There is no formula for adding new revenue streams, streamlining operations and improving margins. But the old model of doing everything in-house is dead. Telcos know they need to open up. But what is the best format as they attempt to restructure and move into digital services?
Partnerships, JVs, spinoffs or outright M&As all have benefits as well as significant challenges. Telecom Asia asks four industry insiders for insight into which is most appropriate.
Claude Achcar from Actel Consulting says telcos should stop trying to innovate and calls for them to dismantle their R&D teams. He says forget about acquiring, and advocates the opposite: spinning off promising units, divesting and then partnering at arm's length. Mostly important he says is for telcos to speed up their notoriously slow decision-making and dare to fail.
Dominic Arena from AEC Advisory highlights three ways telcos are adapting to stay relevant: restructure the organization and culture into a customer-centric model supported by a ubiquitous and intelligent network; have a strategic management focus on new investments and (independent) joint ventures in upstream opportunities; and form joint ventures with distribution and affinity/niche segmentation specialists (downstream) that can better operate the market - facing business.
Analysys Mason's Amrish Kacker outlines the phases telcos have gone through to establish successful digital services units. In the first, they have created dedicated business units through partnerships, acquisitions via venture firms, acquisitions for capabilities and building capabilities in-house. In the second the emphasis shifts to delivering revenue streams, generally by closer partnerships. In the last phase, he says telcos seek improved financial results with lower risk of failure, which involves investment and expanded industry partnerships in things like m-payments/advertising and increased acquisitions.
Driven by the OTT threat and investment burden in data infrastructure, Axiata Group CFO Chari TVT says telcos are desperately looking at adjacent industries to find a growth path. But he notes the skillsets, investment cycles, monetization models, returns and risks are very different. Chari explains how Axiata is using multiple approaches to move into different digital services and that there is no one-size-fits-all model.
This article is part 1 of Telecom Asia’s May/June 2014 issue cover story:
Part 1: The right formula for the future
Part 2: Dare to partner, dare to fail
Part 3: Invest in ‘upstream' opportunities
Part 4: A phased approach
Part 5: Adapting to data: don't be the next Kodak
This article first appeared on Telecom Asia May/June 2014 issue