The rise of modern technology and digital transformation (CSPs) challenges the traditional business models of telecommunications companies. Capex for CSPs is rising due to the rapid pace of innovation, and they face increasing competition from companies such as Over-the-Top (OTT) solution providers. With ever-changing ecosystems, universal products, and rising customer demand for digital services, it might be difficult for CSPs to maintain profit margins. However, to succeed in today’s market, they need to adapt quickly to new circumstances. Companies in the telecommunications industry need to pay close attention to how these changes may affect their bottom line. Margin assurance programs and solutions are urgently required to facilitate data-driven decision-making and strategic investments with higher returns.
This means that the typical telecom provider is no longer an island. They work together on a wide range of projects, including audio, video, content, analytics, cloud solutions, and more, to meet the needs of their diverse clientele. Undoubtedly, the ecosystem is rich in different and attractive partners, which bodes well for the growth trajectory. However, keeping an eye on profits over the long haul is still a major problem.
For instance, S&P forecasts that CSP revenue growth would slow in 2023 compared to 2022 in a global assessment. Several factors are behind this change:
- New entrants in the Over-the-Top (OTT) market are chipping away at telecom profits by providing a plethora of services tailored to individual consumers at low prices.
- Since the introduction of 4G and LTE, the demand for and use of data services has skyrocketed, while voice revenue has plummeted.
- Due to the increasing complexity of business partnerships and the need for more precise information about products and services, profit margins are under constant pressure.
The telecommunications industry has modified its business practices and services in order to maintain its competitive edge. On the other hand, these factors also have an effect on earnings because of the following:
Voice and short message service (SMS) were traditionally the mainstays of the telecom industry. Nonetheless, there is a shift toward unlimited data plans as customers’ data consumption habits evolve. In addition, telecoms need to do more to maintain customer interest. They need to provide app support, bundled OTT services, and smart products. The result is a portfolio that is difficult to manage from a service delivery standpoint due to its complicated product structures and different offerings. Because of the sheer volume and complexity of these interrelationships, it can be difficult to implement profitable pricing strategies.
Operators are compelled to form partnerships with OTT providers on a local, regional, and worldwide scale to meet the growing demand for over-the-top (OTT) content among their customer bases. Carriers may stand out from the crowd and win over new customers by offering attractive service bundles. But margins can be impacted because telcos have limited ways of knowing if the collaborations are truly lucrative and contributing to top-line growth. Some of them have a poor cost-benefit ratio, making them poor investments for telecommunications companies.
Telecommunications companies are under increasing pressure to modernize their infrastructure and implement cutting-edge technologies like automation, artificial intelligence, network functions virtualization, etc. since the rate of digital transformation has quickened over the past five years. Many stakeholders are still confused about the true ROI of these efforts, even though they are eating up substantial portions of budgets. If you doubt this, just think about how long it took for networks to advance from 2G to 3G and then 4G. However, the transition from 4G to 5G will occur in a relatively brief time frame. The average revenue per user (ARPU) is becoming less of a reliable measure of profitability, hence telcos are shifting their attention to other metrics such as average margin per user (AMPU) to gain insight into their service delivery stack.
With Margin Assurance, telecom companies can accurately account for all of their operating, partnership, customer support, and product/service costs in one place. It makes use of analytics and automation to make key performance indicators (KPIs) for revenue and margin available to company decision-makers in real-time, allowing them to make more informed, strategic, and profitable decisions.
In order to help telcos, understand how the features of margin assurance translate into real-world benefits, we have compiled the following table.
|Operational efficiencies||maintain operational margins across costs plus essential margins as per industry best practices||Accurately derive, compute, and report on profitability|
|Revenue KPIs||Leverage AMPU to segment customers into profitable ones.||Enhance customer satisfaction by creating targeted campaigns|
|Marketing and campaigns||Devise strategies for cross-selling products based on customer segmentation.||Improve business decisions that result in higher revenue|
|Partnership analytics||Transparent margin analytics to channel resources into the right partnerships and customers||Elevate productivity of telcos resources through insights into RoI of existing and new programs, products, and services|
|Business intelligence||Provides market intelligence and margin evaluation to understand one’s position against challenges based on subscriber behavior and margin trends||Improves competitiveness through profitable pricing, unique margin products, and customer retention|
CSPs’ rise undermines telecoms’ established business models. CSPs confront increasing competition from Over-the-Top (OTT) solution providers, which is driving up their Capex. Telecom businesses are under pressure to update their infrastructure and embrace cutting-edge technologies like automation, AI, and network function virtualization. Despite consuming large chunks of expenditures, many stakeholders are unclear about the ROI of these activities. Telecom firms can track operating, partnership, customer support, and product/service expenses with Margin Assurance. Using analytics and automation, it provides real-time revenue and margin KPIs.