As voice and SMS streams decline, telecom operators are increasingly looking for revenue through OTT and data services. What revenue sources will emerge in the near future, and which ones will be phased out altogether?
Like in any industry, trends come and go, and once-surefire sources of revenue gradually die out. The telecoms industry is in such a current transition, with certain cornerstone services that were seen as revolutionary several years ago now becoming increasingly less used. The rise of over the top (OTT) providers, cloud services and the colossal increase in data consumption has left the industry at a crossroads. Telco providers who fail to embrace this shift will likely fall by the wayside, while the importance of leveraging fresh partnerships cannot be understated.
“The industry is going through a transformation that is changing the dynamics of the service provider and operator, and how they compete and position themselves in the value chain,” says Gamal Hegazi, Regional CTO and technical lead, Alcatel-Lucent and Chair of Technology, FTTH MENA. “The Internet and OTT have created a data storm that operators are trying to catch up with in order to provide adequate capacity and better consumer experience. Also, voice and messaging are now under more pressure from OTT applications that are utilising the Internet and data to bypass traditional voice and messaging SMS applications.”
Andrew Hanna, Chief Commercial Officer, Viva Bahrain, is in no doubt that the rise of mobility is an unavoidable disruptor in the field. “The increase in the volume of devices and data – along with innovative and exciting applications of mobile technology – are driving new revenue opportunities for the companies that are ready to embrace change,” he says. “First and foremost, I believe we can’t ignore the opportunities that exist from data and broadband and the convergence of the usage from larger screens onto smaller mobile screens which is certainly an area of growth globally.”
Although voice and SMS may be under threat, that is not to say they are becoming redundant. Reinvention of the services, as well as looking for other new streams, is a way to turn a potential threat into an opportunity. “It is hard to predict what services will be phased out, but it is fair to say that SMS and voice are under considerable pressure and they have to be re-invented,” Hegazi adds. “Data remains king, but its economic value depends on how much the operators can capture and retain from the OTT domain. Continuous investments are to be made to keep up with the data tsunami but the re-commercialisation and re-bundling and packaging of traditional service like voice and SMS are essential to keep the revenue stream sustained.”
One particular sector that a range of Middle Eastern countries are seeking to exploit is banking and financial services. With a range of financial centres in the Middle East recovering in the midst of the financial crash, the likes of Dubai International Financial Centre and King Abdullah Financial District are dependent on high quality telecoms services that ensure their businesses can run around the clock. Mahmud Awad, Chief Business Officer, Vodafone Qatar, sees a range of continuing opportunities in the sector for big telco players.
“Although invisible to the public, telecom solutions probably have the biggest impact on the financial sector,”he says. “It is only through telecom services that financial institutions are now able to connect with their own branches in or outside the country, and with other institutions worldwide. Telecom solutions provide security, connectivity, backup and disaster recovery facilities, without which none of current financial institutions are able to grow and expand.”
However, Awad believes that the real value of telecom services can now be found in security solutions. Tying in with the need for 24/7 communication in the BFSI sector is the need for watertight security, and this applies for any vertical where cash or private data is at stake. The search for the right solutions is sure to spur a range of competition and new services in the space. “Security is the most popular telecom trend now,” Awad says. “Years back, it was connectivity, with the need to be connected with all destinations, but security is now the most important element, especially with the increasing number of cyber-attacks worldwide.”
One revenue stream that will have to be accounted for in coming five years is the Internet of Things (IoT). With billions of connected devices set to spread across both homes and the enterprise, the IoT, if approached with the right strategies, presents a great opportunity for the telco industry. However, it still remains something of an unknown, with operators still exploring the right channels and models that will best serve the market. The main challenges are making the jump from machine-to-machine communication up to a fully integrated Smart City, and at the same time competing with OTT services to ensure that their services are not bypassed.
”There are numerous new models like M2M, Smart Cities, Smart home, telematics and digital media distribution that provide potential for new services to consumers and subscribers,” Hegazi says. “Also, various vertical applications in the realm of M2M can be provided in B2B or B2B2C types of models to create new revenue streams to add in the top line of operators, and change their position in the value chain.”
In the same vein as the IoT, the quantities of data requiring analysis will dictate a new demand for faster telecoms services. Big Data arguably has the potential to be the biggest game-changer for the enterprise in the ‘third platform’ of IT, and with businesses everywhere seeking the hidden details that can make the difference, new revenue streams are sure to open.
“Companies have an opportunity to think laterally when it comes to areas like Big Data; aiming to find ways to process and analyse large amounts of customer data quickly and in real-time in order to engage with customers effectively,” Hanna says. “By analysing varied and unformatted digital data from digital channels like social media and through mobile phones, there is an opportunity for new sources of business economic value to be revealed and provide fresh insights into customer behaviour.”
Hanna concludes by admitting that a great number of unknowns remain in the industry, which leaves the door open for a range of players to capitalise on fresh opportunities. “The great thing about our industry is its sense of unpredictability,” he says. “Whilst we can make assumptions on what is declining or about to decline, I truly believe there are opportunities coming up in the next 18-24 months that haven’t been created or commercialised yet. That’s the exciting part. To be able to look at what is happening and what may happen with a keen eye on the changing behaviours of the customer.”
