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39 Telco-centric group primarily consists of traditional telecom incumbents, such as AT&T, Deutsche Telekom, KPN, Verizon, and Telenor.

Operators from this group tend to take a more conservative stance on expanding their service offering beyond core connectivity and largely focus on internal processes

digitization, technical stack, network virtualization, modernizing core business (digital customer interaction, touchpoints, using data driven customer insights). Apart from that, some companies in this group prioritize developing critical digital competencies and transitioning to an agile organization. In the consumer market, these companies rely on partnering with OTT players (e.g., Spotify, Netflix, and Amazon) to expand content services offerings.

When it comes to the corporate market, on top of traditional connectivity, telco-centric operators primarily focus on developing IoT capabilities in 5G, targeting various industry verticals, Cloud, and security.

The key distinguishing factor for operators from the second group is a heavy emphasis on developing digital services and apps beyond core connectivity and stronger customer focus vis-à-vis internal processes perspective.

Table 2. Key digitization / business transformation elements in Digital-centric group

# Operator Key Digitization / business transformation elements 1 Airtel - Consumer segment: content and digital payments

- Enterprise segment: Cloud, IoT, Advertising

- Emphasis on external partnerships (AWS, Google, Disney, etc.) - Digitized internal processes

2 Axiata - Consumer segment: digital financial services

- Enterprise segment: AdTech (separate data and artificial intelligence company)

- Internal digitization: customer touchpoints, business functions and operations.

3 BT - Proprietary Data and AI platform

- Digital incubation business line to develop and test innovative products

- Internal digitization: software development insourcing, building digital talent pool and competencies

4 Digicel - Wide array of consumer apps: self-care, content, messaging (majority sourced from Turkcell) largely offered for free to drive mobile data consumption and improve customer loyalty (lifetime value)

5 E& - Consumer segment: fintech and entertainment; single SuperApp - Enterprise segment: Cloud, IoT and Cybersec

- Internal digitization: customer experience and operations - Ventures arm to invest in external opportunities

6 Millicom - Consumer segment: separate fintech business line

- Internal digitization: increasing efficiency of operations through leveraging new technologies

7 MTN - Consumer segment: Fintech ecosystem, e-commerce, messaging super app "Yoba" with integrated marketplace and financial services

- Corporate segment: mobile advertising

8 MTS - Consumer segment: digital ecosystem gateway, fintech, content (incl. original), retail

- Corporate segment: Cloud, Adtech

- Internal digitization: agile structure, product focused teams, processes automation

9 NTT DOCOMO - Consumer segment: Financial services, video/entertainment, ambition to expand into electricity retail, e-health, XR

- Internal digitization: sophisticated digital marketing/ data driven management) and build out of software development capability 10 Ooredoo - Consumer segment: financial services, content

- Corporate segment: Cloud

11 Orange - Consumer segment: Mobile financial services, content

- Corporate segment: Cloud, Cybersecurity, Business IT support - Internal digitization: Customer care automation, optimization of

network and sales efficiency through AI and Big data

12 Singtel - Consumer segment: Financial services, content and media, health, education, e-commerce

- Corporate segment: Data insights, AdTech

- Internal digitization: building internal digital talent pool and capabilities.

13 Telefonica - Corporate segment: launched a separate B2B business Telefonica Tech, focus on Cybersecurity, Cloud and IoT/Big Data.

14 Turkcell - Consumer segment: Fintech, messaging, content, e-commerce;

wide array of apps

- Corporate segment: Cloud, cybersecurity, business apps, specialized solutions (education, healthcare)

- Lifecell ventures: separate spin off to market its range of digital apps/ services to other mobile network operators

15 VEON - Consumer segment: Fintech, Content, wide array of apps (sourced

41 - Corporate: B2B e-commerce (ShopUp)

- Established Ventures, a spin off with the ambition to attract external funding (and higher valuation) through private placement and/ or public offering and invest in attractive external

opportunities

16 Vodafone - Consumer segment: Financial services, lifestyle super app, content - Corporate segment: IoT, Cloud & Security

- Internal digitization: technologies are leveraged to improve customer experience (predictive base management, digital marketing platform, App/Web as primary retail channel and AI-based customer service (My Vodafone app and Tobi AI-bot).

Majority of companies from the second group target content (video, music streaming, gaming, media) and financial services adjacencies to complement their connectivity services offering for the consumer segment.

Messaging super apps, e-commerce, e-health, VR/AR currently remain nascent and appear to be promising emerging areas.

Unlike players from the first group, digital-centric telcos strive to offer a broader range of services for corporate clients on top of connectivity, complementing already traditional Cloud, cybersecurity and IoT with more sophisticated data customer insights, AdTech, business applications and IT support.

