|  27.06.2014

Failure to adapt to new technology is the number one risk facing telcos

Telecommunications operators (telcos) must reposition their business models and adapt to new roles across a growing number of new technologies or else risk losing major growth opportunities, warns a new report by EY.

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EY Romania




Adapting to new technologies along with questions surrounding regulatory uncertainty, privacy and organizational flexibility represent the latest risks and opportunities facing telcos. ‘Top 10 risks in telecommunications 2014’, the annual study based  on the insights of EY’s Global Telecommunications Center and other leading sector practitioners, underscores that although the industry is starting to benefit from the global economic recovery, many structural challenges still exist. While operators stayed largely competitive during the downturn through defensive positioning, there is now an expectation for the industry to push new business models in the face of new technologies to unlock new growth.


Realizing new roles in evolving industry
The biggest threat facing operators lies in the industry’s ability to embrace new digital technologies and the new competition this landscape creates. This environment, while both volatile and rapidly changing, requires new value chain positioning in areas as diverse as cloud computing and over-the-top (OTT) smartphone applications. In many instances, telcos will share ownership of customers with a host of players, whether partners or more disruptive competitors. Isolating new roles in complex and fast changing ecosystems has never been more important.


Bogdan Tenu, Senior Manager, Transaction Advisory Services, EY Romania: ‘The constant evolution of value chains is forcing the industry to work more closely with OTT players. In many cases, OTT providers have created more appealing alternatives to traditional offerings, like mobile instant messaging with greater interactive features compared to standard SMS services. The challenge for telcos is whether to replicate these competitor offerings by developing their own apps, or to partner with these newer players to deliver a richer customer experience. The longer operators wait to enter a particular segment, the potential for lost growth only escalates.’




Regulatory uncertainty
Regulatory pressures climb the list in this year’s study as the second highest risk as global operators seek greater scale efficiencies through more rational market structures. For example, European operators see consolidation as a route towards ultimately committing to higher levels of network investment in 4G. At the same time, ongoing uncertainty in both the US and Europe over netneutrality regulation continues to undermine the industry’s ability to solidify long-term business plans.


Rebuilding trust through privacy and security issues

Consumer trust in service providers has declined sharply this past year in the wake of the global political fallout over mobile data privacy and security. Operators must ensure that they cope with a changing compliance landscape while redefining their relationships with consumers and businesses alike.

Proactive stances are required on privacy and security issues with partners and policymakers so that new demands for data sovereignty, personal data privacy and cyber-security – which may vary according to geography – can be reconciled in the long term.


Improving flexibility and efficiency
Like adapting to new technologies, organizational flexibility is paramount as telcos compete with smaller, more agile competitors and expand their service propositions in new directions. Meanwhile, operators also need to improve  interdeparmental communications and overcome the fragmentation of customer information assets if they are to make the most of big data opportunities.

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