Many believe that the 5G network will become the heartbeat of the future digital economy and society, fuelling the explosion of the internet of things (IoT), so much so that major governments are debating the security credentials of 5G equipment suppliers.
However, for the value and benefits of 5G to be truly unlocked, I believe it will be essential for mobile network operators (MNOs) to enter into partnerships on a level not seen before.
Huge capital expenditure will be required for the deployment of complex 5G networks, and the payback is unlikely to be covered by consumer mobile spend. As a result, the focus must shift to enterprise solutions.
While industry analysts are forecasting multi-billion pound benefits from 5G for many different sectors, the problem that MNOs face is simple - the breadth of potential 5G solutions will create a market too big for them to handle alone (GSMA predicts 5G will contribute £1.72 trillion to the global economy over the next 15 years). They will need to partner and collaborate with other players in the ecosystem to develop viable 5G use cases.
In a recent Accenture survey of more than 1800 executives, from mid-sized and large businesses across industries in 10 countries, only 37% expect 5G to bring a “revolutionary” shift in what they already do with 4G. Sixty percent of executives said there is a lack of knowledge among MNOs about the challenges in their industries, like how diverse industries can apply 5G to innovate. Enterprise customers will only engage if 5G technology creates tangible value by solving existing problems or creates new business models. Therefore, MNOs will have to think beyond conventional connectivity-driven revenue and become more like a consulting business and tailor value propositions by sectors. To unlock the value of 5G for enterprise use cases will require a combination of 5G connectivity, IoT, artificial intelligence, big data processing technologies and security systems. If MNOs do not lead in orchestrating such collaboration, the device manufacturers or software application providers will seize the initiative instead.
Research from the Netcracker & TM Forum underlines the likely extent of partnering. Sixty nine percent of telecoms providers are planning on a partnering strategy for industrial automation use cases. These are expected to be worth £187 billion by 2023.
Players in the telecom industry already collaborate and partner to some extent. But as the race towards 5G deployment intensifies, we are already seeing MNOs partnering with other stakeholders for 5G network roll-outs and use-case testing. This includes Vodafone with IBM, and O2 inviting FTSE 100 companies to participate in its 5G testbed. There has been a flurry of shared investment in 5G infrastructure such as towers, fibre and data centres. These trends will need to continue and intensify.
As MNOs break new ground with their partnerships, they will need to ensure the risks and rewards are distributed appropriately. This will be essential for successful commercialisation. Developing pilots / test applications for vertical markets are challenging, but the ultimate goal is to commercialise the solution and this requires careful consideration on how the partnering is structured.
The same good principles in any deal negotiations will apply – but the imperative to get it right, given the sums being invested as potentially anxious shareholders look on, will be even higher than the norm.
Operators will need to be very clear about why they are entering into a deal with a strong focus on:
We are also likely to see more M&A activity as the big telcos will look to buy up niche technologies from developers to improve their services (particularly in the areas of artificial intelligence and edge computing that reduces the distance data must travel and reduces transmission costs). The World Economic Forum states CSPs are ideally positioned to serve as the backbone of the complex data flow that links machine sensors to back-end services.
Some MNOs may look at information and communications technology (ICT) businesses to bolster their enterprise capability, seeing this as a quicker solution than joint ventures.
Providers will need to continually scan the market for new technologies and services that bring competitive advantage and the competition to obtain first mover advantage will be fierce.
Beyond this, however, a new mindset is likely to be critical for success in the future of telecoms. In the new 5G world, MNOs will move from their role as providers of connectivity services to being creators or brokers of solutions for their enterprise clients. Their solutions must help clients solve the new challenges and open up new revenue streams.
MNOs will have to think beyond connectivity-driven revenue and become more like consulting businesses. The operators that best manage this mindset transition will be the ones likely to enjoy the greatest success.
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