Get Telecoms Smart - The year ahead

Get Telecoms Smart - The year ahead

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  GET TELECOMS SMART The yearahead
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  GET TELECOMS SMART Theyear ahead The business of delivering connectivity has undergone a lot of change and disruption over the last decade. Mobile and fixed broadband connection has become akin to water and electricity – an essential element in the infrastructure for modern lifestyles and economies. As more things become connected and we perform more of our activities on connected devices, the importance of broadband as well as demands and expectations placed on it will only increase. In 2019 we will witness the beginning of a new era of mobile connectivity with 5G launches imminent in many markets worldwide. It is set out to be the year of questions and exploration laying the foundations for the 5G future. We turned to Ovum analysts to help us shed light on some of the major implications of the arrival of 5G. WILL THIS BE THE YEAR OF 5G? The new mobile technology is the hot topic this year. Indeed, leading markets across the globe will see first commercial 5G launches in 2019. “Operators will have commercially deployed 5G in at least 18 countries by the end of 2019.”1 However, 5G will not yet disrupt the market as it will not reach critical mass this year2 . Coverage at launch will be limited, as will be availability of compatible handsets. According to Ovum analysts, Apple is not expected to launch 5G devices until 20213 – a prediction based on the manufacturer’s previous new technology introduction patterns. Customer’s contract and device renewal cycles, as well as a gradual approach to new technology take up will also contribute to the slow launch in 2019. Yet, category experts predict 5G adoption to be faster than that of 4G4 . Possibly because mobile video consumption is already an ingrained behavior and the new technology with its superior speed and low latency will significantly improve the experience, in particular when it comes to live video streaming. WHAT WILL 5G MEAN FOR MOBILE OPERATORS? Pricing and revenue growth will be the key challenges for providers to solve in order to reap the most benefits from the new technology. Ovum predict that operators will not necessarily be able to charge a price premium for 5G connectivity, rather this will be an opportunity to sell higher value data plans – larger in size and bundled with premium content. 1 2019 Trends to Watch: Consumer Technology Super-Themes, Ovum 2 BBDO Knows interview with Ovum analysts, December 2019 3 Accelerate your 5G Business, Ovum webinar 2018 4 Accelerate your 5G Business, Ovum webinar 2018
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  GET TELECOMS SMART Theyear ahead “For CSPs launching 5G in 2019, this will be an opportunity to sell a more expensive 5G smartphone and a more expensive plan (with a bigger data allowance) to early technology adopters.”5 The overall impact on revenues is, however, likely to be offset by decreasing revenues in lower value, SIM-only, segments (non-5G) driven by the fierce price competition across the world. This will mean that any gains from more expensive 5G plans will be outweighed by the losses in the lower end, and the net result is likely to be close to zero.6 However, 5G will offer another benefit to providers – the lowered cost of delivering data and traffic offloading in high capacity areas7 , which will allow for cost saving, efficiency and an improved customer experience of the network. Early 5G communication will matter in order to raise awareness and position the technology in ways that are relevant to the customer. “The 5G message that will be pushed out to consumers is very important as it will plant the seed for future growth.”8 Being seen as offering the latest technology will be important for operators’ brands. We expect to witness the return of the old connectivity communication themes – quality of experience, coverage and reliability – likely launching a new wave of “communication war” focused on rational product features. We believe that providers able to find points of differentiation beyond rational will be the long-term winners. WHAT DOES 5G MEANS FOR THE HANDSET MANUFACTURERS? The new technology will require new compatible devices, which will trigger a new replacement cycle. Smartphone replacement cycles have been consistently lengthening worldwide, growing from 23.8 months in 2014 to 32.3 in 20189 . “The smartphone market is in desperate need of innovation that will drive a new replacement cycle and 5G is the perfect candidate, but this kind of innovation only happens once in a decade.”10 Capitalising on this rare opportunity will be key for handset manufacturers allowing them to promote new handset use cases and offer premium features reflecting the new possibilities offered by the super-fast connection. Qualcomm’s president Christiano Amon 5 2019 Trends to Watch: Consumer Mobile Broadband, Ovum 6 2019 Trends to Watch: Consumer Mobile Broadband, Ovum 7 2019 Trends to Watch: Consumer Mobile Broadband, Ovum 8 2019 Trends to Watch: Consumer Technology Super-Themes, Ovum 9 Statista 10 2019 Trends to Watch: Consumer Technology Super-Themes, Ovum
