Innovation and technological advancements over the past three decades have resulted in more competition across the telecoms value chain (TVC), bringing with it better services, greater customer choice and lower prices.

This is one of the key findings of a report released today by Africa Analysis, a market research consultancy focused on Africa’s ICT sector. The report, “Evolving Telecoms Value Chain Industry Report”, examines the TVC in South Africa and globally, consolidating the views and predictions of C-suite leaders from a wide range of players in the sector. Featuring five case studies, the report notes that the TVC has evolved from having simple, linear relationships to a complex ecosystem of multi-dimensional, interdependent relationships among its participants that engage in extensive infrastructure sharing.

Five predictions about the future of the TVC feature in the research are:
* Regulation and increasing infrastructure will spur further investment with new operating models emerging and the most adaptable companies being successful.
* Cloud/content/application providers — like Netflix, Amazon and Google — will grow in importance while other role players will become less visible to the customer.
* Machine learning and artificial intelligence (AI) will allow content and application providers to consolidate services, including business process outsourcing.
* The telecoms industry will move towards a usage-based payment system, with entities along the value chain only buying what they need, and blockchain possibly facilitating a new settlement system.
* Content and cloud providers will further vertically integrate, increasing investments in submarine cables and data centres.

With the rapid changes taking place throughout the telecoms sector, the report highlights the need to reconsider some of the key performance indicators (KPIs) being reported in the industry.

Traditionally, KPIs in the TVC have looked at value creation through a retroactive lens with over 60% of KPIs reported being so-called descriptive KPIs or quantitative measures of past operational performance. According to the survey participants, organisations need to become more future-oriented rather than focusing on past performance.

In addition, respondents indicated that qualitative KPIs (metrics relating to suppliers, employees, and customers, such as Net Promoter Scores and customer experience measures) should become more prominent to better reflect the sentiments and behaviours of these stakeholders.

“KPIs that are ordinarily reported to the market — like sales measures and subscriber numbers — are outdated metrics,” says Andre Wills, MD and lead analyst at Africa Analysis. “These should be complemented with future-focused KPIs that talk to intention and predictive qualities such as customer lifetime value.”

According to survey respondents, future-focused KPIs demonstrating value drivers should make up 44% of a company’s KPIs rather than the current 26%. For example, the conversion of CAPEX to OPEX requires new KPIs to express value creation.

Moreover, the interplay between the respective business models of network operators and retail service providers requires different KPIs be used to understand the value of each of these players.

“KPI reporting is shifting towards more predictive and stakeholder-specific KPIs,” says Wills. “With telecoms infrastructure increasingly being shared, KPIs need to reflect how resource sharing impacts the value that different participants create and/or co-create.”

Reframing Value and CRM

As new technologies are introduced, more services are being launched and the costs to deliver existing services have decreased, thereby lowering the entry barrier for new services.

As a result of service diversification, customers’ perceptions of value are shifting. Looking forward, players in the value chain will engage with customers more closely to deliver value where customers need it. Instead of traditional customer relationship management (CRM), telcos will increasingly position themselves around customer needs, empowering customers to define what they believe they will want.

This will require a re-orienting from CRM to CMR, or customer managed relationships, where customers will be more involved in the development of new products which will better suit their needs.

Sharing: The Future of South African Telecoms
Over the coming five years, the single largest telecoms CAPEX investment in South Africa will be for the build-out of 5G mobile networks, followed by fibre-to-the-home (FTTH), fibre-to-the-business (FTTB) and fibre-to-the-site (FTTS).
Africa Analysis forecasts that 5G network coverage will reach 60% of South Africans by 2030.

Overall, the firm estimates that if five mobile operators choose to build the same sized network (based on population coverage) along with the Wireless Open Access Network (WOAN), then the total cumulative capex over a five-year period would be upwards of R240-billion.

“This calculation underlines the importance of network sharing to reduce the CAPEX required to enable a strongly competitive 5G market to exist in South Africa,” adds Wills.

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