MSPs Will Lose New Opportunities Unless They Change Their Market Perspective

Mobile Service Providers (MSPs) are at a turning point in their history. On the one hand, most MSPs have widely accepted that in recent years they have failed to lead the market and capture new, emerging opportunities resulting from the data explosion and the digitization of customers. On the other hand, changing macrotrends in the form of regulations and new technology development seem to be opening new doors for MSPs bold enough to target new revenues.

Despite their large ambitions, many MSPs are still tied to their traditional processes and models, even though new digital and enterprise vertical opportunities are appearing. As time is crucial to seizing these new emerging opportunities, MSPs must transform their views and attitude, understand the strengths and weaknesses of their assets, and acquire a better understanding of future markets. MSPs must look at the market not as a telcos but as digital providers.

Many MSPs are not looking at the wider picture and are still trying to interpret the new market through old lenses. Things are changing, and MSPs who are tied to legacy views will not succeed in generating new revenues.

Several operators are speaking about “hyperconvergence” as a ready-to-take-off opportunity. While there are lessons to be learned here, hyperconvergence is effectively the traditional bundling approach that they have already been using in the consumer market. While bundling can work in some cases, it is a mistake and an oversimplification to believe that one approach can be used for all new fragmented opportunities.

Strains are also emerging between MSPs and network vendors, as the latter category is aggressively pushing for 5G without considering whether MSPs really need 5G. In the short term, 5G will bring limited benefits for MSPs who are still struggling to understand commercially strong 5G use cases. Network vendors such as Nokia are also pushing into end vertical markets with their own solutions beyond connectivity, and they are doing so with and without MSPs in another sign of a changing relationship.

MSPs have looked at web-scale players for inspiration; however, this is still a work in progress. The telco market is experimenting and attempting to learn lessons from pure digital players regarding digital transformation and related fields such as virtualization. However, the truth is that these initiatives are slow. These developments have been underway for some time; as in the case of network function virtualization, they have been happening slower than expected with the market still facing fragmentation, hesitation, and confusion.

Many operators have also been discussing the issue of “regulatory rationality” and lamenting an uneven playing field between themselves and web-scale companies. While regulatory pressure to web-scale players will increase, this in itself is not enough to change the fortune of MSPs, whose shortcomings are related to internal structures and strategies rather than regulatory burden.

While in recent years a major trend was the move to global, MSPs now see their local presence as a winning hand. Local presence is an asset, but it should not be overestimated, as it is not unique to MSPs. Other players can count on the local factor, with utilities (e.g.,Enel) and infrastructure operators (e.g.,Ferrovial) being prime examples.

MSPs must change their traditional business model and adapt it to any vertical market they want to address. This means that MSPs must know beforehand those verticals they want to dive into. Vodafone provides a good example of this process, with the company targeting revenues beyond connectivity in automotive, insurance, digital buildings, healthcare, and logistics. While some see hyperconvergence as a key revenue opportunity—given the opening up of new enterprise markets and the arrival of new technologies that potentially support new services—MSPs cannot simply export their traditional business model. Telefonica, via its Fusion offering, has been one of the champions of convergence in the consumer space; however, replicating the same approach in the enterprise space will not be easy, and MSPs should pursue a varied approach. Connectivity is becoming increasingly commoditized, and upselling additional services, such as the cloud (where MSPs may not be world leaders), will be increasingly difficult if the value for those services potentially ends up with the MSP’s partners.

MSPs must pursue innovation across all layers of their business. They must be aware that each opportunity brings new risks, however. Flexible asset deployment models such as network sharing or new ownership models can play a role in the future of MSPs, such as South Korean operators’ sharing 5G infrastructure or Tele2 and Telenor shared networks. This provides an interesting opportunity to reduce capital expenditure but must be followed by MSPs’ redirecting that investment into targeted research and development. At the same time, this is not without risk—a reduction in ownership and in control over the network could lead to a new trend of MSPs slowly giving up their key competitive asset and differentiator.

MSPs must look beyond their own backyard. They should focus on learning and understanding network vendors, web-scale giants’ activities, and long-term plans, as each company is both a partner and a competitor. Big tech companies may need help, but the same is true for MSPs. In the case of web-scales and MSPs, the relationship and interaction between these two will increase; however, web-scales are going to benefit the most from this increasingly closer relationship as they are (so far) better positioned to deliver added value services, since connectivity is increasingly perceived as a commodity. The future will see the merging of these categories with companies such as China Unicom or Rakuten—early examples of this new trend—attempting to bridge these two worlds.

New technologies are bringing new opportunities, but MSPs must do their homework. Blockchain, quantum computing, artificial intelligence, and so onrequire telcos to have the basic understanding of market opportunities, use cases, and business models. Even so, this will not be enough. MSPs will also need to understand the more complex nature of these end vertical markets; their different ecosystem and power players; and their current technologies as well as how these elements fit with the MSPs’ current and upcoming disruptive technologies and offerings.