How to succeed in today’s telco market

Mobile telecoms today is very different compared to what it was 20-30 years ago when the first mobile networks emerged.

In those days it was national networks and the ideas of roaming were un heard of, today we take it for granted that we can fly from London to say Sydney get off the plane turn on our mobile and place a call.

We have seen tariffing legislation curbing the cost of roaming calls.

With a global population of several billion mobile phones, what does all this lead to?

Intense competition, the mobile business has been rather like the early days of the Railways. “Build a railway my son – you can’t fail to make money” but those days are over. The mobile telecoms business is no longer the purview of the big budget operator.

Back in the early 1980’s we at Vodafone knew as the first launched operator in the UK it was a license to print money. That is no longer the case.

Today operators are facing static or even declining ARPU and the markets are saturated. Looking forward we can see a shift in the revenue stream break up, no longer is the revenue driven by minutes airtime. Mobile data and the smart phone dominate and the revenue pie chart is progressively becoming more about data traffic.

10 years ago or more we had the call back card followed by the “net to phone” service now dominated by Skype ™ all of which have radically altered the shape of international calling. What was a major revenue earner is now delivered free of charge or a low cost.

In the late 1990’s much of the Telecoms consultant talk was concerned with revenue replacement, with the erosion of calling charges how were the operators going to replace that “lost revenue”? There were schemes proposed for “sponsored calling” for example, none of which have happened.

Faced with collapsing revenue prospects a new entrant has to plan his service carefully, identify his market, keep his operation lean and mean, be ready with new services promptly and be ready to exploit opportunity.

Not only that but the life cycle of these new products and services is getting shorter and shorter.

All of which means that the concept of a Managed Service is crucial to modern mobile telecoms. The available economy of scale allows an operator to pair down his operational cost and “Enterprise Manage” his business.

We can see numerous parallel examples, the Oil, Hotel and even the automotive industries have all lead the way for the modern telco.

But it is immediately obvious that to fully exploit these opportunities the Managed Service provider must be much more than adequate. He must be an “in class” leader!

The vendors have over many years built up very enviable reputations in the design, build, production and installation of the support equipment needed but they are now trying to move out of core business into the domain of the operator. This is bound to create a learning curve; mistakes as we have seen so far are inevitable.

The biggest problem is that these kinds of mistake are highly public for they affect the subscriber’s service. This creates yet another reason for great care in the design of Managed Service contracts and their execution. We have already seen court battles with the costs running into millions of dollars. These kinds of thing are the worst possible outcome both for vendor and operator. Yet with the proliferation of Managed Service projects the risk of litigation only increases.

The vendors need that critical operator experience and within their organizations they need the right support culture, for example a manufacturer’s HR is a different animal to an operator’s. The different processes and procedures need to be understood.

The successful Managed Service vendor understands the operation end to end, has seamless processes and procedures, dovetails with the operator and most importantly has the right governance and control mechanisms to allow true excellence and the maximization of revenue.

At the same time the operator needs to know that vendor has these skills and qualities before turning over the operation to the vendor.

One of the most important issues is to understand that the successful Managed Service is a partnership over time for operator and vendor. There is no point in beating the vendor down to un-economic business as one day the operator will be drowning in subscriber complaint and when he calls his counter part at the vendor, simply they will not be there. Worse still, for example, the regulator will threatening to cancel the operator’s license or the vendor will be facing litigation for failure to provide tier 1 service.

To sum up, in a highly visible market place both vendor and operator for a Managed Service must work together in a smart way, they must engage with each other, they must ensure that on both sides they have the necessary skills and functions suitable for the project. The only way to avoid dispute is careful planning and execution. They should be open to taking expert advice and realize the value of that advice, advice which can transform the revenue proposition of their Managed Service contracts.

Bruce PetersonPrincipal Consultant: TMSConsult.netwww.tmsconsult.netCo-author Managed Services: Theory and Practice for Telecoms