Roland Berger: Telco operators must utilise blind spots

16 July 2015

The telecom operators market is difficult to enter, with high capital costs and stiff competition from incumbents. There are ‘white spots’ however, spaces to which already established players are blind and in which a competitor may be able to generate considerable value for underserved customers, whether rural or on low income. By correctly leveraging the market potential, new entrants can still make their mark, capture market share and generate considerable EBITDA from merely two years of operation.

Market entry
Entering into a new market can be difficult, especially markets in which initial capital costs require a healthy EBITDA (earnings before interest, taxes, depreciation, and amortisation) figure to be successful. The mobile telecom operators market is one such market. Recent Roland Berger Strategy Consultants research finds that new operators that fail to achieve 10-15% market share also have difficulty in gaining an EBITDA margins of around 20%, which is needed to meet CAPEX (capital expenditures) investments costs, interest payments and tax.

This difficulty can be seen back in the number. The analysis shows that in the mobile telco market, where mobile use has reached 80% of penetration, by the time a third entrant enters, the average market share after three years is only 16%. Although individual variation exists, with a range between 42% and 1% in the markets analysed.

Correlation between market share and EBITDA for 150 3-player markets

Key levers for entry
New entrants into the market can make inroads however. According to the consulting firm, a number of considerations may provide new telcos with success. provides a summary:

One area in which new entrants may be able to ‘out compete’ the competition is network capital efficiency. Entrants taking a holistic approach, accounting for both technical and commercial aspects, are the most successful. This can help operators become more selective and cost effective in both maintenance and technology roll-outs. Increased network sharing, for instance, could allow operators to focus their technology investments on core areas, whilst transforming other capital investments into operational expenditures.

A further method for increasing market share comes from the introduction of new product combinations into a market that targets a particular under-served segment. Possible strategies include emphasis on online/non-physical distribution together with a simple and aggressively priced product portfolio.

Another way in is by identifying markets in which regulatory conditions are not excessively punitive to new entrants, due to for instance, spectrum allocation, unfavourable roaming agreements and/or mobile termination rates (MTR). According to the consultancy, without such regulatory support, late entrants are likely to face great difficulty becoming attractive to customers while securing adequate profits.

Success in France

Successfully moved up
While entry is considered difficult in many markets, Roland Berger does note a number of success stories, including in France, Mozambique and Kuwait.

In France, Free Mobile managed to claw its way to almost 20% market share against three incumbents over a two year period. The company, a subsidiary of Iliad Group, used a simple product portfolio, aggressive prices, and online channels. Leveraging its fixed broadband services (present in the market well before the launch of mobile operations) the company could push aggressive pricing for its mobile offering even further. This aggressiveness was further facilitated by asymmetric MTRs.

Success in Mozambique

In Mozambique, Movitel Mozambique climbed from existence to 35% share over a period of two years, decimating the dominant position of Mozambique Celular. The company, a subsidiary of the Vietnamese telecom group Viettel, approached the market by being customer service directed. In addition, it invested heavily in the rural population, creating a rural network and actively going door-to-door to acquire 80% of the rural market.

In Kuwait, Viva Kuwait, which is partially owned by Saudi telco incumbent STC, launched in 2008 in the face of stiff competition from Zain and Ooredoo. The company quickly differentiated itself through identifying underserved segments in the market and launched mobile broadband packages together with other innovative plans. Realising the importance of data, the company focused on rapid deployment and upgrading of its 3G sites. On the back of its competitive data- mobile offerings, Viva was able to achieve success both with subscriber numbers and substantial improvements in financial performance. In 2014, revenues were up 31% and EBITDA up 72% compared to 2013.

Success in Kuwait

Commenting on the research, Santiago Castillo, Principal of Roland Berger Middle East, remarks: “There is no 'one size fits all' for becoming a successful challenger, but the strongest performers tend to focus their efforts on capital/cost effectiveness, accentuated differentiation of products and services compared to the competition, and ensuring a regulatory framework that makes it possible for them to compete effectively.”


5G internet impact underestimated by business

27 March 2019

The UK rollout of 5G mobile internet is set to get under way in 2019, with a growing number of telecomms providers stating they will launch their next-generation coverage by the end of the year. Despite the increasing buzz surrounding the new technology, however, a survey of executives has found a business community which holds rather downbeat opinions about the transformative potential of 5G.

