Telecom Service Providers Should Focus on Network Expense Management and New Technologies
January 29, 2013
By Rajani Baburajan, TMCnet Contributor
Expense management is critical for telecom service providers to offset flat revenue growth over the next five years, according to Ovum (News - Alert).
The research agency predicts a mere 2 percent annual growth in telecom service provider revenues between 2012 and 2018, thanks to the increased over-the-top (OTT) competition and limited customer interest for usage-sensitive billing. Further, the proliferation of new mobile devices and apps has resulted in a shift in customer interest to buying devices and apps rather than buying services.
However, Ovum believes telcos have the potential to gain greater economies through their global vendors in terms of network rollout, network operations, network optimization, customer experience and service quality management.
According to Matt Walker, principal network infrastructure analyst at Ovum, telcos need to take control of their capex and need to spend heavily on technology. “What’s changing is that operators are more smartly attacking their operating expense (opex) budgets, which opens new opportunities for vendors,” said Walker.
In order to take advantage of this opportunity, vendors need to have a true understanding of telco opex – something, which until now, has been complicated by the lack of granularity and consistency in carrier financial reporting, amongst other barriers, according to Walker.
According to Ovum, the top telco operational expense segment that accounts for telco spending includes network/IT operations (18 percent). Of this, 60 percent (US$126bn) is for spending internally, mostly using salaried staff. However to fully utilize this opportunity, vendors will have to develop far more complex solutions for carriers than in the past.
“While services projects don’t come with guarantees of profitability, there is clearly some upside for vendors as carriers look to outsource more of their operations,” Walker said. “As telcos explore this, vendors need to be creative and aggressive about winning the business – but should not forget to protect themselves.”
Edited by Ashley Caputo