The telecom industry has remained in the spotlight throughout 2018, with constant news around the race to deploy a 5G network, mergers and acquisitions, the rise of mobile commerce, apps, privacy and more. It’s going to be very interesting to see what technologies are on the horizon in 2019. After years of planning, how will 5G deployments become a reality? With eSim making its market debut, will consumers finally have more ground to choose their operator at the drop of the dime? Finally, will the consolidation of Telco thru mergers and acquisitions become the new normal or more of an exception?
Here are my predictions for the industry over the next twelve months:
#1: MVNO or M&A: The Bears vs. the Bulls
2019 will see an acceleration of competing visions of the future of Telco (Network Bears vs. Network Bulls). The Network Bears are represented by MVNOs which have evolved from their humble prepaid origins to become thriving operators in their own right. The Network Bulls are the traditional Telco operators that are leading massive M&A efforts in order to build bigger vertically integrated networks.
What sets the two apart is a divergent vision of success in the modern digital age. For the Network Bears, the fundamental belief is that customer experience is the primary driver of loyalty and revenue. Whether wholly independent or backed by an operator, an MVNO’s business model is built on the principle that ownership of physical network infrastructure is irrelevant to success. For them, ownership of the front-end customer experience is where the real financial opportunity is located. Towers and networks are important, but only as a means for ensuring reliable connectivity for their customers.
Integral to the business model of most MVNOs is the ability to focus on niche markets or specialized offers. Freed from the costs of infrastructure maintenance, MVNOs can chart a path to profitability built entirely on customer experience and the loyalty that results. The outcome is a business model that is laser-focused on digital experience which they believe is ideally suited to today’s dynamic, rapidly evolving market.
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In fact, many large operators have joined this trend of customer-experience-first. Whether they’re doing it to better compete with smaller, more nimble competitors or to open new markets that their mother-brands can’t reach, the number of operator-backed digital sub-brands has been exploding around the globe. Which, for those Network Bears, is just one more proof-point that, for consumers, the experience trumps the network right down to the bottom-line.
The Network Bulls, however, see the world quite differently, as is manifest by the robust M&A activity that has recently been headlining the Telco press. Rather than shedding network assets and going all-in as virtual operators, they’ve been doing exactly the opposite. Whether through aggressive mergers and acquisitions, or sizable infrastructure investment, the Network Bulls are betting their P&Ls, and their futures, on a belief that the network-experience itself is crucial to success.
For Network Bulls, the physical infrastructure itself is the differentiator necessary for unlocking customer value. From towers and cables to servers to content, large operators don’t just want to borrow the assets they’re dependent upon, they want to own them. These Bulls believe that the core functionality of the network is inseparable from customer experience. At the heart of their business case is a very simple truth - if the network’s too slow or too unreliable for a customer to do what they want, no amount of great customer experience will overcome their dissatisfaction.
In this way, whereas the Bears compete on agility, the rapidly-consolidating network operators are choosing to compete on personalization that can only be achieved at scale. They believe that only when you own every piece of the customer’s experience can you offer them precisely what it is they want. Yes, a great app experience is, well, great. However, it’s the speed, reliability and accessibility of the network, not to mention the content that can be piped through it, that forms the foundation upon which success will be built.
Which vision will rule the market? Will it be the virtual operator using agility and personalization to offer compelling customer experiences or will it be the big carrier leveraging network investments to enable richer and more robust customer experiences? While it is unclear which side will become the industry norm, these dueling visions of customer experience mean that consumers will be the winners, no matter what.
#2: 5G Hype Bubble Will Inevitably Burst, Revealing the True Value of 5G
As operators battle each other to out-hype their consumer 5G offerings, the breathless mania will surely run into the hard reality of the consumer marketplace. The roll-out of next-generation capabilities will be lengthier than consumers expected, device manufacturers will be slow to adopt the standards, and a whole host of other challenges to 5G enthusiasm will surely arise.
While initially painful, this bursting of the hype bubble will provide the impetus necessary for operators to pivot away from today’s heavy focus on speed, coverage and price, and refocus their businesses on monetization opportunities for new and emerging technologies. By embracing innovation as a way to help pay for their substantial network investments in the near term, it will afford Telcos breathing room for the consumer ecosystem to catch-up and fully leverage the new capabilities that 5G will offer in the long run.
#3: eSim Will Arrive, Forcing Operators to Double-Down on Customer Experience
2019 will be the year that eSIM went mainstream. Apple let the proverbial genie out of the bottle with the launch of dual-SIM iPhones for niche markets, and it’s expected that they will make eSIM globally available in 2019. eSIM is unique because, unlike today where a consumer has to change their SIM card in order to switch carriers, eSIM makes switching mobile carriers as easy as opening an app.
For consumers, the potential benefits of this newfound power to switch carriers on a whim are apparent. Operators should expect greater pressure on pricing as competition is brought directly onto the phone and as mobile users have unprecedented freedom. They can choose between services and networks, and devices will have the intelligence to automatically and seamlessly switch to a network, either mobile or Wi-Fi, and accept an offer with the best performance and value at any moment in any location.
For operators, while the arrival of eSIM will surely weigh upon their stock valuations in the near term, it will also create huge new opportunities to monetize digital over the long haul. With consumers’ newfound freedom to churn on-demand, operators will unlock new ways to grab customers with innovative pricing, packaging, offers and experiences. As operators see the benefits of embracing innovation, it will create a virtuous cycle of revenue and experience that will drive improved stock performance for those willing to invest in change.