Telecom network operators have been grappling with the declining profitability trends and margins across the world. Not just that, the ARPUs have also been declining across all markets without prejudice. Even though the internet traffic had been growing throughout the world, including the emerging markets, the net margins have been declining.
GSMA predicts that mobile data growth may score a CAGR of 47% over 2016-20 period mostly driven by 3G and 4G network availability. For example, LATAM will see 38% 4G connections by 2020 from 16% now in 
2017. Similarly, MENA will be at 19% from current 6% in 4G penetration. The reasons for data usage growth is not just the availability of higher speed networks (read CAPEX by Operators), but the availability of digital content. The growth of OTT players in the arena explains a lot (see Figure 3).
Additional factors like connected TVs, online PC games live streaming etc. are slowly catching up with the data growth rate. This exploding proliferation of digital into telecom arena is both an opportunity as well as a threat to the traditional telecom business.
The good part is, few players have already started to evolve and take the opportunity head on.
The Challenges of New Environment
- Cannibalization traditional revenues by OTT services
- Decreasing data prices
- Increased churn or lower CLV (customer lifetime value)
The combination of demographics, technology and user behavior, all point to the availability of content as the primary driver of this opportunity. Emerging markets like LATAM, Africa, APAC and the Middle East are all bustling with new users of below 25 years of age. These users are spending more time online than any previous generations.
More than 2/3rd of this user group accesses YouTube daily, even more than 50% of Facebook subscribers access the platform daily on their cell phones.
It is not that everything should be optimized for cell phone usage, but that modern users are no longer vying for the ownership of the digital content (limited storage space on cell). The paradigm is shifting to streaming content. This trend, with the increasing bandwidth and lower data tariffs, is only set to rise further.
Content is The Surf Board
The wave of change can be turned into opportunity using digital content. Since users are increasingly turning to subscriptions, operators with highly diverse digital content will enjoy an edge over others.
- Higher User engagement
- Lower churn
- Higher data revenues
- Opportunity for subscription revenues
- Opportunity for On-Demand Content services
What Type of Content?
According to a report published in Strategy&, a PWC mouthpiece, the daily pageviews in the media and entertainment category peaked at 282 per internet user, while in Africa this figure went as low as 32 per user, signifying the availability of local language content. Example of Indian local language content growth story points to the similar opportunity (see figure 4).
Not just the content consumption, but even the success of a brand’s marketing effort depends on the adoption of local languages. The same KPMG report states that more than 80% digital users are more likely to respond to a digital ad if it is in the local language as compared to English.
Developing local language compatibility is going to be ever important if OEMs, content providers and network operators are to attract and retain more and more customers.
Sourcing Local Content
Sourcing content can be a big challenge for telecom operators, especially when they are operating in as linguistically and socially diverse regions as APAC or Africa. The best possible method is to engage with a digital service provider to cut the content procurement and distribution cost and time.
Digital content provider benefits both the telecom operators and content creators (see figure 5). Digital content providers offer digital asset management service to content providers, while network providers get access to highly diverse and easily distributable content.
The platform allows users to generate and share content, all the while saving storage and procurement costs for operators.
On the one hand, the digital services portal allows global access to content providers, and on the other telecom operators also have access to all kinds of content regardless of their regional presence. Also, due to user shift to subscription based content, switching between operators may be difficult as user preferences and usage history are captured by one operator.
Conclusion
Today’s digital environment is for a “global network and local content.” As users spend more time on mobile phones and online than ever before, the operators can use this opportunity to turn from network providers to a more holistic service provider (read VAS). Fortunately, there is no dearth of the type of possible service inclusions – content, government, mobile payments, entertainment, etc.