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  GET TELECOMS SMART Theyear ahead announced at the end of 2018 that "by the holidays [2019], every flagship handset – at least when it comes to those running Google's Android software and using Qualcomm's Snapdragon processor – will tap into 5G.11 " We expect to see a new wave of handset communication with most key players (with the likely exception of Apple) fighting to deliver the most impactful and relevant messages and win over the early adopters ready to pay a premium for the latest technology. WILL WE SEE GROWTH IN MOBILE-ONLY CONSUMERS AS A RESULT? As mobile connectivity becomes faster and offers the quality of experience approaching that of fixed broadband, the threat of fixed-mobile substitution is exacerbated. The share of mobile-only customers, according to Ovum, is to a large extent determined by the availability of affordable large data packages, which can differ significantly by market. For example, in 2018, mobile-only customers represented 10% of the overall UK market, while in Italy the figure was twice higher at 21%12 . “In 2019, more data will be offered more affordably over mobile.”13 Despite the high likelihood of the resulting growth in the mobile-only segment, “Ovum does not believe [they] will become a majority in developed markets within five years”. Yet this group, largely represented by younger Generation Z customers with high rates of mobile video watching, should not be overlooked by operators. They will represent an immediate opportunity for challengers and mobile-only providers who will attempt to encourage mobile-only subscriptions and capture the young audience. For integrated providers, the focus should be on establishing relevance for the new breed of customers and cultivating relationships with a view on future cross-sell and up-sell opportunities as the segment moves up in economic status and life cycle. WHAT ARE THE IMPLICATIONS FOR THE FIXED BROADBAND PROVIDERS? With the imminent launches of 5G and consumer preferences shifting towards mobile, the question fixed broadband providers will be deliberating in 2019 is: “How do we keep fixed broadband services competitive in a world of superfast mobile speeds, huge data allowances, and unlimited plans?”14 11 https://www.t3.com/news/best-5g-phones 12 2019 Trends to Watch: Consumer Mobile Broadband, Ovum 13 2019 Trends to Watch: Consumer Mobile Broadband, Ovum
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  GET TELECOMS SMART Theyear ahead Ovum predict that for some customers gigabit speeds exceeding those possible via a 5G connection might be attractive and “some twenty CSPs have [already] commercially launched 10 Gbps consumer services”15 . However, super-fast connection will not win over all customers and “traditional fixed-only bundles like triple-play and dual-play will continue to decline in many markets in 2019”16 . To minimise the risk of fixed-mobile substitution, integrated providers will need to bundle their fixed broadband with 5G, whilst fixed-only players are expected to launch MVNO mobile services in order to remain relevant to the increasingly mobile customer base. The biggest opportunity, however, will be found in offering improved in-home connectivity experiences. With proliferation of connected devices in the home, fixed providers have been focusing on offering superior Wi-Fi reach and coverage with the help of premium hardware for a few years now. However, a 2018 Ovum survey found that “a quarter of [fixed broadband] customers suffered poor quality of experience on a regular basis”17 . To address the flaws in home connectivity experiences, differentiate on quality and solidify their competitive positions before the mass-adoption of 5G, “in 2019 more connectivity service providers will adopt a more advanced Wi-Fi strategy”18 . THE YEAR AHEAD – PREPARATION FOR THE BIG BATTLE 5G will undoubtedly become a new battleground for connectivity providers, presenting new challenges and opportunities and revisiting old ones. In 2019 category players will be gearing up and getting into position for what is to come. Ultimately, the winners will focus on understanding the connectivity needs of various customer segments, and delivering relevance through innovative bundles and meaningful communication messaging beyond the rational product features. Yet, initially, hygiene factors such as coverage and reliability will play a crucial role in driving uptake amongst early adopters. The challenge facing 5G providers is no small one - “connectivity service providers need to battle it out for premium customers (which are worth fighting for) on all fronts”19 . 14 2019 Trends to Watch: Consumer Technology Super-Themes, Ovum 15 2019 Trends to Watch: Consumer Fixed Broadband, Ovum 16 2019 Trends to Watch: Consumer Fixed Broadband, Ovum 17 Ovum’s Digital Consumer Insights 2018: Smart Living 18 2019 Trends to Watch: Consumer Fixed Broadband, Ovum 19 2019 Trends to Watch: Consumer Mobile Broadband, Ovum
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  GET TELECOMS SMART Theyear ahead If you are interested in learning more about the subject of this article, please contact Melanie Norris, Global Planning Director, [email protected] ABOUT BBDO KNOWS BBDO KNOWS is a planning resource for the BBDO network. BBDO KNOWS offers thinking, strategy, insights and inspiration on key categories, key themes and consumer segments. If you are interested in learning more about the way BBDO thinks please contact Melanie Norris, Global Planning Director, [email protected]. DISCLAIMER The information and materials in this article are for general information purposes only. Whilst we try to ensure that all information and data in this article is accurate, complete and up to date, this article should not be relied upon and you should seek advice if you intend to use or rely upon any of the insights or data contained in this article. This article must not be shared, downloaded, copied or distributed for commercial purposes without the prior approval of BBDO. © BBDO 2019 All rights reserved.