It has been a challenging year and every line of business, in every part of the globe, has been impacted by the COVID-19 pandemic
While it’s easy to focus on just keeping business moving, it’s also important to recognise the vast opportunities there are now to make positive changes
For telcos, there’s never been a more crucial time to differentiate and improve their product offerings, if they are to remain relevant, win customers over and beat competition.
On the business side, telcos have seen revenue sources like roaming drop as B2B clients cut spending as their own revenues declined. That said, there have been other avenues for growth in consumer fixed and mobile connectivity, classic pay TV and fixed mobile convergence offerings. If businesses do continue to build on their product offerings, Kearney research found that in Western Europe, there’s room to grow revenues by about 25 per cent and in Eastern Europe, by 10 per cent.
Keeping up with the pace of change in a world – and industry – that is evolving faster than ever, is a challenge hard fought, but the past few months have shown just how resilient the industry really can be and just how many opportunities there can be to grow despite recent events.
The rise in digital reliance
According to data from Netscout, internet traffic jumped between 25-35 per cent on home broadband networks from mid-March, when lockdowns were beginning to be enforced around the globe. Schools and offices went virtual practically overnight, and people were having to stay connected with loved ones and family through online tools. Telcos had to take immediate action to manage the influx of use and keep services running smoothly whilst finding new ways to maintain customer satisfaction by offering value-added services. The crisis has proved just how crucial telco providers are to the functioning of our society, and there’s real opportunity for operators to build trust and loyalty from their customers and make up for their losses from business clients
That said, research has shown that though resilient, the past few months haven’t been all smooth sailing for the industry. Research from Quadient found that 33 per cent of UK consumers suffered from a bad internet connection during lockdown, and a similar number of home broadband (31%) mobile data customers (32%), have either switched their provider in the past year, or are planning to. This is a significant reminder of the negative impact of bad service, and why moving forward, telcos will need to think outside the box and deliver more than just discounted prices.
A connected consumer
The move to working from home is set to last, with over a third (37%) of employees planning to work from home on a regular basis once the crisis is over, according to the CIPD, which is almost 20% higher than those who did so before lockdowns began in the UK. The world of media and entertainment is also evolving as more and more of the general population relies on virtual services for leisure.
Although these shifts in attitude and behaviours aren’t new, the pandemic has accelerated change. Telcos have an opportunity here to adjust their cost structures in line with changing consumer wants and needs. They should seek to offer attractively priced bundles that incorporate mobile fixed and digital services which continue to gain popularity such as video-ondemand, music and online gaming.
Another area to not neglect is how consumers shop, particularly following COVID-19. Branded stores typically contribute between 5 to 6 per cent of the total operating costs for telcos, and in today’s environment where online transactions are proving more popular, there’s a clear need to scale back the store footprint. Although the bricks-and-mortar shop is far from disappearing completely, its role is changing and there’s less of a need for telcos to have a full portfolio of stores. Instead, they should reserve owned stores for value-added services which offer something different. At the same time, telcos should revamp their digital channels to ensure there’s less friction in the buyer’s journey and consumers are given a high-quality customer experience.
A growing competitive landscape
In the past 10 years, tech companies have been growing fast, generating significant market value creation. In fact, tech companies’ market cap has been growing rapidly at 28% CAGR – while telco recorded a much lower growth rate of 4% CAGR. It would be unwise to not recognise the potential growth in competition from digital players who are offering connectivity through their own networks or with support from a wholesale provider.
Kearney’s own research has shown that 48 per cent of consumers might prefer to buy telco services from hardware manufacturers, media providers or voice assistants in the future. This is more evident in consumers who have a higher use of, and spend on, digital services. It’s crucial therefore that telcos look to maintain consumer trustthat they offer the best value and most reliable services.
Whilst it’s been challenging for businesses everywhere, and the next few months and years to come will likely have its hurdles, COVID was a chance to reset, not because the pandemic changed so much consumer behaviour, but because of the built up need over time for valuable change. Now is the time for telcos to put the consumer front of mind and focus on customer service and value-added offerings.
About the Author
Täpp Jonatan Matsson is Partner and European Lead in the Communications, Media and Technology Practice at Kearney. As one of the original firms, we’ve never lost sight of the fact that consulting is a people business. A global partnership in more than 40 countries, our people make us who we are. We’re individuals with different passions and strengths who take as much joy in the work we do as from those we work with.
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