Big Tech’s got the market rigged
African, Middle Eastern and Europe telcos must work with hyperscalers if they want access to the digital consumer service markets, for which businesses and consumers will a collective $513 bn by 2027, claims analyst Omdia. If telcos don’t work with hyperscalers they’ll have more chance of finding growth in the dead sea (pictured) according to the report, because the environment outside the operators is too barren to sustain growth.
In its report Quantifying the Consumer Telco Opportunity – 2023 it claims that new demand for the likes of digital gaming, online video, messaging apps, smart home services and digital music will by 5-21% in the next five years. While the volumes will be overshadowed by mainstream services like mobile data, fixed broadband and pay TV, the new services will have much more lucrative profit margins than the commodity services, for which telcos will have to fight for every penny of revenue.
It’s better to have a easy euro in profit than an arduous ARPU according to report author Jonathan Doran, principal analyst for digital consumer operator strategy at Omdia. The five new markets will not only add half a trillion dollars to earnings but, if operators target their efforts wisely, they could find excelling in the two fastest growing markets, digital gaming and online video.
Additionally, there are indications that strong future potential for operators lie in developing the right e-health and financial services for clients. Several telcos have already began investing in these areas, a case in point being Vodacom South Africa, whose financial services and lifestyle super app VodaPay which has more than 1.1 million monthly active users (MAUs) since launching in 2021. VodaPay was responsible for a 30.6% rise in financial services revenue for Vodacom Group in the last three months of 2022.
Doran urged service operators to look beyond data and diversify into adjacent digital markets to enable continued growth of their telco consumer businesses. While many telcos have already invested in TV and online video entertainment, Doran suggested that there are other fast-growing markets that operators can explore.
The problem is thar hyperscalers are likely to get there first and there are many in the industry who say big tech players like Google, Amazon, Meta and Apple are masters at rigging markets. The only way to get a piece of the action will be to form a pact with the colonists, because they cannot be beaten.
While Germany’s regulator has teeth enough to investigate charges of ant-competitive behaviour and market rigging by Apple, Microsoft and Google, in theUK it has been a completely different story. In April the UK Competitionand Markets Authority was prevented from investigating Apple’s tactics because Apple’s lawyers objected.
“In many areas, telcos will need to accept that competing head-on is unrealistic and developing partnerships with such players is not only more pragmatic but will also serve to strengthen their own products and brands,” said Doran.
The more actively the mobile network operators invest in a given service area, through partnerships, the bigger market impact they have, said Doran. “In turn this gives a better position them to take a bigger slice of overall market revenue,” said Doran.
Omdia’s report and related recommendations are far from unexpected, as many global telco players already have a flair for the possibilities in the realm of digital offerings. Middle East telco giant e& recently agreed to spend $400m for a majority stake in Uber’s Careem Super App to deliver digital services, including food and grocery delivery, fintech offerings and a digital wallet among many more.
In another recent move, UK operator BT asked Amazon Web Services (AWS) to help it launch 4G and 5g edge trials. Without AWS BT would miss out on the chance to bid fforan estimated $500m revenue from Internet of things (IoT) and 5G edge computing.
In January AWS said it was building 32 AWS Local Zones worldwide and intends to build 24 more: they are designed to enable businesses within countries to shift more workloads to cloud. They do this by providing “a hybrid cloud migration strategy and simplifying IT processes”. These include an AWS Local Zone in Lagos, Nigeria, having opened its first office in the city last November.