Should CSP's be afraid?

Luke Taylor
Author: Luke Taylor CCO & Deputy CEO
Date: 18th July 2017
Categories: Technology, Data, Financial, Telecoms, Revenue Assurance, Fraud protection, Optimus, Neural Technologies, Big Data, Revenue Management, Digital Transformation, Digital Integration

The Telecommunications industry is going through some significant changes... what does it mean for the CSP's survival... While consumers view these changes as positive evolutionary steps to a more connected world, CSPs are uneasy, with survival on their mind.

The number of unique mobile subscribers globally is on course to surpass 5 billion this year. In other words, nearly three quarters of Earth’s population will be subscribed to a mobile service. Mobile telephony’s unique power lies in its ability to touch people and change lives through enabling communications, financial inclusion, improved healthcare, increased security and more. For vast swathes of the Earth, Telecommunications has changed the way we live, while our children have not known anything different than our connected world.  Infants play on tablets, children browse on smartphones before reaching adolescents and teenagers are creating websites and driving content on the go across mobile networks. Social media and instant messaging has become a major factor in  our children’s development while in more developing regions the benefits are more fundamental -increased GDP for countries that instigate innovation, entrepreneurship and business.

 The number of unique mobile subscribers globally is on course to surpass 5 billion this year.

When we hear ‘Mobile Telecoms’, what first comes to mind?  I asked a handful of people from different ages in my social circle.  The responses ranged from Apple, Google, Facebook, Snapchat, Pokemon Go, Whatsapp.  Many of these are OTT providers (Over the Top providers) that merely utilise the telecommunications infrastructure.  I only got a handful ofresponses that identified actual Communication Service Providers…  This is quite staggering when we consider all the advertising undertaken by the CSP’s on TV, social media, within sport sponsorship, etc. It appears the ‘person on the street’ now takes the CSP for granted, which only heightens the recent concerns around  CSP’s eventually becoming a utility…

Global Digital Snapshot

Would it be a bad thing if a CSP became only a utility?  Would this affect the consumer?  To be honest I do not know, but if CSP’s do not have a longer-term strategy for where they see themselves in 3 years’ time, then they will probably fail.

Mobile phones is at 70% global penetration

We should examine some of the data behind the gloss and sheen of shiny handsets, virtual reality concepts, empowering applications and mobile interaction.  The GSMA have recently published a report, The Mobile Economy 2017, while Hootsuite has also undertaken research in this area.  These reports contain a number of telling charts and infographics that show the steady growth of mobile phone users over the last 10 years. Let’s hark back to that truly amazing statistic on mobile service subscribers – out of 7.4 billion people globally, nearly 5 billion have a mobile handset… that’s nearly 70% global penetration. This statistic becomes even more outstanding when we consider that around 25% of the population is estimated to be between 0-14 years old; the saturation and reach of mobile phone usage has grown exponentially since inception.   

unique subscribers by region

This growth can be seen with the evolution of mobile usage too -In the beginning,  mobile phones were a dedicated verbal communication device before eventually progressing to SMS and MMS before this fully evolved into instant messaging providing immediate social chat.

As well as this, our devices offer us video streaming, mobile finance, integrated cameras and other lifestyle supporting apps that have made the mobile handset more important than your purse or wallet

On top of all these technological advances we see that actual transactions, events and data usages has grown exponentially, as demonstrated by the table below.

GLobal mobile data growth

Now you’d be forgiven for thinking that with all this growth the telecommunications industry would see big increases in revenues. What has happened to the hard dollars, the cash in the bank?

Mobile revenue growth outlook remains modest at best….

Total mobile revenues peaked at $1.05 trillion in 2016 which is up just over 2% on 2015’s total. Even though this technically marks the second consecutive year of rising revenue growth, the rate is so insubstantial it is hard to get excited.

Developing markets saw a notable improvement in growth rates and markets such as China and India posted encouraging growth rates on average. However, the outlook and projections moving forward remain mixed. Increasing competition, regulatory intervention and subscriber saturation are seriously affecting revenue growth projections.

ARPU & total mobile revenue

Interestingly, CSP’s have invested just over $1.2 trillion in capex since 2010.  Global mobile CAPEX levels peaked in 2015, but fell by 6% in 2016. It is projected that CAPEX levels will continue to decline (but at a slower rate) before potentially bouncing back in three-years time as CSP’s in advanced telecoms markets invest in the infrastructure to support 5G.

Mobile capex forecasts

To sustain data growth, global operator CAPEX investments in mobile networks is forecast to exceed $1.7 trillion (USD) from 2012 to 2020. As revenue figures and CAPEX get steadily closer and profits are squeezed tighter and tighter, the natural path for CSPs will be more consolidation to ensure less competition and drive up revenues. 

CAPEX investments in mobile networks is forecast to exceed $1.7 trillion (USD) 

The coming years will be challenging for the CSP’s as they watch the OTT players such as Google, Facebook, Netflix, Amazon, WhatsApp continue to increase customer base, services and offering and revenues.

CSP’s need to be afraid and very aware that every cent they can save will count toward tightening profitability and survival.  The push towards revenue management and optimised processes, systems and technologies will be critical.

The next 3 years will see some changes in the industry. There has to be or the writing will be on the wall for some of the less competitive CSP’s – before they know it they will be eaten up by the hungry more strategically aware players in the industry.