Telco 1.5: operators are falling behind in the transformation stakes

STL Partners has announced what it calls “the first benchmark of future telecoms business models”. The idea is to tot up how far a selection of telcos has progressed from a business transformation point of view towards what STL Partners defines as Telco 2.0.

The 2.0 telco is an innovation-led platform and production player rather than an engineering-led infrastructure business. That’s not to say that infrastructure and engineering will no longer be important, rather that the business focus will be on customers and services and underpinned by the nuts and bolts, not defined by them.

The Telco 2.0 Initiative sees this transformation as an imperative since it will be the route to new sources of revenue as the old sources - voice and messaging in the main - get chipped away: Telco 2.0 is about finding growth again with a revamped business approach and STL partners believes that establishing new business models could eventually account for around half of a telo’s enterprise value.

The problem is that there are few signs yet that the transformation is happening within many telcos. Globally only Telefonica and SingTel (Singapore Telecom) have made respectable progress, it says, considering the rush. Others, such as AT&T and Verizon as well as Middle Eastern CSP, Ooredoo are at an earlier stage of the transformation journey.

Figure 1 - Telco 2.0 Transformation Index Summary Scores

Telefonica, for instance, has been active on a range of fronts to advance telco business models. It is a major backer of the Firefox OS initiative which aims to develop an open, web-based smartphone operating system in contradistinction to the relatively closed native operating systems which currently hold sway. As such it should enable telcos to play a more profitable role in mobile commerce. Launched at last year’s Mobile World Congress we expect to see progress announced at the MWC upcoming in a few weeks’ time.

Telefonica has also established Telefonica Digital to explore app-based and IP services. Services that should compete directly with ‘over-the-top’ services from third parties,

But it’s not just “about CSPs launching a handful of ‘digital services’,” says Chris Barraclough, Telco 2.0’s Chief Strategist. “Transformation needs to be company-wide covering both ‘hard’ factors, such as organisation structures and business metrics, but also ‘soft’ ones, including business processes, partnerships and culture.

The Telco 2.0 Transformation Index covers all this in depth and provides strategic guidance on the process of change in the telecoms industry.”

STL Partners believes that all CSPs should be aiming to score 75 per cent or more on the Telco 2.0 Transformation Index to give themselves a good chance of enjoying successful growth in the future. However, even SingTel (scoring 60 per cent) and Telefonica (scoring 57 per cent) and deemed to be leaders in this space are still progressing too slowly.

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