The rise of the mega-operator

Tony Poulos
25 Jun 2012

The problem with businesses constantly generating billions of dollars in revenue is down to perception. Their customers think they are being ripped off, governments think they need to be controlled more and the stock market thinks they should be showing more profit.

These are just a few of the dilemmas telco CEOs face each and every day, but the list is far greater when you take into account the need for constant investment in networks and ICT, dissatisfied and churning customers, margins under constant pressure, the need to keep lowering costs and still maintain service levels, pressure from labor unions, the constant need to innovate, OTT pressures, etc. The list goes on and on, and one has to ask is it all worth it?

Apparently, it is, but the game is changing rapidly and today's communications service provider may be barely recognizable in the years to come, and it is likely a new breed of "outsider" CEOs will be introduced to help make the transition.

We are already seeing the emergence of the international mega-operators, primarily through M&A activity by players from saturated markets looking for continued growth. What started as loosely coupled groups are fast-evolving into tightly integrated entities creating economies of scale, benefiting from regional cost savings achieved by shared resources, ICT and cloud services, all taking advantage of core-competency centers.

There appears to be a definite trend toward using wholly-owned resources and moving away from fully-outsourced models that became popular for national operators wanting to move from capex to opex based business models.

SingTel Group is leading the way in Asia as Ovum's Claudio Castelli recently noted. Optus Business has announced a series of initiatives where it is now part of SingTel Group ICT, and could pave the way for more regional offerings. Leveraging SingTel's capability and experience will also help Optus Business to strengthen its enterprise portfolio in Australia and contribute to the cost-efficiency program that the company is currently going through.

However, investment in the local delivery capacity is still necessary and is likely to offer services each property excels in back to the group. It also means that innovation is not limited to one national team and being able to share ideas across different demographic and cultural boundaries.

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