Why operators need to take advantage of the nascent B2B2x market for differentiation

A new report from Arthur D. Little (ADL) outlines how the telecoms industry is set to become more diverse in the coming five years, with an opportunity afoot in B2B2x (business to business to x).

The report, titled ‘Major strategic choices ahead of telcos: Reconfiguring for value’ and which pulled together interviews from more than 100 executives globally, argues that revenues will stabilise, with a modest growth outlook for the majority of European countries. Yet the B2B2x market is slated by ADL to account for 8% of global ICT spending by 2020, and the consulting firm argues this is an ‘untapped opportunity’ for operators.

The report explains the significance of this nascent market. “B2B2x differs from the traditional B2C, B2B and wholesale segments in that services become part of the client’s value chain,” ADL argues. “It differs from the Internet of Things in that it does not include B2C, but it does include services delivered by humans.

“This segment is not necessarily new – it was originally created by IT companies. What is new that telecom operators, leveraging their assets, can carve out a space in it and address a much larger share of the mega-trend ‘digitisation of the industry’ than they have historically,” the report adds.

Naturally, this means a greater understanding of what companies need to ‘digitise’ their offerings – and ADL believes it’s a ‘give or take’ option for operators in the future. “The digitalisation of the telco industry has made possible a variety of strategic choices,” said Bela Virag, partner at Arthur D. Little. “Some will leverage synergies from globalised production models, while some will become exceptionally lean local players. Some will go asset light, while others will remain asset heavy. Some will master the B2B2x opportunity, while others may ignore it altogether.

“It is these choices that operators face regarding their configuration that will drive them to be less lookalike than they are today,” Virag added. “Ultimately, there are multiple forces that will drive operators to take on much greater design responsibility for their IT, network and services.”

When it comes to European telcos, ADL says its relatively gloomy forecasts from 2015 have produced sunnier results, thanks in part to the decline in fixed telephony not being as significant as originally thought. In three of the five categories it outlines – mobile data, fixed broadband, and pay TV – European operators should see growth, albeit with the two laggards, mobile voice and messaging and fixed telephony, culminating in only a 1.2% CAGR increase by 2021.

As one might suspect, VoIP and OTT services are the primary culprits in declining voice revenues, the report adds – growing subscriber numbers for mobile telephony will not compensate for ARPU declines.

Overall, the report concludes that as operators change their offerings, be it through design or necessity, the market will note their different risk profiles and abilities to scale.

“Operators can differentiate their plays by becoming truly global players, partnering-capable players fully embracing the new segments and customer needs, remaining strong and highly efficient in their domestic markets, becoming asset-heavy or light operators, or pure asset-holding and operating players,” ADL says.

“All of these possible paths have one thing in common: they anticipate the arrival of the next wave of efficiency increases – this time on a much more global scale.”

You can read the full report here (no registration required).

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