Several companies from the second group (VEON, e&) have established venture capital arms to target external investment opportunities in tech startups and attract

external funding aiming to monetize and extract value from their own standalone successful digital business lines (e.g., Fintech, content).

Turkcell represents an interesting edge case in the second group. After having invested in developing a wide array of consumer and business apps and achieving some success in home markets, the company established a separate B2B entity to market these apps to other mobile network operators outside its geographic footprint.

In terms of internal perspective, digital-centric players also explore processes and operations automation, focus on building internal software development capabilities, expanding digital talent pool, implementing agile organization and product-focused teams, and using data-driven digital marketing tools powered by AI.

As an interesting observation, all operators from the third radical disruptors group represent the Asian continent, with companies from more advanced economies (Japan, South Korea) and developing market economies (China, India).

Operators in the third category are not homogenous and could be put in additional subgroups:

a) Infrastructure players: China Mobile, China Telecom Group, China Unicom b) Advanced telcos: KDDI, SK telecom

c) Entrants from adjacent markets: Rakuten, Jio,

Chinese operators have invested heavily in Cloud infrastructure and appear to be shifting from telecommunications to computing infrastructure (akin to AWS, Google cloud and Microsoft Azure). These companies use state-of-the-art telco connectivity as a gateway to target corporate clients for industrial digitization (mining, factory, grid, metallurgy, port, hospital, surveillance) utilizing IaaS and PaaS service models.

KDDI and SK telecom, apart from the content, financial, and e-commerce services for the consumer segment, alongside Cloud and IoT for corporate clients, aim to develop platform services for Web 3.0 and metaverse.

Rakuten is the biggest e-commerce platform and a dominant online ad platform in Japan, boasting 70 various businesses under one brand. In addition, it has launched subsidized mobile communication services to complement its digital Internet services, aiming to augment customer loyalty and expand available customer data.

43 On the infrastructure front, Rakuten has pioneered the Open Radio Access Network (Open RAN). This new innovative architecture allows mobile networks to be built using agnostic combinations of hardware and software, including the ones from an emerging generation of new vendors. Rakuten Mobile has deployed the world's first network-based on Open RAN standards. Since then, it has launched "Rakuten Symphony", a global B2B services spin off focusing on extending its know-how and expertise in building and integrating Open RAN to other mobile network operators, thus stepping on traditional network equipment vendors' (e.g., Ericsson, Nokia, Huawei, ZTE) territory.

Jio is another example of a non-conventional telco player. Its parent company is engaged in retail and e-commerce and has launched a telecom operator arm using super cheap subsidized services to gain market share.

Jio's services span connectivity and cloud, media, digital commerce, financial services, gaming, education, healthcare, agriculture, Government to Citizen (G2C), smart cities, and manufacturing.

In 2020 Jio Platforms received a $5.8 bln investment from Facebook alongside $4.5 bn. from Google.

Since investing in Jio, Facebook has integrated Reliance's platform JioMart into WhatsApp to connect customers with local retailers selling groceries and other essential goods. Google on its hand, plans to work with Jio to produce and market low-cost smartphones with Android operating systems to expand its share in one of the world's fastest-growing smartphone markets.

Both Jio and Rakuten appear to be using mobile communications as customer acquisition, data insight and loyalty tool, where telecom services serve as a connectivity

layer/ gateway for customers to access their other e-commerce and financial services, which serve as true revenue engines thus resembling OTT-players business model.

In most cases, there was little change in the evolution of operators' approach to digitization between 2017 and 2022, with largely incremental additions to the already pursued strategy. However, there were several cases identified with more radical shifts and turnarounds that deserve some special attention.

One of the cases is VEON Group which in 2017 made a bold bet on developing a global internet platform, an application with reach features extending to mobile account

management and self-care, messaging and calling, content, and an integrated marketplace.

The app was intended to compete with other OTT messengers such as WhatsApp, Viber, Telegram, and others. However, in 2019 the initiative was shut down as the company didn't manage to gain the necessary scale ("VEON", 2022).

The other two cases relate to US market players Verizon and AT&T, which currently fall into a more conservative telco-centric group.

In 2015 Verizon made a rather bold move into the internet business with the acquisition of Yahoo, AOL, and a launch of "go90", a mobile video platform aimed to become Verizon's own YouTube. However, after a failed attempt to grow and expand these non-core

businesses, in 2021, the company divested "Verizon media" assets and wrote off $4,6 bn, admitting its failure to capitalize on online media and digital advertising opportunities, unlike non-telco players (Google, Facebook) ("US telecoms decide focusing on pipes isn’t so dumb after all", 2022).

