Building new businesses: Why telcos should focus their strategic way forward, beyond connectivity

By Niroshana De Silva 

The biggest impact that the COVID-19 crisis has had so far on the telecom industry has been that the industry has become ever more central to how modern society operates. Think about how many people had the need to work from home, learn from home and log into the system. Videoconferencing has been booming; file-sharing has been booming. Most importantly how will the Gen Z lifestyle be in the years to come? For example, Super Apps offers a range of services and have gained a substantial following and daily regular users. 

In this new normal situation, individuals and businesses are looking at improving digital experiences by investing in “phygital” (physical + digital) and organisations putting consumer trust at the heart of all they do. Today, consumers having reached high levels of digital penetration in most regions and industries, the acceleration into digital channels now seems emerging. The industries are most vulnerable to the loss of digital consumers maybe those that saw the biggest gains in digital adoption during the pandemic.

Digital Outlook Sri Lanka 

Sri Lanka’s total population was 21.54 million in January 2022 and the country has around 5.8 million households. Data show that Sri Lanka’s population increased by 81,000 (+0.4%) between 2021 and 2022. There were 11.34 million internet users in Sri Lanka in January 2022. Sri Lanka’s internet penetration rate stood at 52.6% of the total population at the start of 2022. However, issues relating to COVID-19 continue to impact the internet adoption, so actual internet user figures may be higher than these published numbers. There were 8.20 million social media users in Sri Lanka in January 2022. The number of social media users in Sri Lanka at the start of 2022 was equivalent to 38.1% of the total population. 

Mobile connections in Sri Lanka in 2022 – Data from GSMA Intelligence shows that there were 32.29 million cellular mobile connections in Sri Lanka at the start of 2022. However, note that many people around the world make use of more than one mobile connection – for example, they might have one connection for personal use, and another one for work – so it’s not unusual for mobile connection figures to significantly exceed figures for total population. GSMA Intelligence’s numbers indicate that mobile connections in Sri Lanka were equivalent to 149.9% of the total population in January 2022. The number of mobile connections in Sri Lanka increased by 1.0 million (+3.2%) between 2021 and 2022. (Digital 2022: Sri Lanka – datareportal.com)

The average frequency of online purchases – 46% of the Internet users have stated that they make online purchases occasionally, while 17% stated that they make online purchases at least once a month. When it comes to the most-purchased products online, 43% of the internet users have stated that they purchase electronic devices and accessories online, while 26% purchase clothes online and 19% purchase personal care and beauty products online. In metro regions, food and beverages and grocery purchases have climbed over 40%. (Digital Outlook Sri Lanka 2022 – Annual Market Insight Report)

Demand for digital platforms 

E-commerce, ride-hailing, delivery, fintech platform services have enormous potential to reach a wider audience and build engagement. Moreover, today’s tools and software make it much easier to develop digital services. Sri Lankan consumers have been gradually adopting digital platforms. This is evident through the increased mobile penetration in the country, increasing smartphone and internet usage, and increased number of consumers carrying out transactions via digital channels. Platforms run on a microservices architecture which makes them highly scalable and adaptable. 

Moving for lifestyle services 

From a lifestyle perspective, telco companies should not restrict themselves only to their core business which is connectivity. Since the telcos have access to the critical mass of the transforming society, companies should look into launching new ventures beyond connectivity that solves problems and addresses needs in people’s day to day lifestyles. Sectors such as commerce and entertainment represent fully-integrated examples, but much more work has to be done to popularise these services in education and healthcare. 

The education sector requires content that is not just engaging, but retentive; and healthcare users require high-quality solutions that are accurate to the minutest degree. Not only in the consumer end, but even the B2B segment is looking forward to transforming itself to an online marketplace environment. For example, an integrated B2B marketplace will be able to transform the procurement systems enabling to creation of powerful benefits for buyers as well as sellers. 

Capital investments over core infrastructure 

Despite the never-ending huge capital investments made by telecom operators – irrespective of fixed (fibre) or mobile (3G, 4G and 5G) technologies – to keep pace with successive waves of new technology over the past decade, their core business has become increasingly commoditised and growth has slowed while demand for usage increased. This demand increased due to the fact that most of the value created in the industry has been captured by players manufacturing handsets, developing apps, building infrastructure, or providing streaming or other digital services. This is probably because telcos do not want to lose the ground to bandwidth-hungry performance-driven digital services like Netflix, Amazon, Facebook and Apple. 

