2018 Outlook: Traversing the digital wave

2018 Outlook: Traversing the digital wave

The Delta Perspective

Author:
Darren Tan - Intelligence Unit Senior Director

Digital challenges will continue to drive operators to transform. While some will achieve marginal success, many traditionalists will continue to struggle with the headwinds. Traditional revenue pools will continue to recede as operators’ digital initiatives are taking longer to materialize. Expect technological disruption to impact many aspects of the sector's evolution, primarily on continuous improvement on service delivery (experience) and the constantly evolving digital landscape.

Artificial Intelligence and Advanced Analytics
Artificial intelligence will be applied more broadly to revolutionise the way customer service is delivered and internal processes are managed. Expect AI to enhance service personalisation through offers and customer experience. Anticipate more automation and advanced analytics to drive significant benefits on operator’s top and bottom lines, thanks to better cross-selling opportunities and optimised offerings, as well as OPEX reduction through automation, improved efficiencies and elimination of redundancies.

AR/VR will accelerate mobile data traffic growth
With real-time social media services and video streaming usage at its high, we expect more social (and commercial) use cases of augmented and virtual realities to drive further data demand. We expect virtual and augmented reality and other real-time applications to outpace video demand, placing more demands on mobile networks. Unlike current video, VR/AR requires high bandwidth on a bidirectional basis, with low latency, and edge computing. Expect operators to adopt smarter capex deployment through deep network analytics to ensure appropriate network densification to enable this. An operator’s digital agility will be further tested to ensure base-case connectivity experience is sustained.

5G readiness – welcoming IoT opportunities
5G trials edging closer to the initial promises. Expect operators in China, Korea and Japan to lead the way through their 5G roadmaps and commercial use cases, especially the ones identified for the 2018 PyeongChang Winter Games in South Korea. With the recent 5G breakthrough by Qualcomm, operators will begin to outline their consumer and enterprise propositions, specifically use cases in IoT, Cloud, IDC and AI.

Recent field trials by Qualcomm on the highly debated 5G New Radio (NR) millimeter wave technology has underscored millimeter-wave bands as a key enabler for 5G. Expect more trials to establish viability of 5G as a true mobility standard, beyond just fixed wireless capabilities.

Digitally lean and agile
Telcos will continue to drive lean initiatives to increase productivity gains leading to higher earnings in light of continuous revenue erosion. While many are already operating at very high levels of productivity with limited upside, telcos could further assess their cost structures through the advancement of machine learning and automation capabilities to achieve better optimization results. Network optimization through physical infrastructure sharing will continue and further encouraged by regulators.

Revenue Diversification: Omnipresence Provider
Promising non-telecom revenues observed with Asian operators establishing digital omnipresence, such as SK Telecom’s popular T-map, e-commerce’s 11st and Axiata’s fintech ventures (i.e. JV with Merchantrade and Sri Lanka’s Colombo Trust Finance). Expect more operators to venture into a myriad of digital services, including video bundling, fintech, lifestyle propositions linked to home and simplicity. Albeit still marginal in comparison with current traditional telco revenues, an operator’s omnipresence can generate greater synergies and enhance overall customer experience through deep analytics and potential cross-selling opportunities. This will strengthen an operator’s challenge (and sustainability) against the onslaught of digital giants such as Amazon and Alibaba.

Specific on IoT opportunities, operators are expected to decide their degree of participation, i.e. as an enabler, reseller or a platform provider (e.g. Vodafone and Orange). Expect operators to establish collaboration with global IoT enablers in developing customised IoT platform architectures relevant to specific industrial verticals (e.g. aviation, industrial, manufacturing, agriculture). While IoT itself is an opportunity, such venture could result in serious reputational damage if the platform/ solutions’ security becomes compromised. Serious investment in this space is anticipated.  

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Delta Partners - TMD Advisory and Investment