Presentation of the 7th annual exclusive Telco CEO & Private Equity Event hosted by Arthur D. Little in Vienna
On May 15th, 2017, Arthur D. Little hosted its seventh annual exclusive Telco CEO & Private Equity Event, with an impressive attendance of CEOs and shareholders from telecom operators, investors and leading banks.
The topic of this year’s event was “the strategic choices operators face and how they can leverage the impact of digitization”. Arthur D. Little presented how operators can best configure for value in their commercial approaches, production models and asset compositions.
The importance of these topics for players in telecommunications, information technology and media attracted over 60 top executives and shareholders of leading mobile, integrated and infrastructure operators; software and equipment vendors; banks; and private equity and venture funds, spanning 18 countries from across the world.
The event began with a welcome by Karim Taga, Global TIME Practice Leader and Managing Partner of Arthur D. Little Austria. Following was a presentation on the key observations and future strategic choices by Bela Virag, Partner at Arthur D. Little Austria and lead author of this year’s flagship report. The event finished with a Q&A session, during which the topics raised a lively discussion about the implications of the findings on the future development of telecom operators.
Key insights shared
- We expect that telcos will master the “ARPU x volume” battle moving forward, which will amount to approximately +1% CAGR (in Europe) over the next five years, stabilizing top-line growth.
- B2B2x is gaining importance – it represents a new segment and an untapped opportunity for telcos, which can be captured by leveraging core assets and capabilities and understanding what is needed to help companies digitize.
- New production models begin to emerge – a tailored transformational journey will be key to drive improved customer experience, lower production costs and more innovative/faster time to market.
- Operators will need to review how they manage their diverse portfolios of assets to deal with a potentially significant impact on balance sheets due to a shift from depreciation to opex.
- We expect the markets to recognize that, given a change from the traditional approach of asset management, vastly different types of operators will offer different risk profiles and abilities to scale.
Volume-driven growth in core European telcos is on the horizon
The “ARPU x volume” equation remains a key characteristic of the telecom services market. Declines in ARPU are anticipated across nearly all market segments, coupled with volume increases. We forecast that telcos will win the “price x volume” battle. Mobile and fixed broadband services will act as key growth drivers and offset declining segments such as fixed telephony. This is part of a transition from having voice segments as the main revenue driver to becoming a complementary service in converged bundles. Voice markets will become less relevant as the revenue share of converged services grows stand-alone segments and revenue becomes too complex to be attributed to the voice market.