Untapped potential

The core business of telcos still has many opportunities to capture underserved customer segments in any country. In parallel, operators are eagerly waiting to invest and launch new business models by unlocking the value of 5G technology. With implementing the 5G ecosystem, many operators are also seeking to establish new businesses that reach beyond connectivity, which this topic discusses.

Data and insights for non-core services 

This transformed market gives operators the chance to deploy several important assets in the building of new, non-core businesses. Their established customer base gives them a broad range of data such as call history, app usage, data consumption and payment history for millions of customers and often for entire households. That data and the accompanying customer relationships often stretch back years, as many customers tend to remain loyal to a single operator. The result is rich information on which to build accurate consumer profiles, behavioural predictions, and thousands of microsegments, boosting targeted marketing efforts and decreasing customer acquisition costs.

Assets to leverage on non-core services 

Telco operators’ established distribution channels such as dealerships, owned branches, customer touchpoints, e-commerce channels and other digital services partners give an edge over any other player to enter into non-core areas. These assets, distribution channels and brands will stand telcos in good stead, particularly when bringing new services to market.

Driving new opportunities 

Two shifts in the industry are facilitating telcos’ expansion into new business areas beyond connectivity.

n GloCal market structure. One of the key advantages enjoyed by tech companies has been their reach. Netflix, for example, can be streamed in more than 190 countries and in local context PEOTV and Dialog ViU has the capability to facilitate entertainment and content services. Also Uber provides ride-hailing services in more than 70 countries, and within the local context, PickMe is doing very well on par with global trends. ‘SLT Muve’ ride-hailing platform launch was a good example of telco giants’ initiative to dig into this lifestyle services domain, but nurturing the services with a sustainable approach is the most important fact. 

In comparison, operators’ market reach has been more limited given the necessary infrastructure and investments. Today, however, as the market for digital services matures, more companies are emerging that offer alternative or additional services to those offered by the global giants, catering to local tastes and preferences. Regionally or locally-focused super apps are able to offer a range of services and have gained a substantial following with GloCal (Global-Local) approach. 

n Technological know-how. For many years, telcos had their pick of the top technical talent required to build innovative solutions. However, technological know-how should no longer be a barrier to operators wanting to build new digital businesses. Outstanding talent is of course still in high demand and cutting-edge innovation depends upon it. A handful of developers can build and release an app in a matter of months; a task that might otherwise have required far larger teams featuring the very best technical talent.

Building new businesses 

Against this backdrop, we see companies building three main types of new, non-core businesses.

n Data analytics businesses: Some companies are leveraging their data from customer interactions to offer big data services, business insights, and data consultancy services to corporate clients. Customer data with telcos helps retailers understand the duration and frequency of physical and online store visits, or helps government departments to plan road traffic controls. Whether the customer data opt-in or not, some behavioural data is required to analyse to enable the digital transformation or the societal transformation. 

Building a large data analytics business can serve various customers, including those in retail, banking, and even telecom. How data supports fintech industry matters on the efforts put in place to improve the financial literacy of ordinary people which directly impacts the national economy. Product offerings include geolocation insights, predictive analytics, predictive customer insights, and credit scoring. These are true digital lifestyle product offerings to the end consumer. 

n Ecosystem businesses: Some telco companies are building portfolios of digital service businesses that not only drive new revenue but also reinforce the core business. These ecosystems include digital services portfolio, Fintech and e-Wallet services like mCash and eZcash leading payment platforms in Sri Lanka, and Chinese WeChat, Daraz in South Asia. These, like super apps have enormous potential to serve as gateways for other services and third-party apps / services such as news, entertainment, mCommerce, software and gaming. Operators are able to leverage their data analytics platforms to make an ecosystem play across gaming, media streaming, and loyalty points, etc.

n Marketplace businesses: Marketplace businesses are either e-commerce trading platforms that earn the telco revenue from goods it sources and sells itself or in partnership with retailers, or from the commission it earns on transactions. Marketplace can have multiple categories of goods accounting a major share of total annual revenue of telcos. These telcos can also have a core offering by providing special discounts and benefits to telco subscribers, such as giving a chance to play with their monthly billing cycle with a loyalty scheme.

(The writer is a Chartered Marketer, Founder, PR, Corporate Communications, and Brand Management Professional. You can reach him on [email protected].)