As the scope of competition for telcos goes beyond other telcos, the strategies need a complete makeover. Erik Almqvist, managing director goetzpartners Middle East on how regional telcos can thrive and develop into digital powerhouses with strong cost efficiencies.
As intensifying competition leads to stagnating ARPUs and declining EBITDAs, it is increasingly important for operators to be in the top tier of their market. Erik Almqvist, managing director, goetzpartners Middle East believes that with a clever combination of increased cost-efficiencies, effective and selective digitalisation, balanced regulation, and investment in connectivity focused adjacencies, operators can stand out as the new age powerhouses.
Almqvist says: “In the past twelve months we have assisted telcos on digital transformation, cost efficiency, e-government, technology and customer migration strategies, regulatory advice and post-merger integration. These cases are all about shaping the future, not fine tuning the past!”
“On the mobile side there is a race to become number one or two as most number three operators struggle and eventually may not survive,” Almqvist says. “This is the reason we see intensifying steps of consolidation, both among operators and on the network asset side.”
OTT players were recently painted as the bogey man of the industry but most operators today realise that although they gradually destroy the voice business they are also perhaps the most important drivers of data demand. Data demand is of course a mixed blessing as it tends to drive capex faster than revenues which accentuates the need for efficiency but also the need for the right pricing models.
On the regulatory side we see a divergent region where some nations seem to have struck the right balance between regulation and incentives to invest, but there is still a long way to go to get this mix right in many regional economies. For example, there has been an over-tendency in the past for early taxation. Almqvist says this can prove to be detrimental for the economic growth, as evidenced in the past, by the European economies which took more than a decade to recover from the effects of exorbitant licence fees following the introduction of 3G.
He explains how high charges in the initial stages of telecom infrastructure investments dissuades operators from high quality investments or ends up transferring the burden to consumers who are forced to pay higher amounts to use the services. In both the ways, consumption is affected, and as a result, there’s hardly any scope for the economy to grow.
Almqvist suggests the best way through is to adopt late-stage taxation, for example, VAT, wherein taxes are imposed only at the point of consumption of a particular product or service, and not before or during their production.