Capping IT Off

Capping IT Off

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

Has the real competition only just begun?

As telcos look to transform the way they do business, among the trends in 2014 are greater consolidation coupled with network and system investment in order to deliver new services and cut future operational costs. Driving developments will be what Gartner calls the nexus of forces: Mobility, Social Media, Cloud and Information.
Certainly, the battle to take a bigger slice of consumer spend is leading to increased merger and acquisition (M&A) activity among operators looking for greater scale and the ability to provide multi-play services. Among significant deals in the past few months: French cable company Numericable agreed to buy SFR for 13.5 billion euros; Hutchison’s 3 Ireland was given regulatory approval to acquire O2 Ireland for 850 million euros (O2’s takeover of E-Plus in Germany also looks set to get clearance); Level 3 announced the purchase of TW Telecom for $5.7 billion; and Sprint is hopeful that its long-running attempts to buy T-Mobile for around $32 billion will be approved.
But greater scale might not be enough for some operators as OTT players eat into their core revenue streams. When it comes to messaging, for example, Informa Telecoms & Media forecasts global annual SMS revenues will fall from US$120 billion in 2013 to US$96.7 billion in 2018, due to greater use of OTT applications.

As a result, telcos are looking to develop new services and revenue streams. Investment in LTE networks has been significant in the first half of the year: According to the GSA, the number of operators with commercial LTE services reached 300 in June, and is expected to exceed 350 by the end of the year. Nextel launched LTE in Rio de Janeiro in the same month to boost coverage during the World Cup. 
Some are already moving to the next stage to provide greater speeds and higher–quality services in an attempt to attract or keep customers. The GSA says “at least 20% of operators” are investing in LTE-Advanced technologies, with Bouygues Telecom and Swisscom among the first European operators to launch, in June, and Netherlands operator KPN, EE in the UK and Orange in France set to follow. In addition, 62 operators are investing in Voice over LTE (VoLTE) to consolidate network operational costs and deliver premium services such as high-quality voice: eight operators in Asia and North America have commercially launched HD voice services using VoLTE, says the GSA.
Indeed, US telcos were among the first to launch VoLTE, with T-Mobile and AT&T leading the way. Analysts say telcos will look to use VoLTE to provide voice services over multiple mobile devices including tablets in future.
Social Media will also continue to be central to operators’ attempts to provide a better user experience, and that is sure to lead to more alliances with OTT players. Juniper Research estimates that telcos could generate revenues of 14.7 billion euros by 2018 from new service propositions and bundles delivered through partnerships with standalone OTT service providers. 
Among cloud-based trends going forward will be investment in areas such as storage and business and operational support systems (BSS/OSS). In June, Sprint struck a deal with ItsOn to provide cloud-based OSS/BSS services for its customers, a trend that will spread as operators look to cut costs for back-end operations and provide customers with more flexible and cost-effective services.
And when it comes to Gartner’s fourth driving “force”, Information, operators will look to real-time analytics to unlock and make full use of the Big Data residing in their systems. Acquiring new skills and technologies to thrive in the Big Data era will be high on the agenda in the coming months.
So in addition to more M&A activity in the second half of the year, look out for announcements around SMAC (Social Media, Mobility, Analytics, Cloud)

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Pierre Blanchard
Pierre Blanchard

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