TELECOMMUNICATION COMPANIES SHOULD CHANGE THEIR BUSINESS MODELS

Why Telecommunication Companies Should Change their Business Models

Written by Guest Author On May 29, 2017 - 3 min read

Enterprises such as General Electric and Siemens have been representing themselves as data firms since 2010. When such enterprises made the change in the way they communicate with the market, and in their operations both internally and externally, the telecommunications landscape changed. Telco companies own customer’s data, and they should be the first ones to capitalize on this advantage. In today’s world, data is no longer an abundant resource. Quoting the digital brief of The Economist: “Data are to this century what oil was to the last one: a driver of growth and change. Flows of data have created new infrastructure, new businesses, new monopolies, new politics and—crucially—new economics. Digital information is unlike any previous resource; it is extracted, refined, valued, bought and sold in different ways. It changes the rules for markets and it demands new approaches from regulators. Many a battle will be fought over who should own, and benefit from, data.”

Telco companies almost own the medium where most of the data is transferred and even more importantly, they have people’s full records of customer information. Telco’s are extremely powerful in the eyes of the masses in the western world. However, fortunately for them and just like in China, Telco’s do not run into data privacy regulations and PR issues in the Middle East. Among other things, the lack of sensitivity to data privacy could be traced down to the decades of authoritarian regimes, which have always disrespected personal privacy to say the least.

Tencent, a Chinese investment company continuously positioning itself to capitalize on the fast growing sectors such as mobile payments, online loans, mobile advertising, mobile gaming and WeChat are the reasons of their recent rise.

WeChat was created after the founders encouraged employees to compete against each other to create a mobile messaging business. Now it has more than 800 million users, who beside instant messaging also use the platform for playing games, paying bills, placing online orders, and video sharing. Since the introduction of WeChat, Tencent grew to be the largest publicly traded company in China. Their share price has quadrupled. Take that as a motivation for Telco companies to change their game.

Tencent is continuously exploring other fields such as sports, music, gaming, and other sectors. The staff, both employees and interns are told to look out for new trends and startups emerging in various industries.

The three examples below are some of many. Traditional services offered by Telco companies today are kind of obsolete and come from a mindset that is not on the same level with today’s users.

Mobile Payments:

More than $400 million Chinese people use their mobile phones as their wallets, an enormous 65% of over all mobile users. Just 5 years ago this service did not exist in China. 44,5% of mobile payment users today say they no longer carry cash with them thanks to mobile wallets. Tencent will take 50-60% of the overall FinTech market along with Ali Baba in China according to JP Morgan.

GAMING:

Tencent led the list of the top 25 public companies through the gaming revenue. The Chinese company’s game-related sales rose by 17% to reach $10.2 billion in 2016 (from $8.7 billion in 2015). Tencent itself — which publishes titles such as Crossfire and has stakes in companies like Riot Games, Supercell, and Epic Games — claims 10% of the global market. If Supercell’s revenues are included (Tencent owns 84%of it), then Tencent has 13%.

VC Investments

Tencent bought shares in Snap in 2013, now valued at more than $20 billion, Didi in 2015, now valued at $50 billion, Lyft in 2015, now valued at $7,5 billion, amongst others. Not only do these companies invest abroad, but they also share their expertise with the local companies they invest in. This is the case for Mobike and Didi, both of which are now integrated into Wechat Wallet, through which 889 million users can hail a Didi and rent a Mobike. Companies that they invest in also integrate Wechat Pay into their apps, further increasing Tencent mobile payments revenues and improving the ecosystem.

The possibilities are limitless for Telco companies. They could even compete with the global social networks on some unfamiliar frontiers. Facebook Sign-in plugin, for example, is one of Facebook’s most successful products. Among the top 100 website in the US, 85 of them have the plugin as a mean of logging-in instead of the regular sign-in method. Several carriers in India started to notify select customers about something called Mobile Connect as a means to login instead of suing Facebook Sign-in plugin. The service carriers Airtel, Vodafone, and Idea informed their subscribers that it will make it even easier to login to several of their apps and websites. The service is actually getting traction and is competing with Facebook on a critical level.

The revolution could even stretch further so that Telco’s would be heavily involved in the smart cities of tomorrow. Recently, Emirates Etisalat and Nissan Middle East agreed on working closely together in the smart cars systems sector. Under the terms of the deal, Nissan Middle East and etisalat will jointly pursue opportunities to develop connected car technologies and applications to enhance the connected car ecosystem in the UAE and the region.