In brief

In brief

  • Communication Service Providers (CSPs) must maintain a strong focus on cost optimization, while under pressure to improve top-line growth.
  • They must release operating expenditure (opex) spend to increase capital expenditure (capex) investment for the next wave of technologies, such as 5G.
  • In late 2019, before the Covid-19 pandemic, Accenture partnered with Ovum to complete a cost-benchmarking assessment of 27 CSPs worldwide.
  • As the market conditions return to a new normal, we explore how end-to-end cost optimization can help unleash CSPs' future growth potential.

The COVID-19 pandemic has seen the telecoms industry respond exceptionally well by maintaining essential connectivity, extending communications to those that need it most and supporting vulnerable customers. And now, as economies reopen and the world returns to a new normality, CSPs will play an integral role in that recovery. Major economic contraction is inevitable, but how long it will last remains open to question. But there are likely to be severe constraints on consumer and enterprise spending as recessionary impacts bite.

However, even before the pandemic, the scale of the challenge confronting CSPs was substantial. The significant investments required to roll-out 5G and satisfy consumer and business needs for new and innovative digital services were straining CSPs' balance sheets and P&Ls. In the post-COVID-19 world, those pressures will only intensify.

Changes in consumer behavior and new ways of working post-COVID-19 will also present opportunities for CSPs to address cost pressures. Customer care will migrate from physical stores to automated digital channels. Remote working is likely to increase. These shifts will create opportunities for CSPs to lower their own office costs while also introducing new solutions to help their business customers support remote workers.

As they move forward, CSPs will need to understand their cost drivers in more detail than ever in order to support the strategic choices they must make to compete and thrive in the new environment. This paper sets out the cost-benchmarking analysis carried out by Accenture and Ovum which highlights the criticality of end-to-end cost optimization for achieving competitive agility. The insights and recommendations it contains have acquired even greater urgency and relevance for CSPs developing their roadmap to success in the post-COVID-19 communications market.

Cost to compete

A deeper dive into the structure of opex costs reveals an important trend: CSPs have been actively shifting their spend from indirect to direct costs. As a result, direct costs including Network and IT, and Enablement (interconnect, content and devices) now represent nearly 70 percent of all opex costs. More and more CSPs are compelled to spend big on content and network to differentiate their offerings and maintain competitiveness.

Direct costs including Network and IT, and Enablement (interconnect, content and devices) now represent nearly 70 percent of all opex costs.

CSPs are seeking out new strategies. The good news for CSPs is that customer demand for connectivity is set to grow strongly and CSPs have opportunities to capitalize on rising demand for new enterprise and consumer digital services. These include the internet of things (IoT) and other emerging 5G-based applications. According to IDC, by 2025 there will be 41.6 billion IoT devices generating 79.4 zettabytes (ZB) of data.

End-to-end opex cost optimization: key focus areas

CSPs generally take a broad-based approach to cost management. However, CSPs must constantly juggle the need to manage their cost bases with the risk of reducing investment in areas that will have a negative impact on customers. This requires an end-to-end, enterprise-wide approach to cost management.

CSPs must focus on cost optimization rather than cost reduction and ensure they get maximum value for dollars spent.

Three specific areas where cost optimization can be achieved: 1. Supply chain and procurement 2. Automating network operations 3. Data-driven customer understanding and experience.

A targeted approach to capex investment

By focusing on Return on Invested Capital (ROIC), CSPs can improve business performance and lower operational costs. Three approaches that can help CSPs achieve this: 1. Drive network capital efficiency 2. Migrate legacy systems to the cloud 3. Take a more strategic approach to capex/opex interplay.

Competitive agility requires a zero-based mindset

In today’s hyper-competitive landscape, CSPs must strive for business advantage. This requires a high degree of competitive agility, which enables an opportunity to turn disruption into an advantage. The key to success is to drive growth and innovation, and keep the core running optimally.

Competitive agility

In the hyper-competitive landscape how do you thrive in the now, the new and the unknown?

What is competitive agility?

A way for companies to gain a competitive edge, invest in new opportunities and drive growth while keeping their core business running optimally.

Why it matters

The landscape is shifting as customers seize control. Leaders must shift to a more agile, confident mindset to turn disruption into opportunity.

Where it’s going

Leaders will be able to maximize investments, reallocate resources and prioritize growth by cultivating Competitive Agility from within.

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Choose your partners carefully

In this paper we’ve identified just a handful of the myriad initiatives CSPs can pursue to optimize costs and ensure their network and IT investments are fully aligned with their business strategy and goals. As they continue on their journey toward competitive agility and ZBx, CSPs need partners that can help them both in transforming their cost bases (capex and opex) and in leveraging savings to unlock new growth opportunities.

About the Authors

Vikrant Viniak

Senior Managing Director – Accenture Strategy, Communications, Media and Technology

Maddie Walker​

UKI Industry X Lead – Strategy & Consulting​

Terry Steger

Managing Director, Accenture Strategy

Boris Maurer

Managing Director – Strategy & Consulting, Communications & Media, Europe

Andrew Walker

Senior Managing Director – Communications & Media, Global


Alastair Livingston

Manager, Strategy & Consulting

Jatin Gambhir

Senior Manager, Strategy & Consulting

Declan Lonergan

Research Senior Principal, Communications & Media


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