The telecom industry has recently emerged from an inflection point. Dizzying rates of digital adoption, ecommerce usage, and changing ways of doing work are rapidly reshaping the future of telecom services. Margins are growing thinner, cost of data transfer is plunging, and purchase of communication services is shifting to direct channels.

This has compelled telcos to rethink their sales and distribution (S&D) strategies. While disintermediation and rollout of direct channels like mobile and web apps have helped telcos regain profitability, their S&D approaches are yet to find alignment with the changing rules of the game.

S&D in the evolving playfield of telecom

In the 2000s, telecom players were not only the providers of prime networking services, but were also looked upon by device manufacturers as key distribution channels. Network services drove the sales of mobile phones, and buyers were still willing to pay for “talk time” and SMSes.

Today, however, manufacturers have largely reclaimed device sales, and network services are no longer the reason why customers purchase handsets. On the other hand, network services are purchased in order to consume other services on smartphones and other devices. Connectivity, while crucial, is taken for granted – Gen-Z perceives 100 Mbps as a basic necessity, thereby placing network services at the lowest tier of Maslow’s hierarchy.

In other words, the nexus of power has shifted away from the network operators. A single hurdle in buying can detract a customer and lead them to a competitor. Clearly, the purpose of telcos has evolved – to adapt to this new purpose, their sales and distribution strategies must demonstrate cognizance of this new reality.

So, what’s shaping this new reality? Take a look at these four broad factors.

Demographic factors

Digital literacy

While global digital literacy levels have climbed (for instance, at 89% in the USA), they remain significantly lower in some countries of Africa, South America, and APAC.

Impact:

Digitally illiterate consumers (typically feature phone users) not only rely on point-of-sale outlets and agents for consuming network services, they also buy new connections through physical stores. Growing digital literacy levels will shift these customers to online channels, and the physical presence of telcos may grow irrelevant. Today, however, omnichannel presence is crucial to reach marginal customers while also appealing to urban, digitally-dextrous buyers.

Digital infrastructure

Smartphone penetration

Today, 83% of the global population possesses a smartphone, and the number of feature phones in use is expected to decline rapidly by 2025.

Public policy

Efforts to increase digital literacy levels and the push towards digitization of government services, national IDs, and payments are being observed across the globe.  eKYC frameworks and UPI-like capabilities are being developed across all countries today.

Hybrid work

As hybrid work models become the norm, customers are growing used to the convenience of online channels, while choosing in-person channels for delightful experiences.

Electronic SIMs

eSIM capabilities are already being rolled out in new handsets. When their adoption goes mainstream, the cost of switching carriers will become as easy as logging into an email account.

Impact:

Strengthening digital infrastructure, growing adoption levels, increasing smartphone penetration, and eSIM usage is impacting telcos in five significant ways:

  • Handset shops are a key source of customer acquisition for telcos. As device purchases shift to ecommerce, network services will be sold digitally too.
  • Onboarding can now be digitised using existing capabilities and eKYC, and SIM cards can be shipped directly to customers.
  • Services like broadband are now finding a market in Tier 3 towns globally. Support channels need to evolve to accommodate the growing user base with IVR and chatbots.
  • With wider adoption of eSIMs, zero outages and seamless network services will no longer differentiate telcos, and operators will have to figure out a new recipe for retaining customers.

Expanding service portfolio

IoT consumption

Growing use of IoT devices at home and at enterprises is driving the need for IoT platform capabilities. This trend will be further accelerated by the rollout of 5G networks.

Satellite internet

Satellite internet is expected to be a $17bn market by 2030, and this will lay the foundations of a continuum of network connectivity inside and outside the physical walls.

Impact:

Cloud providers are already offering bundled 5G services for enterprises in partnership with telecom players – their marketplaces have added yet another channel in the telecom sales channel mix. Moreover, IoT usage in homes, enterprises, and public spaces will create new opportunities for telcos. These offerings, in addition to existing ones, will lead to the sprawl of the service portfolio, which will trigger a consolidation of S&D channels.

Telecom in the extended ecosystem

Over-the-top services

The OTT market is rapidly growing today, and niche OTT platforms and community-driven content players are winning consumer mindshare rapidly today – at the same time, network services are slowly being slotted into the utility category from a customer perspective.

Privacy regulations

Regulations like GDPR are making it harder for telcos to collect and use first-party data. This will make it harder for telcos to understand their customers and market to them intelligently.

Impact:

Telcos may slowly become invisible as OTT platforms own the customer relationship, and privacy regulations make it harder to build and nurture customer relationships. As a result, network services may be bundled with OTT services instead of the other way around – and technology providers and OTTs will turn into telco distribution hotspots.

Conclusion

To calibrate their S&D to this evolving future, telcos will not only need to reimagine their channel strategies, but also figure out ways to foster symbiotic relationships with their new channel partners. But how?

With a strong presence in the APAC, Americas, and EMEA, Comviva is watching this space closely to help telcos gain a strategic edge in this fast-changing landscape. Find out how you can adapt your S&D strategy to this new reality in the next part of this blog series.

 

Chirantan Sharma

Chirantan Sharma

Director of Products, Digital Financial Solutions, Comviva