Monetising networks: the major challenge facing operators

Alexandre Iatrides

Analyst at ODDO BHF Securities

European telecoms operators are currently confronted with the same challenge the music industry faced in the 2000s with the emergence of peer-to-peer platforms: a strong rise in usage but weak monetisation.

We live in an increasingly digital word, consuming a growing number of telecommunications services including voice, internet, data sharing and ambient connectivity in the home. To facilitate this growth, operators are investing heavily to extend and improve network quality and capacity (4G, 5G, fibre, etc.). The paradox, however, is that households are spending an increasingly small share of their budgets on telecommunications. According to the 2018 report by the French national statistics agency INSEE, household spending on telecoms dropped from 2.5% in 2006 to 1.9% in 2016. Strong competition, encouraged by the European regulator, has driven down the cost of telecoms plans.

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If this trend continues, growth in the industry will suffer. But it’s never too late to turn things around. The music industry was able to take back control of online distribution. Leading operators like Orange need to leverage their assets to maximise the return on their investments. Quality networks, access to new, diverse value-added services (cloud, mobile banking, etc.) and guaranteed data privacy all help to build trust with customer. In a world where digital technologies are all around and where consumers are concerned about data storage and processing, trust is an extremely valuable asset for major operators. Building on that foundation, operators can develop strategies to reassess the profitability of the data plan market, charging the right price to customers who recognise the value in the service provided.

Operators must develop strategies to monetise networks if they are to continue deploying fibre where there is strong demand for fixed broadband, like in Europe, or become leading 5G providers where there is strong demand for mobile broadband, as is the case in Africa, and also support the development of connected devices and appliances across the world.

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