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Communications

Pathways to profitability for CSPs

September 26, 2022 5-MINUTE READ

RESEARCH REPORT

In brief

  • In the middle of an exponentially increasing digital and connected world, communications service providers (CSPs) are a central force.
  • However, the pressures on telcos have never been greater: Capex & Opex are on the rise even as traditional revenue streams only grow modestly.
  • But a window of opportunity exists, where -with tech and innovation- CSPs can transform their business and the experience of the customers they serve.
  • We have charted five transformative pathways to profitability for industry leaders, elevating their role in tomorrow's digital ecosystem.

Over the past two years, the way we connect and are entertained, the way we work and conduct business, and even the way our social, economic and government institutions are run has changed. Entire industries are re-thinking how they operate, responding to everything from demands for greater operational efficiency to higher environmental standards.

Operating in a saturated market facing declining returns and increased connectivity demands, CSPs continue to face commoditization pressures, even while they face rising operating costs preparing for the next era of connectivity and connected services. Telcos are facing three major industry-wide trends. As agile, asset-light digital natives continue to gain ground in the market, their response must be swift.

Telcos at an inflection point: the next 1-3 years

The world's insatiable appetite for data is translating into large scale investments by CSPs without the return.

+137%

Projected growth in data traffic by 2026 (24% YoY 2022-6), rising to 1.8 million petabytes. [source: Analysys Mason Datahub based on a sample of 27 countries]

-37%

Decline in median ARPU between 2012 and 2021 [source: Analysys Mason Datahub based on a sample of 27 countries]

$1.4T

Cost of capital expenditure to build and upgrade networks between 2022 and 2026. [source Analysys Mason]. Contrasted to -15.4% decline in ROIC over the past 5 years. [source CapIQ]

Telcos are facing 3 major industry-wide trends

Their response must be swift, as the agile, asset-light digital natives continue to gain ground in the market.

Aggressive end-to-end enterprise reinvention and bold structural transformation – often fuelled by a new approach to partnerships – can accelerate progress within compressed timelines.

Markets and business models have shifted, and so have the expectations of customers – for sustainability, accessibility, versatility – whether they are personal, SMB or enterprise users.

The aggressive adoption of new and emerging applications, from 5G and cloud to web3 and the metaverse, must drive innovation, agility and talent.

Amidst change, charting pathways to profitability

We have identified five scenarios that can guide CSPs through the transformation and business reinvention processes towards profitability that starts at the core. These pathways to profitability capitalize on the strong foundations of the telco business, guiding CSPs on their journey to improve the returns on their investments, deliver products and services that delight customers, and elevate their role in tomorrow’s digital ecosystem.

In the expanding digital ecosystem, CSPs are not only positioned at the nexus of core control points, but they also boast strong trust with customers, owning these critical relationships. As they explore building differentiated solutions, they are often partnering with digital natives who compete for market share. This new approach across the ecosystem will drive growth beyond connectivity, spurring development and charting the way for five pathways to profitability.

The future of networks

Establish the foundation for a new era of connectivity, leveraging AI + analytics for speed & value.

Connected consumer

Use data & consumer trust to become the ecosystem control point for the “connected life”.

SMB Growth

Become a true advisor and business partner invested in SMB success through new services & targeted offerings.

Large enterprise orchestration

Build horizontal & vertical E2E solutions that demonstrate the power of 5G, connectivity, edge, and security.

Industry restructuring

Create innovative business structures to focus on core & differentiating capabilities, and to streamline investments.

Making the move from learners to leaders

CSPs are unlocking their value potential with a deliberate focus on four key fundamentals. The journey is different for each telco, but the foundations of these actions are the same.

1. Network foundation

Build advanced networks and deploy with speed

2. Improve operations

Reduce costs to improve margins and fund innovation

3. Business innovation

Create new offers and transform go-to-market to find growth

4. Revenue capitalization

Execute necessary structural changes to unlock value and capital

The window of opportunity to elevate the communications industry's role in tomorrow’s digital economy is now.

Meet the team

Andrew Walker

Senior Managing Director – Communications & Media, Global
LinkedIn

April Wirtz

Managing Director – Strategy & Consulting, Communications & Media – North America
LinkedIn

Astha Bhardwaj

Managing Director – Strategy & Consulting, Communications & Media, Asiam
LinkedIn

Jeffrey Berry

Managing Director – Accenture Strategy, Mergers & Acquisitions and Private Equity
LinkedIn

Sean Delaney

Managing Director – Strategy and Consulting, Communications and Media

Brian Smyth

Managing Director – Communications & Media, Innovation
LinkedIn

Ankit Dhamani

Senior Manager – Corporate Strategy and Mergers & Acquisitions, Communications and Media
LinkedIn

Mark Flynn

Senior Manager – Accenture Research
LinkedIn

Get the essentials

Explore the five transformative pathways to profitability for communications industry leaders, elevating their role in tomorrow's digital ecosystem.

15 minute read

Pathways to profitability for CSPs

Explore our vision for the communications industry in-depth, with a focus on telcos’ growth opportunities and investments for the future.

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In brief

5 minute read

Understand the communications industry’s major trends and the opportunities we see for communications service providers.

Pathways to profitability for the communications industry from Accenture

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