Redefining business models in telecommunications

In the face of declining revenues from their traditional service offerings, telcos are now exploring new sources of income and better ways of holding onto their existing customers, as we find out from Microsoft’s Rikke Helms

By Rebecca Lambert on 30 April 2015

Redefining business models in telecommunications

This article was first published in the Spring 2015 issue of OnWindows

Wanting to be more than just simply providers of basic connectivity in today’s digital world, telco companies are searching for new ways to boost their profits and attract new customers. As revenue from traditional services such as voice and texts continues to fall into decline, telco providers are shifting their focus to developing new offerings, while lowering operational costs and delivering more engaging customer experiences.

Research firm Analysys Mason estimates that between 2013 and 2017, voice revenue for the telecommunications sector is set to drop by US$38 billion. On the flipside, data revenue is set to grow by US$128 billion in that same period.

“Telco operators are constantly having to balance their revenue streams and keep up with the latest customer demands, and that means they’re having to adjust their business models and deliver new services,” says Rikke Helms, managing director of Global Telecommunications at Microsoft. “As their traditional offerings become increasingly commoditised, telcos are having to find new sources of income and ways of holding onto their customers, and that requires a completely different outlook.”

Much like in other industries, telco providers are finding that they need to move away from a product-centric model to a customer-centric one. “Retention is one of the telcos’ biggest issues, but it’s something that they must tackle to ensure a sustainable business,” says Helms. “It actually costs a great deal more to attract new customers than it does to hold onto your existing client base. That’s why customer service is now considered a top priority within the industry.”

In particular, telcos are finding that they need to deliver a consistent level of service across multiple channels – from in-store to the call centre to online – so that whenever a customer interacts with the company, the person on hand to serve them has access to all the information they need to deliver a personalised and relevant experience every time.

With the raft of mergers and acquisitions taking place in the industry at the moment – BT in the UK is currently in the process of acquiring mobile network EE in a deal worth a reported £12.5 billion – having the right tools in place to capture customer information from disparate sources and consolidate it is becoming more and more critical.

“Microsoft has a big role to play equipping telco providers with the productivity, communication and customer relationship management tools they need to better serve their customers and gain the business insights they need to succeed in future,” says Helms. “From SharePoint and Dynamics CRM to our enterprise-grade cloud and BI tools, we have the end to end suite required to meet their specific needs.”

What has become clear is that it’s the customers, not the telcos, which will dictate how the industry will look in the coming years. And that could mean that rather than delivering the same products and services – which they’ve been doing for the last decade or so – carriers could end up diversifying, focusing on cloud services, the internet of things, TV and media, and so on.

At Mobile World Congress in March, Telefónica announced that it had entered into a joint initiative with Microsoft to deliver TV content over the internet to Windows Phone devices, building on the success of its already popular Movistar TV Go service. Speaking about the move, Michael Duncan, CEO of Global Video Unit of Telefónica, said: “The availability of our television services on mobile devices increases the attractiveness and potential for enjoyment of the content we offer to our users, and places Telefónica at the forefront of video products with an offer of TV everywhere, which is increasingly diverse.”

As Helms notes, it’s critical that telcos keep up with new technologies and have insight into their customers’ demands to ensure they continue to meet their expectations. It is therefore expected that telcos will go far beyond providing a basic level of connectivity, and will look to new revenue streams, whether that may be reselling services such as Office 365 or bundling services to include TV and music.

To help telcos keep up, Microsoft is finding its own relationship with them changing too. “We’ve got a long history supporting the telco industry,” says Helms. “But until recently we have primarily sold our Windows productivity tools for their own consumption. Now, we are finding that we’re selling to them, with them and through them.”

From a sell-through point of view, Microsoft is seeing huge growth in its cloud business, driven largely by the telcos’ desire for more sophisticated cloud services, which they can not only use themselves but resell to their customers. “We’re seeing greater demand for our Azure platform and hosting capabilities,” says Helms. “Rather than building their own cloud infrastructures from scratch, it’s much more cost effective for them to use ours. It’s all about efficiency and taking advantage of the existing infrastructure out there.”

When asked what will distinguish the market leaders from the laggards in the coming years, Helms is convinced that great service is key. “It’s about understanding customer needs and having the ability to move fast to keep up with their demands,” she says. “Price is no longer enough of a differentiator; customers expect a great experience and access to the most innovative services and technologies. It’s up to us to work with the telcos to bring these new services to market as quickly as possible, in the most cost-effective manner.”