telco towers

The future of telcos are more than just a network communications provider. Source: Shutterstock

The ever-changing future of a telco

THE telecommunications industry is one of the first sectors to get disrupted by digital innovations.

As digital-based communications gained prominence over network-based communications, telcos are forced to reconsider their role as service providers.

During the Wild Digital conference in Kuala Lumper last week, the Chief Executive Officer of Axiata Digital, Mohd Khairil Abdullah spoke with Tech Wire Asia in an exclusive interview about how the role of a telco is changing and what the future of telco looks like.

First, they came after messaging

When the industry first rolled out short message service (SMS) 15 years ago, it was the most innovative form of communication.

Today, over-the-top (OTT) messaging services such as WhatsApp, WeChat, and Facebook Messenger has taken over. Intelligence firm Ovum predicts that by 2020 the amount of traffic from OTT messaging will be 12 times the size of SMS.

“SMS was a successful product, but no one innovated on it. For 15 years the way you sent SMS was exactly the same,” Khairil said.

As OTT messaging grew in popularity, telcos saw their revenue sliding downhill. Soon, telcos were offering more than just a network or data connection; they bundle additional functionalities to provide users with a better user experience.

Recently, Google attempted to revamp the SMS experience by rolling out a new protocol called Rich Communication Services (RCS). It’s supposed to mimic all the functionalities currently found in most popular chat apps. The only advantage RCS has over OTT, is that there is no need to install third-party apps or create an additional account.

“It’s too little too late to play in the space,” Khairil commented. “As an industry, we’ve been talking RCS for more than five years. It was hard for RCS to take off because telcos didn’t want to work together.”

What is truly needed isn’t just a new communication protocol, but the interoperability between different chat apps.

Next, we go after the other industries

What telcos need, wasn’t just a new protocol for SMS alone. While some have attempted to create new bundles with video or music streaming services, it wasn’t making waves the way telcos had hoped.

As the industry begins to re-evaluate their product offerings, many also begin to see the hidden value of the largest asset that all telcos hold – data.

Axiata group itself has about 350 million customers and subscribers that interact with the company on a daily basis. It also has about 1.8 million retail touchpoints across the region performing transactions daily.

All that data translates to access and insights on customers, which would benefit companies beyond the telco industry.

With that, telcos begin looking at working with other verticals. In the case of Axiata, they’ve identified three core businesses that they are currently focussing on beyond telco. The three companies are mobile wallet Boost, advertising technology ada, as well as API platform Apigate.

“We’ve learned the hard way. In the early days, we ended up building 30 different businesses in our portfolio and it ranged a whole different gamut of industries – video service, music streaming, etc.,” Khairil recalled.

It wasn’t feasible, as all industries have their respective licensing and regulations. Managing the risk and compliance was a nightmare. Soon the company realized it does not have a huge resource pool to handle that level of diversification.

Finally, they decided on the three pillars mentioned, based on the company’s assets, resources, and capabilities.

Partnering is the way forward

“There’s an unfortunate legacy DNA component of a typical telco – they tend to want to build everything on their own,” Khairil laments. “However, things are moving so rapidly in areas where traditional telco engineers don’t know how to do.”

Today, more and more telcos are more receptive towards partnering with other companies to create new value propositions for customers. More than just bundled telco plans, companies are partnering to offer digital services like mobile wallets.

The future of telco according to Khairil, will see a lot more sharing and interoperability.

He thinks that telcos will provide a platform whereby services can latch on, and it won’t matter what apps a user is using. Gateways on the platform will connect and translate protocols so that apps of a similar function will be able to communicate with each other.

For a future where communications are not limited by the hardware, communication platform, or protocol used, it will require a lot more partnership.

In a connected world, telcos will remain crucial for providing network services. However, diversifying their portfolio and partnering with other verticals to make full use of their existing assets will be key for them to remain relevant in the market.