Every decade or so, a new generation of network technology comes along that promises more speed, more capacity and more uses. With each generation, network operators invest capital to upgrade their infrastructure, with the firm belief that those investments will lead to more satisfied customers and reinvigorated revenues and profits. Following on from the launch of 4G in the 2010s, the next decade is set to see the rise of the 5G generation of new mobile technologies. EE, Vodafone, O2 and Three UK are among the telecomms providers to have already announced they will launch 5G services in the UK in 2019.

While previous generations have been understood in almost universally positive terms, the often complex definitions as to precisely what 5G consists of often causes confusion and, in some cases, cynicism. Indeed, a recent study found that 53% of business leaders see no near-term business case for the technology. While the leaps to 3G and 4G were more noticeable, 5G New Radio speed in sub-6 GHz bands is said to be ‘modestly higher’ than 4G, meaning many still believe networks can do well enough leveraging 4G, while implementing 5G is likely to invoke hefty movements of capital.

In response to this lingering scepticism, George Nazi, Global Lead at Accenture’s network practice, has argued that businesses are missing the point about 5G. Commenting on the state of play following the release of a new study on 5G by Accenture, Nazi said that breakthroughs in three-dimensional video, immersive television, autonomous cars and smart-city infrastructure are set to unleash opportunities that are difficult to imagine today, but will soon be transformative. If companies fail to plan for 5G, they could well miss out on these opportunities.

Nazi added, “The reality is that 5G will bring a major wave of connectivity that opens new dimensions for innovation and commercial and economic development… Telecommunications companies will play a pivotal role in bringing these prospects to light.”

Underestimating 5G disruption

Despite these apparent opportunities, the majority of the 1,800 executives Accenture polled remain unconvinced. 53% of respondents from the mid-sized and large businesses canvassed across industries in ten countries said that there were ‘very few’ things that 5G will enable them to do that they cannot already do with 4G networks. Meanwhile, less than two in every five executives expected 5G to bring any sort of  ‘revolutionary’ shift in terms of either speed or capacity.

There were notable differences in opinion across different sectors, however. According to Accenture, over half of respondents from the energy sector believed 5G will have a revolutionary impact with its ability to reach new places – like remote and inhospitable areas – something which can further boost innovative new techniques in the renewable sphere in particular. Compared with just 41% of all executives surveyed, this suggests that specific sectors likely have an altogether more positive outlook for 5G.

Slow uptake

One factor which might be hindering enthusiasm for 5G is that executives may simply not know much about it. While it is true that these same executives are unlikely to have truly understood 4G either, the fact remains that simply improving the product’s name to the power of one has ceased to impress business leaders enough to invest in the technology. Accenture found that almost three-quarters of executives needed help to foresee future 5G possibilities and use cases.

If the upgrade is to take off, then, its champions will need to work hard to address this. This need is further underlined by the fact that roughly six in every ten survey respondents blamed their lack of knowledge on communication service providers. These providers were subsequently slated by executives, who said they had not been made aware of specific challenges in different industry verticals.

Pivotal role for telcos with 5G

At the same time, around a third of respondents noted a number of other perceived barriers for 5G adoption, which they need to be convinced are worth facing. 36% of respondents predictably said upfront investment was their biggest hurdle to get past – the most sizeable minority of those surveyed. 32%, meanwhile, said security was a concern, and understandable qualm in an environment where many still struggle to protect data under tried and tested 4G systems. Employee uptake was also mentioned as a cause of concern to that end, with 30% of responses.

Despite this, Accenture’s survey still found significant cause for optimism on the subject of 5G. Anders Lindblad, Accenture’s Communications & Media industry lead for Europe, contended that despite the knowledge gap, there is excitement among business leaders about the value that 5G can bring to enterprises.

Lindblad added, “This value is currently trapped within the perceived risks and uncertainty around 5G, which can be unlocked by organisations that understand customer needs, can overcome barriers to adoption and can drive collaboration among service providers.”

Looking ahead, the analysis suggests that 5G service providers have a lot to be upbeat about, especially from 2022 onwards. As many as  70% of survey respondents said 5G applications will give them a competitive edge with customers after that point, suggesting that while uptake will initially be sluggish, it will pick up rapidly in the next three years.

On top of that, respondents also related that they were optimistic with regards to 5G coverage. Three fifths of all those surveyed said that they expect 5G to cover nearly all the population – presumably in their own national territories – by 2022, something which would give them rapid access to new markets across the globe in ways never seen before.

While only 46% of survey respondents thought 5G will be making its mark on speed by 2022, and 42% thought the same about capacity, there is a clear belief that eventually the technology will become indispensible. It just may take some time to do so.