‘From Telco to a Techco': Enterprise business to catapult telecom industry to next level

‘From Telco to a Techco’: Enterprise business to catapult telecom industry to next level
From a ‘telco’ to a ‘techco’ – that’s what the future of the telecom industry looks like.
The next level Industry 4.0 is around the corner with Covid accelerating the whole process of digital transformation of enterprises alike – be it small or large. And telecom players are not letting this golden opportunity slip away. There is a renewed focus on enterprise business which has a huge potential to generate additional and significant revenues for telecom players.
With the launch of 5G including artificial intelligence, machine learning, internet of devices, the digital transformation will be much faster. Being an enabler of connectivity already, which has become critical in a post Covid scenario, telcos are looking to provide customised and innovative solutions to enterprises with an aim to offer full fledged tech and telecom solutions on a platform. Telcos are trying to go beyond their core connectivity offerings, they are trying to become a technology player compared with just a telco player.
Currently, around 10-14% of revenues of telecom players come from enterprise business and this will grow to 20-25 % in coming years, according to experts.
“In the near future, you might equate the telcos with every company..they are building software, they are building products, they are building enterprise products. Telcos are becoming like a product engineering company trying to build products like a technology company, so you might see a completely different landscape of telcos in the next three years,” Purushothaman KG, Partner and Telecom Sector Leader, KPMG in India, said.
With substantial cash flows in hand post the relief package announced by the government, telcos can now invest further in the networks, building products and offering new services. Business to business (B2B), though currently generates lesser revenues than business to consumers (B2C), but the margins are pretty high which is one of the reasons for telcos to diversify into new segments. B2C is capital intensive but profitability is low because of stiff competition.
Enterprise opportunity & 5G
Tata Communications is already a formidable player in the enterprise segment while telcos including Airtel, Vodafone Idea, Reliance Jio have been slowly and steadily upping their ante. Every telecom player has a separate business unit to tap the enterprise segment. Tata Tele Business Services (earlier Tata Tele Services) also caters to enterprise customers.
Large variety of use cases will evolve by leveraging 5G connectivity, emerging technologies and engaging multiple skill sets that reveals a potential global market of $300 billion with an average CAGR of 25 % per sector, as per a report from KPMG – ‘The Connected Enterprise – A world of possibilities’.
First some background. Corporates are adopting cloud solutions as traditional networks are not purpose-built for it. The new solutions, which run on internet WAN, are challenging the conventional hub and spoke model. Services are being sold independent of the network, which is challenging the conventional model and pushing telcos to re-innovate and broaden their service offerings by expanding into platform/software services. The market for traditional services (voice and data) are declining, but the larger markets are opening up to cloud and managed services, such as security, edge computing, unified communications etc.
Experts say enterprise services portfolio will increase by many bounds, once 5G kicks in.
Enterprise use cases will drive 5G revenues for Indian telecom operators initially but retail use cases will pick up with mass adoption of 5G smartphones in the country. “But initially, a major share of the revenue from 5G will be contributed by enterprises rather than consumers. The trend is likely to change in the future considering the efforts by smartphone makers to increase mass adoption of 5G devices,” Peeyush Vaish, Partner & Telecom Sector Leader, Deloitte India, said.
Cloud products have already been launched sufficiently and now there are SME (small and medium enterprises) and SMB (small and medium business)pProducts. There are multiple products that have been worked up by telcos along with startups who are collaborating with telcos experts to white label their solution.
“Enterprise products have actually grown over a period of time and will continue to register good numbers. The telecom business has gradually moved away from just being a connectivity to a host of other value added services that goes with connectivity which includes the security, Internet of Things etc. Many of the telcos have actually started offering multiple end to end services,” Purushothaman said.
Post Covid, the MSME’s (micro, small and medium enterprises) have become a huge opportunity to tap. There are around 50 million MSME’s in the market. Jio’s enterprise arm JioBusiness recently launched new tariff plans offering integrated services for MSME. Airtel and Vodafone Idea have been constantly launching new IoT solutions, cloud and services for enterprise customers.
It is estimated that the current turnover of this segment (only for telecom and tech players) would be around Rs 25,000 crore for India itself. This doesn’t include global firms which offer solutions only in this space, another expert adds.
Airtel CTO Randeep Sekhon had previously told ETTelecom, “…enterprise customers can have private networks and can also have edge to support their secure enterprise 4.0 use cases…there will be common threads of automation, there will be common threads of cloud and there will be common threads of 5G use cases of lower latencies and higher speeds and mass contingencies”.
Airtel Business, the B2B arm of Bharti Airtel is the most profitable business for the telecom major given that it contributed 14% to the consolidated revenue and 12% to the EBITDA in FY21, according to a report by ICICI Securities. Airtel Business derives 80% revenue from 20% customers, and sees “huge potential in farming and hunting”.
5G technology will open new revenue streams for telecom players in enterprise digitisation and IoT economy. “This transformation (shift to 5G) will take India to the next leap of growth in the economy. This network transformation will give birth to new businesses and new business models where telcos will no longer be just a pipe to ride on, but a digital marketplace with better opportunities to monetize the assets,” Sanjay Bakaya, Country Head- India & Regional Vice President- India & South Asia, Mavenir, recently said.
4G has shown the potential of what connected solutions can offer. 5G will bring in large scale disruption in the way business activities can be carried out, it will be transformative and has potential to harness the true value of industry 4.0. Through network slicing and private 5G networks, enterprises can enable customization that will allow them a robust network to deploy different use cases securely.
Telecom players have realised that their survival is bleak if they remain only a connectivity provider as technology companies will completely overtake this space forcing telcos to diversify to this space.

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