Telco Transformation: Beyond Connectivity

Transformation is not a new concept for many telecom operators in APAC. According to KPMG, global revenue growth of telcos has stagnated, decreasing from 2.5% in 2021 to 1.25% in 2022. Traditional telco models, focused on infrastructure and network operations, result in thin margins and high capital investments, prompting telcos to seek new revenue streams and transform services beyond connectivity. 

Accelerating Transformation of Telcos in APAC 

Heightened competition, shifting customer expectations, and rapid technological evolution are driving the transformation of APAC telcos.

 

Mobile virtual network operators (MVNOs) are shaking up the market with asset-light models, offering more attractive connectivity services at competitive prices. This urges traditional telcos to rethink their commercial strategy and transform their service and product offerings. For example, Circles.Life entered the APAC market in 2016 as ‘Asia’s First Fully Digital telco and Consumer Company’. Its unique offerings, such as no-contract plans and The Circle of Joy loyalty program, helped Circles.Life win the recognition of Singapore’s Best Customer Service by The Straits Times for two consecutive years. 

 

Customer expectations are also reshaping the telco landscape. APAC consumers prioritize value, convenience, and services over price. One report by TikTok highlights that 79% APAC consumers are influenced by non-promotional content. This trend aligns with the declining revenue of Telco traditional Pay TV market due to the growing popularity of over-the-top platforms such as Netflix, Amazon Prime and Disney+. Additionally, security is a crucial factor that telco operators often overlook during their transformation. Studies show that more than half of APAC consumers value their data privacy and security when interacting with brands online.  

 

Lastly, modernizing the tech stack and reducing IT costs are also pivotal in transforming telcos’ business models. Investment in technology is on the rise, with APAC telecom operators projected to invest $1.03billion in telco cloud by 2028, allocating 38-44% of their network budgets to this area. Emerging technologies, such as generative AI and network APIs, offer unlimited use cases including automation of customer services, credit card fraud prevention, glitch-free videoconferencing. McKinsey estimates that the network API market will unlock up to $300 billion in connectivity and edge-computing revenue for telco operators.  

 

From Telco to Techco 

Given these driving forces in APAC, telcos should position themselves to offer customer-centric digital experiences, supported by automated processes and top-notch customer support. Many telecom giants in the region are transforming from connectivity-focused services to technology-focused businesses, or “techcos.” 

 

Telecom operators are well-positioned to test and deploy innovative offerings for new revenue streams, leveraging their established customer bases, distribution channels, high brand awareness, and connections with ecosystem partners. For instance, Globe’s strategic shift to becoming a tech innovator showcases how a telecom operator in the region can drive growth while expanding access to healthcare and enhancing financial inclusion. Globe launched its Mynt subsidiary in 2015, which has become a one-stop solution for financial needs, including wallets, payments, loans, and insurance, contributing 6% of Globe’s net income before tax. Additionally, Globe introduced KonsultaMD, a health tech initiative enhancing healthcare accessibility in the Philippines through services such as telehealth consultations, medicine delivery, lab testing, and wellness services. Besides new ventures, Globe has also integrated technology with their core connectivity services. Globe has embedded personal cyber insurance into its revamped platinum plans to protect customers against cyber-attacks. 

 

In Indonesia, Indosat Ooredoo Hutchison aims to increase revenue from non-connectivity services from 4% to 20% by 2026 by transitioning to an asset-light techco model. Indosat is redirecting capital towards technology and innovation. One example is the Marvelous eXperience (MX) Center which facilitates 30 ongoing projects to enhance various aspects of Indosat experience. Another Indonesian telecom giant, Telkomsel, is transforming to delight its digital-first customers. As a first step, Telkomsel has built a large data analytics business that serves both retail and corporate customers. Leveraged its analytics foundation, Telkomsel has designed and launched two brands, Orbit and By.U to cater to the underserved and Generation Z customers. Moreover, Telkomsel has revamped the MyTelkomsel app to build a seamless digital payment experience and enable new digital services such as video and gaming.  

 

Towards the Future of Telecom  

The technology landscape in APAC, combined with the evolving business nature of telecom companies, presents a significant opportunity for operators to capture value beyond connectivity and develop a robust portfolio of digital services. The success of many companies in the region demonstrates that technology can be a powerful catalyst for telcos to transition to asset-light, customer-centric, and rapidly growing business models. By embracing the digital landscape, telcos can navigate the complex environment, drive innovation, and maintain competitiveness, positioning themselves as leaders in the future of telecommunications. 

 

References: KPMG, BGC, McKinsey, Circles.Life, TikTok, IDC, Sunstar, Asian Telecom, Globe 

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