Contributed Article
By Angel Dobardziev, Senior Director, European Consulting at IDC and Chris Barnard, Vice President, European Telecoms and Infrastructure, at IDC
Telcos in Europe, the Middle East, and Africa (EMEA) are coming under increasing investor pressure to deliver stronger growth. The average year-on-year (YoY) revenue growth rate among the “Big 5” European telcos — BT, Deutsche Telekom, Orange, Telefonica, and Vodafone — in 2023 and the first half of 2024 was 0% and 1%, respectively. The group of four leading Middle East and Africa telcos, namely Etisalat, MTN, Mobily, and STC, are doing better, with a collective year-on-year revenue growth rate of 5% in H1 2024, but investors are noting that this is slower than their collective 9% year-on-year revenue growth in 2023.
What is going on here? First, the core telco business of providing network connectivity and communications services to consumers and business — which accounts for over four fifths of the revenues of most telcos — is challenged by a new breed of competitors. Users increasingly rely on the more convenient MS Teams and Zoom apps for their business calls, and WhatsApp or Viber apps for their personal calls and messages, which is hurting telco revenues. And a whole host of disruptive players are challenging telcos’ broadband and enterprise networking business, from new entrant fibercos offering full fiber at attractive prices to consumers and small businesses to systems integrators pitching SD WAN and private 5G solutions to large enterprises.
Second — and more important — is the fact that EMEA telcos’ efforts to expand into “beyond connectivity” solutions have not had a major impact on the growth needle so far. Telcos have a bewildering range of market positioning, customer, and technology choices to make in this area, as we show in this diagram:
From a customer perspective, telcos need to not only find ways to serve existing consumer and business customers better, but they also need to consider targeting new customer segments in the broader ICT ecosystem. But the real maze of choices is in the top part of this growth diagram, where telcos need to decide if and how they play effectively in technology areas such as security, communication platform as-a-service (CPaaS), cloud/datacentre, and sustainability, to name just a few. The complexity is compounded by the myriad of sub-segment (i.e., IoT software and services versus IoT connectivity), vertical (manufacturing versus healthcare), and geographic considerations.
As it stands, telcos need to address dozens of “where to play,” “how to win,” and “how to execute” jobs to be done — and do these extremely well — as they seek to address the growth imperative, illustrated on the left-hand side of the diagram below:
And yet, there are three big jobs that telcos need to do particularly well:
Prioritise growth opportunities: No telco will have the capacity to address every segment in every solution box outlined in the growth matrix above, so either/or choices will have to be made.
Identify and incorporate global best practices: Telcos do not need to reinvent the wheel in each of the adjacent growth opportunities, innovative solutions by both telcos and non-telcos across the world offer valuable lessons for those willing to look.
Define winning value propositions: Telcos often have good value propositions in a range of “beyond connectivity” areas, but crucial ingredients that would make them great and irresistible by clients are often lacking.
IDC can help telcos address these critical growth jobs to be done with three well-established custom solutions:
IDC’s Opportunity Thermometer helps telcos identify, select and prioritise the best and most attractive growth opportunities within or outside current product and geographic markets — that are within client’s capabilities to exploit.
IDC’s Innovation Radar helps CSPs identify and integrate inventive best practices and/or value propositions — and leverage the insights from these to accelerate revenue growth and boost customer loyalty.
IDC’s Value Prop Accelerator solution helps CSPs build or validate winning value propositions in target growth areas that often sit outside the connectivity and communication perimeter (e.g., cloud, security, APIs)
Should you wish to learn more about these and other IDC Custom Solutions, please contact your IDC account manager or send an email to info@idc.com. For more info on addressing growth in the telco space, please register for the following webcast: Addressing the telco growth imperative in EMEA