Omdia’s Future Vision conference kicked off today. Enrique Blanco, Global CTO, Telefonica spoke about the future vision for telecom operators.
Blanco said that we are going through the various interfaces and building a new 5G infrastructure. It is all about how you are managing this network. We are working on how we will manage the data lake. We believe that 2022 will be an extremely amazing year for telecom. We need to fully align the skills.
One of our most valuable assets is the data. We are now powering data for our customers. We are trying to build use cases as fast as possible. We have signed some partnerships with Google. How we can go together, and how we can grow faster? How can we use the capabilities of the interscalers? We are also working with AWS in Germany.
Five things that may surprise you
Evan Kirchheimer, VP, Service Provider Research, Omdia, presented five things that may surprise you in 2021.
We tend to think mobile-first, but fixed growth is delivering in the post-pandemic world. We are in recovery mode, and V is the shape. There are four takeaways. There will be 2.5 billion more connections by 2025, for fixed broadband and mobile connections (excl. M2M) by 2025. 5G is already growing the mobile data opportunity. In 2025, over 30 percent of mobile subscriptions will be for 5G (3.3 billion out of 10.9 billion). Mobile data revenues will rise from 62 percent of mobile revenues to 78 percent, delivering another $170 billion in annual mobile data revenues by 2025.
Mobile ARPU will also stabilize. In many countries (e.g., the UK), data revenues delivered by 5G subscriptions will arrest the decline in mobile ARPU. It will still slip slightly globally, with an ARPC of $74 in 2025 vs. $79 in 2020. But, fixed is a critical growth story: Mobile data revenues will enable all mobile revenues to grow 8.5 percent by 2025. But, fixed broadband will grow 14 percent between 2020 and 2025, to $370 billion. Fixed broadband ARPC will increase from $270 to $285.
Bridging the digital divide is more critical than ever for growing our opportunity. Achieving, or exceeding, this growth requires us to bridge the digital divide. Telcos will increasingly look for a purpose. Omdia’s Environmental, Social and Governance tracker reveals investment in a number of CSR initiatives focused on the environment, including green energy, recycling, conservation and green bonds. But, inclusivity trumps them! Social welfare and digital inclusion are, in combination, the top priorities.
Edge will further erode the distinction between the cloud and the network. Hyperscalers are working more strategically with telcos; how tight will these ties become? The network/cloud interplay becomes deeper. Partnerships with network providers are a large chunk of overall partner activities, and they are more strategic and less about commercial partnerships for specific services than they used to be.
Bypass or going direct is sometimes an option. Hyperscalers are, of course, injecting cash directly into subsea fiber, the edge, backhaul and various parts of the access network.
We are now locked in an edgy embrace. From a service provider point of view, some of these approaches are difficult to refuse: “pipe or nothing”; but hyperscalers need the telcos, because they must physically locate more and more cloud infrastructure in the network. Witness the growing number of hyperscaler-telco
alliances and consortia. Cloud, network, both, will be there. Investment patterns bear witness to the clout of the new kids on the block.
Next, Webscalers take the lead. In Q3 2020, Amazon’s CapEx was higher than China Mobile’s. Google’s was more than Verizon, and Microsoft more than DT. The “edge cloud” drives spend. While AT&T and Verizon are investing aggressively to launch nationwide wireless 5G services, the main aim of Capex across provider types is for building infrastructure for cloud computing.
There will be common things across the ‘splinternet’. China mirrors this trend, as their ICPs saw 3Q20 capex increase 21 percent to $7.9 billion. Tencent’s $5.9 billion rolling 12-month capex makes it comparable in size to China Unicom. Fixed capex dominates. For 7 of the last 8 quarters, fixed capex has exceeded mobile, though 5G network buildouts have caused mobile capital intensity to increase – a trend we expect to continue.
Value add! It’s time to radically rethink your strategies, or prepare to struggle for $0.40/month more. Value add capitalizing on growth of services above the network layer has proven challenging.
On the enterprise side, it has been stagnant. After years of trying, most telcos have failed to forge strategic relationships with large enterprise beyond connectivity. For disruption, aggregators, brokers and SD-WAN/Internet/work from home are disrupting even core managed WAN (though often on multi-year contracts). Re-orgs, with many providers have re-re-re organized their business arms. Witness BTGS, AT&T, TEF and T-Systems.
On the consumer side, household spend grows outside the core. Globally, the average household will spend only $0.4 more in 2024 compared to 2019 on core comms and connectivity. But, households will spend an average of $2.60 more in 2024 on online video, digital music, digital games and smart home services – about a 10 percent increase in spend. There will be struggle beyond Pay TV. With Pay TV flat at best, SPs are competing against behemoths in online video, digital gaming and smart home.
There are still, however, considerable opportunities in new approaches and old standbys. In private networks, our trackers and analysis reveals a complex ecosystem is evolving, and hardening. An alternative, multi-party approach is needed. Alternative service providers and multi-party deals for private network deployment have largely disintermediated the telcos. As for the ecosystem, there is real opportunity if providers view partnerships and ecosystem players as critical to a successful private network strategy.
Meanwhile, Covid-19 has re-ignited the mobile money market, with some long-standing operators realizing growth. Orange’s revenues in Africa and Middle East in 2020 were up 5.2 percent YoY, amounting to a considerable Euro 507 million.
The “emergency aid effect” of government financial support during Covid-19 increased the penetration of banking services in Brazil by 20 percent in a matter of weeks, reaching 90 percent of the adult population. And, 100 percent of this increase is mobile banking.
Digital inside out: The next few years will bring a significant digital skill shift inside the telco. CSPs are starting to embrace cloud-native, but there is a lot of work left to be done. 77 percent of CSPs plan to host a portion of their OSS/BSS workload in the cloud in 2021. Most CSPs (32 percent) will host OSS/BSS in a hybrid cloud environment. CSPs are likely to put the BSS in the cloud.
Now, 78 percent of CSPs plan to embrace microservices architectures for OSS/BSS in 2021. 75 percent of CSPs plan to embrace DevOps and other agile operating principles in 2021. However, 61 percent of CSPs say that lack of in-house experts is hindering their move to the cloud.
Telcos are now digitizing from the inside out. Our industry is beginning to understand digital is about people with skills and outlooks, not just technology. Over 21 percent of the openings at BT mention agile skills. At Colt and Swisscom, there is over 100 percent penetration of digital skills required.
In pre-2020, 5G will deliver the growth shot we have been waiting for. In 2021 and beyond, fixed is doing the heavy lifting, and the growing. 5G will require wholesale re-thinking of fixed architectures as core dissipates to edge. Have you prioritized your fixed architecture?
There was a robust CSR. Now, don’t lose sight of your fundamental business and social purpose – there is no market growth without access. Are you aggressively addressing the divide in your region?
In the emerging cloud/network landscape, it’s the edge that will shape applications for 5G. Digital is also about employee transformation: some telcos are well into their journeys. Do you have a digital people as well as technology strategy?