Capital challenges in the telecommunications industry (Reader Forum)

How providers manage costs while improving customer experiences

As telecommunications providers continue to expand their network upgrade initiatives such as 5G, fiber tech, and new network infrastructure, this sector continues to be more capital-intensive – but reports show that it has been hard to pass these costs onto consumers. 

In 2022, telco capital intensity hit a ten-year peak at $329.5 billion. This level of spending, paired with stress surrounding the current economic climate, has many leaders in this sector scratching their heads when it comes to increasing revenues. 

The fundamental challenge telcos are currently facing can be traced back two decades. Back in the days of the dial tone, the technology developed by telco providers allowed individuals to connect with one another in new and exciting ways. Telcos were innovators, and the IT driving this transformation was all home-grown. Flash forward to the dawn of the Internet, the introduction of email and other wireless communication technologies started a new revolution, which non-telco organizations dominated. 

However, connectivity powers all new technology, and as innovations grew from this connectivity made possible by telcos, they tried to capitalize on those applications. 

This challenge for telcos is largely impacted by the consumer mindset. As a population, consumers have been told to pay more for the next best thing and pay less for the so-called ‘old technology’. The cultural mindset of consumers is that the next model, upgrade, and innovation is not only essential to own, but is worth paying more money for – and the previous version becomes obsolete. What this means for telcos is that once they have invested in 3G, 4G comes along, and then 5G takes its place – all one better than the last in the minds of their customers. As a result, telcos must keep up with the marketplace at impossible rates of change, spending massive amounts of capital building out infrastructure and never truly attaining value from those investments. 

As a result, the capital-intensive nature of the telecoms industry continues to rise. 

Solving the capital challenge 

If the basic challenge is evolving consumer mindset, what should telcos do? At a high level, it is evident that individuals are ready to pay more for customer experience (CX). As a result, these providers must envision what types of use cases and experiences can be generated to improve customer satisfaction. For example, cable boxes have been in the home for decades, but the relevance of this product has decreased significantly since the growth of streaming. This is because streaming services have created a more holistic customer data platform that has tapped into individual preferences and allowed them to improve targeting, personalization, and satisfaction. 

What’s further, because of the nature of telcos, they must evaluate how they transform their business model. Today, success is measured by the number of active lines and sim cards. Even in the B2B sector, telcos sometimes measure productivity by the number of SIM cards sold. The mindset focuses on keeping traffic moving and gaining new customers, which must change to transform telcos’ operations and generate more relevance and customer loyalty.

Improve customer experience offerings 

Telcos looking to transform their business model must focus on four core initiatives: 

• Increasing predictability of service: Customers want to know that their service is reliable and that in the event of an outage, there are clear guidelines on how to ensure they are not stuck without connectivity. Increasing your organization’s predictability score is essential for improving customer experience. 
• Evolving pricing models: Customers do not have a good grip on how they are spending their money with telcos or how their prices are being broken down. Ensuring a clear and transparent breakout of pricing will build trust with customers and allow them to better capture the value of their investment. 
• Enhancing digital experience: Telcos must push their digital operating model strategies forward in order to retain customers. These enhancements include email communications regarding payment due dates and contract renewals, the ability to pay bills electronically, and online cancellations. 
• Improving culture: Telcos have instilled in consumers that engaging with customer service is how they will receive the best deal. This has forced telcos to increase their customer service workforce, ultimately driving up costs, and they must shift away from this dated mindset towards a self-healing model. Under this new model, the need for service is predicted and seamlessly taken care of through digital avatars that have access to the full customer profile through digital twin technology.

As 5G and 6G continue to roll out, telcos must focus on these investments and determine how to provide the best customer experience. 

For telco leaders looking to solve the capital challenges facing their organization, consider the role of technology. Disruption from technology knows no limits, and it is impacting every industry as well as the day-to-day markets. Telcos are not exempt from the impact of technology, and it will be important to utilize innovation and new capabilities to your advantage. By doing so, innovations in telecoms and connectivity will continue to grow and improve. 

Leaders should re-imagine their organization and come up with innovative solutions to provide their customers with more value for less. Many telcos are at a crossroads, and they should shift their focus to bet on use cases and innovation. Establishing a product-centric mindset is essential for back-office organizations, as this will enable more versatile product selling (i.e., the same product can be sold to a consumer or an enterprise) without any operational challenges. As a result, these organizations will become more nimble and build a business that consumers feel they can trust.