AT&T has also tried to expand into the media business by acquiring DirecTV, a US satellite broadcaster in 2015 and Time Warner (the company behind WarnerBros studio, HBO and CNN) in 2018. However, after a mixed performance record and deteriorating

45 competitive position in the core telco market, AT&T in May 2020 spun off its media assets and decided to focus solely on the connectivity business ("AT&T is becoming a telco – it's crazy but it might just work - Telecoms.com", 2022).

On the opposite, Deutsche Telekom, unlike its telecom peers, refrained from exploring adjacent markets and remained primarily focused on the core connectivity business.

As a result, the company claims to have much higher TSR (total shareholder return) rates versus its peers. In addition, it boasts an outstanding share performance with value growing from $32 to $76 bn over the 2018 to 2021 period ("Deutsche Telekom", 2022).

VEON, AT&T, and Verizon's failures alongside the Deutsche Telekom example could suggest that bolder digitization strategies may be harder to implement and that they are rarely value accretive. One may conclude that telco incumbents may be better off taking a more cautious approach to exploring adjacent markets and focusing their digitization efforts on core connectivity.

After looking holistically at various digitization and business transformation initiatives pursued by researched telecom players sample, I propose the following framework for their categorization:

1. Technology enablers 2. Products

3. Internal process 4. Customer journeys 5. Organization See figure 3 below.

Figure 3. Categories of digital initiatives

"Technology enablers" category represents initiatives aimed at creation of

infrastructure and software applications (e.g., proprietary IoT platform, or computational/

cloud capabilities in Chinese operators' case, or a wide array of consumer and business apps in Turkcell's case) that would allow telco players to enter adjacent markets, offer products and services beyond the core connectivity and optimize their internal operations. These initiatives do not create value on their own and essentially serve as prerequisites for initiatives in other categories.

Initiatives in Products category primarily aimed at the development and launch of services that would satisfy customer needs beyond core connectivity. When it comes to a bolder digitization or business transformation approach, these initiatives lie at the center of business model transformation (alongside the associated revenue streams and other

essential business model elements).

When it comes to a bolder digitization or business transformation approach, these initiatives lie in the center of business model transformation (alongside the associated revenue streams and other essential business model elements).

47 Based on the holistic review of various digital products and services outside of core connectivity I came up with the following taxonomy (see figure 4).

Figure 4. Taxonomy of digital products

Internal processes relate to initiatives aimed at operations and processes automation (network, sales, warehouse, customer care, field force, etc.) through the utilization of various digital technologies. These initiatives help companies to improve their productivity and reduce the cost base.

Customer journeys relate to existing connectivity products (e.g., My Vodafone app that serves as the primary retail channel and AI-based customer service) and new services beyond the core connectivity. These initiatives help to optimize customer journeys through digitization, resulting in improved customers satisfaction and loyalty.

Initiatives falling in the Organization (Learning & development) category are largely aimed at developing organization capabilities (e.g., agile ways of working, product-focused teams, digital talent pool development, programming insourcing) that are required for initiatives in all other categories.

Fin.

services

Cash (as a mean of stored value)

Top-ups / cash-out Transfer Payment Loans VAS

Air$me top-up

Mobile wallet top-up

Card account top-up

Cash-out

Air$me transfer

Remi:ance (cash)

Mobile wallet transfer

Card to card transfer

Direct carrier billing

Mobile commerce

Mobile wallet payment

Card payment

Air$me loan

Microfinance loan (2 card or in cash)

Device financing

Insurance

BaaS (brokerage model)

Other

Products

Content IoT

Cloud & Security Data

B2C Ecosystems/

3rdparty services (partnerships)

Pay TV (IPTV/Cable) OTT (TV / Video) Gaming Other

Marketplace

PaaS Managed cybersecurity Other

AdTech Geo analyFcs Credit Scoring

Smart metering TelemaFcs

Instant messaging E-Health AgriTech EdTech E-Tourism Open APIs

Other

Wellness

Lifestyle Ride hailing Food delivery Restaurant booking TickeFng Other

Other

SaaS IaaS

1

2

3

4

5

6

Accounts

Air$me

Mobile wallet

Bank card

Alterna$ve instruments

Audio Books

Wearables Smart homes Security

In the business model concept perspective, tech enablers and organization initiatives could be attributed to the so-called "key resources" domain (e.g., creating important physical and non-physical assets required to make the business model work).

When assessing value creation from various categories of digital initiatives, I believe the financial impact could only be reasonably assessed for products, internal processes, and customer journeys via revenue contribution and cost-saving.

Revenue contribution and cost-saving could be classified as either direct or indirect.

Direct contribution would imply that there is a direct revenue that could be attributed to a particular product (e.g., subscription fee or part of it in the bundle, commission, etc.) or direct cost savings which could be allocated to a concrete initiative

The indirect contribution would imply that the initiative delivers incremental revenues or cost savings via operational drivers (e.g., average revenue per user uplift, customer churn reduction, acquisition of additional customers).

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