percent of executives from 20 top global telecoms say their companies don’t have a well-defined strategy for maximizing profits from AI and IoT, according to a survey from Ericsson.
With that challenge in mind, and rapidly evolving technology opportunities, we interviewed a handful of experts across the telecom sector about how companies can best adapt their business models to deploy these technologies intelligently—and profitably.
Strategy #1: Double Down On Customers
The successful telecom of the future won’t simply provide connectivity—it will offer customers personalized digital services, according to Dan Bieler, principal analyst for Forrester Research.
“Telecoms will have to adopt new business models based around data,” Bieler says. “The data they will have access to is enormous as more devices become connected. Telecoms are in a very good position to leverage this data for the benefit of their customers.”
Bieler’s strategic advice for telecoms is simple: “Become absolutely customer-focused. Understand customer pain points and design your solutions around them.”
These customer pain points can begin the moment they sign up for a service. “A customer wants it up and running as quickly as possible,” Bieler explains. “She doesn’t want to wait on a technician or go through too many steps before she can use it.” The intelligent telecom will use AI and 5G to make that process fast and seamless.
Some telecoms have already taken the lead in deploying AI to improve customer service. AT&T, for example, uses an AI chatbot to handle online customer interactions. At Comcast, customers can speak to a Talking Guide, which interacts with users through voice-recognition AI. And CenturyLink’s AI assistant Angie reads and answers 30,000 customer emails each month, correctly interpreting 99% of them and routing the remaining 1% to human managers.
Customer data also provides telecoms with the opportunity for profitable partnerships. “Telecoms know a lot about their own customers: age, income level, consumer behavior. That’s useful for collaborating with third-party vendors,” Bieler explains. “You can decide which kinds of advertisements to place based on the location of the customer, the time of day, the weather and the user’s behavior.”
Strategy #2: Tap The Profit Potential Of IoT
For telecoms, new technologies haven’t always been moneymakers.
“For years, telecoms have been investing in tech to improve speeds and customer experience, but they haven’t been able to monetize their investments,” notes Rajesh Ghai, research director for carrier network infrastructure at IDC. But Ghai believes that, thanks to 5G’s expanded data carriage capabilities, IoT could change that—and become a new revenue source in the process.
“IoT is a promising avenue to offer new services by charging a fee per connection,” Ghai says. “5G has been designed to handle millions more connections than 4G with lower latency so now telecoms can support connected cars, fixed wireless access and other use cases” that they couldn’t before.
For consumers, that could mean paying a nominal fee for speedier data delivery every time they drive their connected car. It’s a small change that could mean big profits. In Ghai’s view, the profit potential is even greater in providing IoT services to enterprises.
“On the business side, IoT can become very valuable in terms of eliminating waste and inefficiencies,” says Ghai. “Imagine a large manufacturing facility with connected machinery and robots. In order to connect those machines, you need a strong network that Wi-Fi can’t accommodate. A company won’t mind paying a few cents more a month to keep everything humming.”
Telecoms are nicely positioned to profit from growing IoT-driven revenue streams in big industries that require more bandwidth and connectivity than ever before. Major manufacturers investing in IoT to streamline industrial processes include GE, Airbus and Siemens, whose smart factories are slashing costs through predictive maintenance of machinery, motion-sensor energy management and monitoring humidity levels on the factory floor. Telecoms that can deliver reliable, low-latency, high-bandwidth 5G connectivity to those customers will be in a stronger position to profit from IoT services in the years to come.
Strategy #3: Go Horizontal
One trend that Herbert Blum, a partner at Bain & Company and head of its Americas telecommunications practice, has been tracking with telecom giants is the race upward. Major telecoms have gone vertical.
“Each major carrier has picked a vertical,” Blum says. “AT&T does smart homes. Telstra is very aggressive on healthcare. Verizon is big on telematics, and so on.”
The logic is clear: Doubling down on a niche market gives you a competitive edge. “They’re compelled strategically to adopt these things because if they don’t do it, the guy next door will,” he says.
In Blum’s view, however, it would be smarter over the long haul for telecoms to invest in horizontal services such as data infrastructure. “Connectivity is very much a horizontal model, but there are other horizontal opportunities,” Blum argues. In addition to data infrastructure, he points to security and lifecycle management as horizontal investments.
The goal is not to excel in one arena, but to build foundational tech advantages across the board. Rather than investing in services to sell a specialized (and limited) market, horizontal services can be marketed and sold across industries that rely on high-speed, secure and reliable connectivity for their business models. Strategically, telecoms are uniquely poised to monetize these intricate networks.
“Carriers have to be incredibly good at managing complex assets,” Blum says. “The number of connection points that you need to manage is tremendously complex. IoT is only going to magnify that complexity.”
Today, Blum says, telecoms are experimenting with a variety of strategies to capitalize on new technologies—by necessity more so than by choice. “The world is evolving quickly,” he says. “Your competitors are aggressively adopting this technology as quickly as they can for better cost margins and to win more customers. Those who resist these opportunities will pay a high price.”
Learn more about how companies are leveraging AI today.
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