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Telecoms delayering: Successfully navigating the journey to ServCo and NetCo

Marco Pizzo
May 6, 2024

The telecoms industry has undergone significant disruption in recent years, evolving from traditional, vertically integrated giants to companies dedicated to specific market segments. This delayering approach allows each organization to focus on its core competencies, enabling them to improve efficiency and service quality, while also attracting capital from large asset management companies.

Callout: A look at Telecoms segment players

ServCo the service provider: Concentrates on customer experience, marketing, and service delivery.

NetCo, the network provider: Specializes in managing and optimizing the network infrastructure.
FiberCo: Focuses on expanding and maintaining the fiber-optic network.
TowerCo: Specializes in tower infrastructure management.

While the separation of Tower companies is a process that started years ago, the delayering of the Network organization and the Service organization is still in its infancy. This process is incredibly complex and requires a strong vision, effective planning, well-defined platforms evolution/consolidation, and robust governance.

Figure 1: Telecoms evolution

Defining the delayering journey

When separating the NetCo and ServCo, financials and contract terms usually lead and define the short-term plan. However, decisions should be based also on long-term considerations for people, technology and processes.

Ultimately, the goal is to enable the ServCo to compete in a fast-moving digital world, where connectivity is often perceived as a commodity. Meanwhile, for NetCos, they must reassess how they deliver and oversee network services in order to make the catalog accessible to diverse ServCo clients over the long term.

Delayering can be a complex and often lengthy process. For example, Denmark announced the split of TDC (NetCo) and Nuuday (ServCo) in 2018. However, as of today the separation remains incomplete, and the evolution and stabilization of the tech platforms are still in progress.  

Advancing the NetCo: Operating the network as a platform

One of the biggest opportunities of delayering is the simplification and decommissioning of old or redundant platforms. These systems tend to be costly to manage and can often hinder innovation.

For example, as NetCos move to a business model with only a few clients, they can massively simplify existing ERP, CRM and billing platforms. At the same time, they will have to work hard on two long-term goals:

  1. Network as a Service: Offering services from the network to various ServCo organizations. Cloudification of the network is a relevant step in this journey.
  2. Autonomous networks: Leverage automation and AI to modernize the network. This is a critical step towards reducing complexity and costs, as well as improving time to market.

To advance the evolution of the NetCo, it’s essential to consider the network as a platform—a dynamic ecosystem of capabilities that the NetCo can offer to various clients. This represents the next phase in the evolution of the Network as a Platform.

Creating the ServCo: The journey to digital marketing company

Now let’s look at ServCo evolution. Because these organizations are operating as digital marketing companies, ServCos need a well-functioning digital customer engagement platform. Their approach will depend on whether they intend to focus on the consumer or B2B segment. Options include:

  • Extending the catalog for consumers and/or focusing on high end customers 
  • Developing the B2B market to cover most IT and communication needs
  • Reinventing the business as a tech company, creating an ecosystem (platform model) and/or continuing to be an aggregation of partners 

Historically, ServCos have been struggling with their monetization approaches beyond core services. Their new configuration will require them to adapt platforms and business models to organize around these strategic decisions.

From the outset, there’s a clear need for a more efficient and agile BSS, widespread integration of AI, and a concentrated effort on southbound integrations for order management, service assurance, and trouble ticketing directed towards NetCo. The strategic focus should be on services exposure and robust API layers to facilitate the seamless collaboration of both companies.

A technical journey underscored by a cultural shift

Both NetCos and ServCos will also need to rethink the cultural shift required to manage the evolution of the competences, as well as their new market positioning and brand. While often overlooked, this is a critical element for attracting talent that will help them be more digital and innovative and the key to elevating their positioning in the market. Both segments will need to become more marketing oriented to attract customers, talents and capitals.

A pivotal shift: Defining the future as NetCo and ServCo

The integration between NetCo and ServCo is robust, marked by broad and deep links and dependencies. Collaboration between the companies is imperative across various agreement layers, encompassing aspects such as the wholesale product model, bundling, ordering/activation/provisioning principles, pricing structures, SLAs, API strategy, and ownership of service platforms.

This process is dependent on the specific separation approach. For example, in some cases the mobile RAN is going to stay with the ServCo, while in other cases will stay with the NetCo. In the former, separation of the fixed part only, is easier.

For example in 2017, BT separated its fixed network asset in Openreach, while in Denmark the TDC split into two companies, TDC NET and Nuuday resulted in TDC NET becoming Denmark’s largest mobile network/broadband provider, focusing on building the country’s infrastructure, and Nuuday becoming Denmark’s largest provider of broadband, communications, and entertainment services.

The delayering of network and service organizations signifies a pivotal shift for the Telecoms industry. As this complex journey unfolds, a clear vision, meticulous planning, and robust governance will be instrumental in navigating the evolving landscape and ensuring the success of these transformative initiatives.

Are you ready to begin your delayering journey? Capgemini is deeply experienced in helping Telecoms companies develop and execute a delayering plan that includes both the business and tech strategy. Contact us today to learn more.

TelcoInsights is a series of posts about the latest trends and opportunities in the telecommunications industry – powered by a community of global industry experts and thought leaders.


Marco Pizzo

Telco, Media and Tech Account Manager – Telco Generative AI Lead
Marco Pizzo is a leader with more than 20 years of tech and business transformation experience at the global level. In his role as a senior director, he proposes transformation program to Telco, Media and Tech companies. He also leads the Generative AI offering in these industries. He leverages experience gained in different roles and businesses to identify solutions to business problems.