Pierre Blanchard is VP of Strategic Sales & Alliances, Global Telecoms Practice, Capgemini.
Eurocomms.com: How are European telcos' business models progressing as the industry and those surrounding it become increasingly digital?
Pierre Blanchard: Telcos share the perception that digital services present a great opportunity for them to come on board as not only a bit-pipe provider but as a full-service partner.
Nevertheless, this is still a recent view in the industry and telcos are just starting to consider the impact on their business models.
There are of course already some concrete initiatives in teaming up with OTT players and setting up specific pricing models to monetise these alliances, but they are still marginal in terms of overall business impact.
What is your view on how European telcos are progressing with the implementation of new platforms/tech in a bid to offer digital services?
Contrary to the traditional communications services such as voice, messaging, data and video, digital services will not be controlled end-to-end by telcos.
We see currently two different approaches to cope with this challenge. Some telcos are modernising their legacy by prioritising the front end and customer related applications.
Others are engaging in radical transformation, mostly BSS, to create a brand new platform, based on the most advanced software packages and technologies.
While more demanding and more risky, the greenfield approach is expected to provide a higher guarantee of flexibility, robustness, and cost effectiveness that will be needed to support digital services.
With Apple Pay on the horizon, have telcos already lost the m-commerce/payments space?
While Apple Pay is really a breakthrough in the development of mobile payments, it is still hard to predict what the adoption by customers across the globe will be.
Google tried with Google Wallet some time ago, but it never took-off with customers.
Telcos have been launching Mobile Money Transactions (MMT) applications for some years now and some of them are now taking one step back in this area (eg, O2 UK closing their Wallet service).
However, we expect there be a lot of new developments in this area in the next few years, with a lot of changes in the role of the different players in the MMT value chain.
That leaves room for telcos to rebound in the MMT area. While we have to admit that this has not been an area of great success for telcos so far, the battle is not at all lost yet.
The IoT is another area that is generating a lot of discussion. How will it disrupt the telco business model this year?
The advent of the IoT is certainly the next big wave of transformation of our society, following computers, the internet, and mobile communications.
For telcos, it is probably where the strongest potential is. Of course, the OTT/internet players are also aiming to grab a large piece of the cake, but telcos have some unique assets.
For example, their infrastructure – both network and IT platforms – to manage and bill clients, and the ability to handle SLAs in the enterprise world.
While this is expected to be a massive transformation, it will take several years. Therefore, short-term disruptions are unlikely.
The IoT is to a large extent an expansion of the M2M area in which some operators, such as Vodafone, have already heavily invested in.
We believe that to ensure they play a key role in the IoT expansion, telcos have to strengthen their current M2M activities.
The smart home and the smart car are two areas where telcos have unique capabilities to drive creativity and make a breakthrough.
Ultimately, to what extent will revenues from digital services make up for current falls in traditional telco services revenue?
Most analysts indicate digital services represent to date around eight percent of telco industry revenues and that it will likely grow up to 20 percent in the next three years.
Even if this pace of development is confirmed, it will not be enough to fully compensate the decline of traditional revenues, but will nevertheless represent a significant alternative.
That said, because the digital services ecosystem will be much more open than the current communications context it is likely that telco digital services will deliver lower EBITDA margin than their traditional services, currently in the range of 20 percent to 40 percent.
This may lower the pace of development of telcos’ digital services and impact whether these new services will be able to make up for the fall in traditional revenues.