It will be another turbulent year for UK and Irish telcos, and the pressure is on to demonstrate ROI on recent years’ capital investments, which have been largely fibre and 5G related, to your shareholders. Inflationary pressures mean increased costs for more than 22 million customers, resulting in disruption and change as consumers reassess their options.
With market share up for grabs and unprecedented changes within the industry, providers who can successfully execute to drive new revenue streams, differentiate their services through customer experience and scale AI throughout their operations to create new efficiencies will be the clear front runners.
I’ve outlined the top trends in 2024 and how Communications Service Providers (CSPs) can best execute them to deliver returns to shareholders and best-in-class customer service.
AI is the Way Forward – Experiment, Then Rapidly Scale
Telcos of all sizes are exploring AI and automation use cases, with many running ‘lighthouse’ projects and trying to determine where these technologies can drive the most value.
Despite the push from others to go straight to commercialised, full-scale AI, I think 2024 will still be a year of experimentation and then rapid deployment to industrialisation. Many operators are starting trials to see which use cases take flight and can be implemented at scale. Key focus areas include customer service chatbots, network optimisation, and predictive maintenance.
Telcos will be seeking ways to manage and coordinate the various AI applications across their business. Those who can build an effective AI foundation and scale key use cases stand to gain a competitive advantage through improved efficiency, lower costs, and enhanced customer experience.
However, despite the hype around generative AI and other machine learning applications, telcos should be cautious. The key to success is having the right data sources and configuration in place otherwise problems will emerge quickly.
Above and Beyond Faster Connectivity
Faced with questions about how telecom operators can monetise their networks and an economic environment where funding is harder to secure, many telcos want to diversify their income streams. For some, this means making a step change from telecoms into tech, becoming the new one-stop shop, and growing consumer revenue; for others, it means doubling down on business-to-business (B2B) sales commitment.
In October 2023, we saw one CSP launch a new online marketplace which included consumer electronics, gaming, home security, and insurance.[i] Working with a whole ecosystem of partners, the desire to scale its offering beyond connectivity reveals a wider trend in how telcos will approach 2024. Doubling down on customer service and convenience as a means of differentiation.
Many telcos have invested heavily in the B2B side of their business, and despite certain players dominating the space, established challengers have started to see the returns on their investments. So, expect these challengers to remain focused on this strategy, while other major CSPs make similar pivots as they make profitability an organisational priority.
The Altnet Market Draws Closer Together
As we predicted in last year’s blog, the altnet market is beginning to consolidate.
For example, we saw nexfibre acquire altnet Upp after just two years of life and £1bn in funding.[ii] However, their situation is less stable than it was this time last year. Easily available startup capital is over and the financial stability of many smaller altnets is in question – leaving them open to acquisition, so expect mergers and acquisitions (M&A) to flourish.
On the other hand, larger altnet players will look to aggressively boost rapid customer growth, underpinned by the value of great customer experience (CX) and transparency as key differentiators.[iii] The altnet market might be contracting, but some firms may be in line to become full-scale challenger telcos in future – if they’re able to get their customer propositions right and optimise their cost base.
Telcos Transform Their Cost Bases
Having made big investments in 5G infrastructure, telcos are now facing the prospect of scaling back these investments and focusing on ways to optimise their cost base. With projects underway to transform their budget sheets – and network infrastructure as the largest cost – telcos will look to consolidate this spending and invest where it makes the most difference. So, expect to see telcos driving the optimisation of their workforces with the help of AI.
Energy is a key pain point– beyond just its impact on emissions and sustainability. There is much to be gained by understanding where energy consumption can be improved in networks and device connectivity.
Vodafone And Three Join Forces
The merger between Vodafone and Three in the UK was officially announced in June 2023.[iv] Since then, the joint venture has been mired in Parliament debates, European Commission reviews, and other challenges to its passage. However, I predict we’ll see this merger approved over the coming months.
Combining Vodafone’s B2B expertise and Three’s brand penetration among consumers will create a powerful joint entity. This will shake up market dynamics and give it a shot in the arm. Its promised £11bn investment in the UK’s standalone 5G network over 10 years aims to deliver £5bn annually in economic benefits by 2030.
Creating a third operator with scale could help level the competitive landscape and provide choice to consumers – but the market is tight and smaller Mobile Virtual Network Operators (MVNOs) may be looking at this market shake-up with apprehension. This move could add pressure to the other concerns that smaller telecoms market players face now.
Practical Advice for Telcos
If you’re looking for ways to navigate these market trends in 2024, here are five areas for you to execute on:
- Find New Revenue Streams. Grow your revenue beyond basic connectivity services by building partnerships to offer digital solutions. For example, a marketplace allowing consumers to purchase value-added products or expanding IoT and private networks for enterprises requiring low-latency edge access.
- Optimise Your Costs. Reduce operating expenditure by consolidating and modernising legacy infrastructure, optimise your workforce and prioritise energy efficiency across your networks through technologies like AI-driven predictive maintenance.
- Focus on Customer Experience (CX). With the marketplace as tight as it is, winning new customers means your CX must be seamless. More importantly, however, great CX is key to maintaining loyalty. After all, it’s cheaper to retain a client than to attract a new one.
- Establish Data Strategy Before AI. Appealing as it is, AI alone won’t solve every challenge. Implement proper data governance and structure first, which will then enable advanced analytics. Without the foundations, clean, organised, maintained, and structured data, the AI won’t yield desired outcomes.
- Re-define Network Capabilities. Operators are starting to introduce cloud technology into the telecoms space – notably, with the advent of telco cloud. The next step is to automate your telco cloud set-up to be more agile, responsive, and cost-efficient.
How Can We Help?
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As a trusted global innovator, NTT DATA employs over 140,000 people in over 80 countries. Leveraging information technology to create new paradigms and values that contribute to a more affluent and harmonious society. We support our clients in their digital transformation journeys through our portfolio of consulting, applications, infrastructure, business processes, IT modernisation and managed services, to deliver measurable business impact. Innovation is at the heart of our business, and we continue to explore advanced technologies, bringing to market pioneering ideas that respond to shifting customer needs.
To find out how we can help you optimise your costs, find new revenue streams, and manage your data and AI implementations, get in touch with us today.
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[III] Telecoms.com – UK altnet Hyperoptic gets a new tech boss
[IV] Vodafone News Centre – Merger of Vodafone UK and Three UK to create one of Europe's leading 5G networks