Monetizing 5G: A Once-In-A-Decade Opportunity

Dr. Kajetan Zwirglmaier, Partner, Simon-Kucher & Partners

Dr. Kajetan Zwirglmaier, Partner, Simon-Kucher & Partners

Telecommunications are approaching a new era: With the fiber-driven broadband revolution and the rollout of fifth-generation wireless technologies (5G), which has already begun in several markets, the telco industry finds itself in a state of upheaval. Most telecom companies in the Western World have reached a high level of maturity and are facing stagnating revenues. To initiate new growth and ensure the profitability of fiber and 5G investments, new innovative approaches are needed.

In the past, the opportunity of product innovations like 4G was not exploited. Most telco companies missed the opportunity to exploit the value created. The large sums telcos are currently investing in 5G infrastructure have to pay off. Therefore it’s vital they take advantage of the chances the new technology has to offer and focus on the value for the customer.

“The biggest challenge of 5G is to unlock the full potential of monetization.”

5G, for example, offers telco companies a whole new range of business opportunities. They can now utilize the full potential of augmented and virtual reality, smart cities, and IoT. This is especially true for the B2B sector’s willingness to pay. However, exploiting the B2B potential will require a more differentiated approach to the market and a change in paradigm as for the first time monetization strategies in telco would be built focusing on B2B requirements.

"In the coming years, telcos around the globe will have the opportunity to unlock the full potential of the 5G and fiber disruption in their markets"

The upcoming technological disruption is a once-in-a-decade opportunity for telcos. But unlike the situation ten years ago, it comes with some challenges. The traditional growth model for mobile-based data consumption is reaching the end of its lifecycle due to the introduction of “unlimited” offerings. In the fiber world, other challenges, such as restricted availability in certain regions, the limitation of up-sell opportunities for consumers after the fiber migration, and the omnipresent risk of price wars are making it hard for telco companies to monetize their investment.

How do telcos stay ahead of the game?

1. Telco companies need innovative packaging and pricing ideas that differentiate them sufficiently from competitors as well as intelligent monetization strategies that take the value of their infrastructure innovations into account. Examples from the Finnish and Swiss markets show that an environment where competitors differentiate their offers can reduce price deterioration by 50 percent (on a per MB level).

2. The traditional mindset where gross adds are the only thing that matters needs to be reconsidered. Existing customers have often been a 2nd priority to the telco companies, but times have changed; the customer base is more important than ever. Retaining and growing the existing customer base isn’t just a more efficient way to spend SAC/SRC, it also means lower price pressure and increased customer lifetime value with each additional product sold. By establishing a 360-degree customer-centric journey, telcos can achieve higher ARPUs and reduce churn rates, as the majority of customers in today’s markets are discount seekers who will seize any opportunity for a better deal.

3. Digitalization provides new opportunities to facilitate customer base management excellence, up- and cross-selling and many more top-line aspects. Advances in data science, such as machine learning and artificial intelligence, enable providers to automate and target their interactions with customers and can support sales teams in their daily work.

In the coming years, telcos around the globe will have the opportunity to unlock the full potential of the 5G and fiber disruption in their markets. To do this successfully, they will need to leave the beaten path and use innovative approaches in design, pricing, marketing, and sales. Refocusing their attention on their biggest asset – their existing customer base – and incorporating the power of digital tools are essential steps towards new and accelerated growth.

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