Thoughts from the trenches

It is just another usual day for the telcos. The industry has weathering so many metaphorical storms for so long, that resilience has become its permanent virtue.

Over the last 45-60 days, we have all seen numerous research reports and thought papers talking about how the COVID-19 crisis has changed the world, and what it means for telecom operators. This is perhaps one of those rare instances when every industry is trying to draw inferences, make forecasts, finetune strategies and prepare for weathering the storm. Like all other businesses, we too made diligent notes, brainstormed with our brightest minds, and came out with sophisticated presentations on what this situation means for our customers, and how we can add value. However, we did one additional thing. Instead of going by just the reports and studies that were published online, we decided to take firsthand inputs from our customers, and truly understand what the impact means to them. So, we interviewed a dozen or more of our customers, and here are our top 10 takeaways.

And oh! Just to make sure this doesn’t end up being yet another strategy-heavy blog on “What COVID-19 means for telcos”, we have tried to keep it light. Because, these are observations based on real conversations beyond PowerPoint slides and Excel sheets.

1. Capacity is a problem, but addition is not easy

It is true. People are now dependent on connectivity more than ever. This means, more load on the network, demanding capacity expansion to service existing customers. The only problem is, given the circumstances, adding new capacity by way of additional infrastructure isn’t an easy option. Operators may have purchased infrastructure prior to the lockdown, but with the lack of resources to deploy these on field, capacity addition is not easy. Reallocation of capacity is one option, but some operators are hesitant to do it, thinking it may have to be soon reversed.

latency to bandwidth

2. Enterprise focus shifting from latency to bandwidth

Enterprise business for telcos has always been a different ball game. The customer needs are different, the pricing strategy is different, and even the landscape of offerings is different. The recent report from GSMA highlighted that Enterprise business might finally be able to overtake consumer business for telcos in the next 1-2 years (a big part of this attributed to 5G), and that was good news. The low latency of 5G was meant to redefine the term ‘real-time’, opening up a host of new possibilities for businesses. Enter COVID-19, and all of this is set to change. Well, not all, but at least the low latency part. The crisis has made businesses rethink what ‘essential’ means, and it appears like latency is not as essential as bandwidth and availability for enterprises.

3. Consumption is increasing, but revenues aren’t

This one almost seems borderline unfair but sadly is the reality. With most people working remotely, the dependence on data and connectivity has risen multi-fold for the average consumer. Their usage patterns have also show severe spikes, with some of our customers reporting up to 40% increase in 2 weeks. The usage of fixed broadband has also significantly increased due to the large number of video conferences, virtual events and webinars happening. Even for leisure, the only sources of entertainment seem to be the likes of Netflix, Amazon Prime, Hulu etc., all of which are bandwidth heavy. Furthermore, as a social responsibility, many operators are partnering with governments to roll out online learning programs, which further increase data consumption. While this kind of increase in usage would have been generally seen as good news, in the current circumstances it is not the case. The general economy is not conducive for price-hikes of packages, and operators will struggle to justify it. While operators will try to roll out innovative bundles, the impact of these efforts are yet to be seen.

4. Cost pressures to continue till the end of the year

Barring a handful of industries, this statement is probably applicable to all other businesses for the next few months. While the telecom industry is fairly resilient to the COVID-19 crisis, it is not spared of uncertainty. And, what do we do in such times? We hold on to what we have, and make sure every Dollar spent is extremely thought through. Over the next few months, some reductions in Opex will be inevitable for telcos. Further, Opex optimization might become a more stringent practice, leading to increased dependence on automation.

5. Capex remains same, but priorities change

An interesting observation that came out from multiple operators is that their Capex spends may largely remain the same, with minor reductions if any. At first, this might seem surprising, but given the fact that lockdown restrictions are beginning to ease out, telcos are looking at ways to meet the increasing demand from customers. The priorities of Capex however seem to be changing from value-add (like 5G) to essentials (capacity enhancement, higher availability, etc.). An important point that became evident is that Capex allocations are now being reassessed and restructured to align with corporate goals in light of the COVID-19 crisis.

6. Accelerated Digital Transformation due to COVID

Over the years, there have been several continued efforts on pushing for digital transformation across telcos, but it appears like COVID-19 has single-handedly acted as the tipping point. Customer expectations have changed permanently, and consumers will now seek a richer omni-channel digital experience and demand higher level of self-service. Be it the use of intelligent algorithms to aid call center agents or the creation of digital stores, telcos are forced to think digital in every aspect. An interesting outcome of this transformation will be the significant increase in the emphasis on trust, because of multiple unknown entities operating behind ‘digital curtains’.

7. 5G rollouts will slow down

Last year’s MWC was a 5G jungle. Anyone who had been there would come back believing that within a couple of years, we would have doctors performing remote surgeries, autonomous cars becoming common, industrial automation going in full throttle and many more things. However, if you haven’t realized it yet, here is some bad news for those. 5G rollouts will slow down. The reasons are multi-fold, starting with the realignment of Capex priorities, to inability to support additional buildout, the pause in the production of 5G handsets, and the lack of complete clarity on some of the standards. While 5G and related services will eventually benefit from the increased adoption of digital services, in the short term 5G deployments are expected to slow down.

8. Functions are keen to utilize allotted budgets

While newer budgets are not being allocated, or are being scrutinized before approval, functional heads of various departments seem to have the ability to make use of already allotted budgets. These are budgets allotted for strong use cases that remain important and are expected to contribute to the corporate objectives. With the looming threat of budget cuts and cost optimization, there is a sense of urgency to take decisions and move forward on putting some of the already allotted budgets to use. After all, no one wants the already allotted budgets to be rolled back, because they were unutilized, right?

9. Telcos looking at vendors that can think ‘beyond normal’

They say necessity is the mother of invention. A corollary of this could be to say that crisis is the mother of innovation. It is in situations like the current one that businesses are required to bring innovation to the forefront, in order to survive and thrive. While telcos are certainly on the right track to innovate and improvise, their strength lies in carrying out their business in the best way possible. This is where they expect vendors and partners to bring in interesting perspectives and value propositions to help them do things that are outside the spectrum of normal. So, a clear advise from most telcos to partners like ourselves is “Do not engage with us if you are only talking about what we are doing today. Come to us if you have propositions that differentiate us.”

10. New business models are being explored and adopted

Well, this point may not be a direct impact of COVID-19, but it is certainly happening. The reasons could be multiple, ranging from digital disruption, to OTT services, to non-traditional competition, but the current situation seems to have brought in an urgency to reimagine business models for telcos. At a time when connectivity is of utmost importance, if telcos remain simply as network providers, they’re losing out on tremendous opportunities that will be picked up by hyperscalers like Amazon and Google. The need of the hour – think like disruptors, get into spaces that were earlier ignored, and hack your way into a growth path. Case in point: JioMart

So, there you have it, folks. Those were the 10 key observations from our recent conversations with customers. If you are in the telecom space, let me know your thoughts in the comments section below, and add any points that I might have missed in this blog.

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