Address financial pressures and maximize returns by splitting into two freestanding businesses – a network operator and a service-oriented organization.
Separate to save
Historically, moves to structurally separate were driven by regulators. But now CSPs are increasingly seeing separation as an effective way to combat value stress and declining growth capabilities such as:
- Stagnant revenue
- Declining returns
- x10 lower investment in research and development compared to e-commerce, software and cloud companies.
Further, 5G network investments are expected cost over $1 trillion in the next 5 years. CSPs must prepare to make bold structural moves to find opportunities to grow.
Separate to grow stronger
For CSPs that are ready, this is a strategic split into two free-standing businesses: one that operates the network (NetCo) and one that is a customer-facing entity (ServCo).
The stand-alone NetCo is easier to operate, has its own revenue stream and is attractive to investors. It also provides new monetization opportunities with the potential for wider market access, space leasing and 5G mesh network expansion.
The ServCo, in turn, can be more efficient and innovative when not saddled with tower operations. Agile ServCos can take more risks and respond much faster to changing market dynamics.
A strategic break
By using the Structural Separator strategy, operational efficiencies will quickly reduce overall Opex. The standalone NetCo will become more attractive to investors and provide both business stability and opportunities for expansion.
The ServCo can use its newfound freedom from network obligations to focus their attention on the billion-dollar service-based solutions of a Connected Consumer Platform, SMB Activator or X-Industry Orchestrator role.
Considering a separation strategy requires multi-factor consideration – which model is right for the regulatory environment, market context and ability to execute:
- Fully owned separate legal entity
- Fully divested entity