80pc of traditional telcos will struggle in future market

7 Nov 2007

Traditional telecom industry tactics such as price cuts, promotions and bundling will have no place in the future telecoms world, analyst Gartner claims, warning that 80pc of carriers will fail to transform into successful content enablers in the next five years.

Failure to transition to the brave new world of telecoms will have dire consequences for many players who will need to reassess their approach and service delivery, said Gartner research vice-president Martin Gutberlet.

He said non-traditional telecom players like Apple, Google and Nokia – who have a strong understanding of consumers – are adopting new business models and telecoms players will need to take note.

To survive, many carriers are likely to transform themselves primarily by exploiting content, but Gartner predicts that 80pc will fail in this endeavour.

“The players that will be among the successful 20pc will be the ones that provide a consumer-centric experience, for example through interactive TV, where users will be able to chat online while watching their favourite TV programmes,” Gutberlet explained.

Owning infrastructure initially gives telecom carriers some competitive edge, but this is mitigated by non-traditional competitors that don’t own a network yet bundle their services attractively.

“As demonstrated by Apple and Google, three new attributes are coming into play and driving change in the marketplace that the traditional telecom players must embrace to become successful content enablers, which create and/or deliver content. They are trust, usability and an exciting customer experience,” Gutberlet explained.

“If customers trust your services, they are willing to grant you access to their personal life. Ultimately, improving the customer experience will increase customer loyalty.”

Gutberlet said the winners will be those companies that focus on usability and actually giving control back to the users. The losers will be the ones that focus on overly technical product differentiation that the majority of consumers will not understand and therefore not use.

Gartner predicts that by 2012, half of the 20 largest carriers will establish new lines of business outside telecom, such as media entertainment, advertising and managed services, but more than half will fail.

Gutberlet estimates leading carriers in developed markets such as Vodafone and BT will be able to derive at least 15pc of revenue from such non-traditional sources.

“To uncover adjacent markets, carriers must leverage their unique assets, in areas such as billing, secure authentication and quality of service, and develop multiple partnerships to add creative talent to existing operational expertise,” Gutberlet said.

By John Kennedy