Executive program in management studies Digital business track

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Executive program in management studies

Digital business track Master thesis:

How Do Telco Players Digitize and Transform Their Business in Response to Evolving Industry Competition and Threats From New


Sergii Nychyporuk

Student number: 12015245

Date of submission: 23-06-2022 Version: final


Ed Peelen


Statement of Originality

This document is written by student Sergii Nychyporuk who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of the completion of the work, not for the contents.

Signature ___________________________________________



3 Table of Contents

Statement of Originality ... 2

Abstract ... 4

Introduction ... 5

1. Literature review (theoretical framework and hypothesis building) ... 12

2. Data and method ... 25

2.1 Research design ... 25

2.2 Case study and research setting ... 28

2.2.1 How telco industry is being disrupted by the new digital entrants? 28 2.2.2 Selective digital entrants and their business models ... 31

2.3 Telco players case selection, methods of analysis and process ... 34

3. Results ... 38

4. Discussion and conclusions ... 49

References ... 52

Appendices ... 59



The research aims to review how telco players digitize and transform their business models in response to the evolving industry competition and threats posed by the new digital entrants.

This exploratory study uses a qualitative approach and focuses on a selective review of digital entrants’ models and extensive case studies of 29 telecom players.

The research findings show that various telecom players pursue different digitization strategies. Therefore, depending on the approach to digitization, telco players could be put into three distinct groups (telco-centric, digital-centric and radical disruptors).

Based on the combination of literature review and case study, the research offers a refined conceptual framework for categorization of various digitization and business transformation initiatives (Technology enablers, Products, Internal process, Customer journeys, Organization) and proposes a detailed taxonomy of digital products and services, deployed by telecom players outside of their core business.

The thesis concludes by discussing key findings, research limitations, and propositions for future research.




My research attempts to answer the question, "How do telco players digitize and transform their business in response to evolving industry competition and threats from new entrants?"

Why do I think this topic is interesting and important, both from a managerial and academic perspectives? Rapid advancement of computing technologies and dramatic growth in proliferation of the Internet has brought to life a plethora of new "digital" so- called technology companies. By leveraging new information and digital technologies, these companies create new markets, develop novel products and services that disrupt traditional industries, and at the same time wipe out the value from conventional "brick and mortar"

incumbents posing a threat to their existence and survival.

To avoid the ambiguity around the term "digital", we should define this notion. The Merriam-Webster dictionary provides the following definition "anything of, relating to, or being data in the form of binary digits ("Merriam-Webster", 2022). Apart from the literal definition, the term "digital" has come now to refer to computing and Internet technology in general.

A few examples of digital entrants who disrupt traditional industries could be Uber, the largest provider of transportation and mobility services which doesn't own fleet of cars;

Booking.com, an online travel agency (OTA) and accommodation services provider that doesn't own a single hotel and the world's most valuable online retailer Alibaba, that owns no merchandise inventory of its own, as well as Facebook, the most visited media

destination, which creates no content (Gallaugher., 2018).

Another great example would be Amazon, that entered a mature retail industry and by leveraging digital technology for internal processes and customer service just in two


decades since founding managed to surpass in market capitalization a well-established traditional retail player such as Walmart ("Technology firms are both the friend and the foe of competition", 2022).

Disruption of the traditional telecommunication industry by these new "digital"

entrants has recently become especially acute. Companies from adjacent markets (Internet, software) have developed novel services and products primarily provided to customers over the Internet as complimentary services (OTTs). At the same time, these services substitute traditional paid telco services such as messaging and voice calls and thus put pressure on the topline of mobile network operators. As a result, recent long-term revenue forecasts for telco players in mature markets look disappointing and imply either stagnating or single- digit decline in their revenues ("Why the global telecoms dream turned sour", 2022).

Free Cash Flow generated by telco players and return on invested capital are decreasing across the entire industry on the back of suppressed topline alongside the growing costs and ever-increasing capital expenditures, required to finance investments in the new generation of networks and infrastructure to accommodate the exponential growth of mobile and fixed data traffic driven by increase in usage of third-party content.

Despite heavy investments, mobile network operators have hard times monetizing their infrastructure, while OTT companies are ripping all incremental value piggybacking on mobile network operators' infrastructure ("Why telecoms groups have fallen out of fashion with investors", 2022).

Declining free cash flows are reflected in diminishing business valuations and market capitalization of the major Telco groups due to timid investors' sentiments towards the overall longer-term telco industry prospects.


7 The Future world of communications seems to belong to social networks (e.g.,

Facebook, Telegram, TikTok, Snapchat), as well as networks-agnostic content and data-rich applications marketed by either software companies (e.g., Microsoft), Internet companies (Google), or manufacturers of the end-user equipment and handsets (Apple).

Mobile and fixed network operators are either likely to face a gradual demise or should consider a drastic transformational change to their business to keep up with the pace of technological changes, changing competitive dynamics, altering consumption patterns and consumers' preferences.

Addressing competitive threats created by these new "digital" entrants by simply utilizing conventional concepts from traditional Strategic Management domain such as generic competitive strategies (Differentiation, Cost Leadership, Focusing) or exploring alternative strategic directions such as Divestment, Consolidation, Penetration, Product Development, Market Development, and Diversification, may not be sufficient (Aaker &

Moorman, 2021).

Companies and businesses to thrive in emerging new fast-paced world have now to entirely rethink and transform their business models by which most of researchers would imply not just what businesses do (e.g., what products and services they produce to serve the needs in addressable market spaces) but also how they do it (Zott, Amit & Massa, 2011).

As convincingly illustrated by Apple's performance before and after business model change, a refreshed business model can create and exploit opportunities for new revenue and profit systems in ways that counteract an aging model that has tied a company into a circle of declining revenues and pressures on profit margins (Amit & Zott, 2001).

In a nutshell, nowadays digital technologies cannot be ignored and "digital transformation" from a popular business "buzzword" is becoming a necessity for every


company that wants to defend itself from growing competition, ensure survival of its business, deliver value to customers and secure returns to its shareholders, regardless of the industry where it operates.

But what is digital transformation? Is it a novel theoretical concept or an extension of the existing concepts and theories well explored in the academic management domain?

Reviewed literature and publications on the topics related to digital transformation and business model innovation from ontological perspective seem to adopt an interpretivist approach as currently there is no clear consensus neither in the business literature, nor in academic publications what the digital transformation exactly is.

Some business authors may argue that digital transformation of the company is driven by a corporate strategy, others would say that digital transformation is a radical change of company's business model, enhanced by the deployment of the new digital technologies, where the business model itself is a description of business architecture.

Based on the review of available academic publications and literature, there appears to be little knowledge on how to transform business architectures, what path to follow, what routes to distinguish, and what elements influence the success and failure of such transformation efforts.

From an academic contribution perspective my research intends to bridge the gap between the notion of the digital transformation, which has recently become widely popular among the management practitioners in the business community, and the various theoretical concepts being explored by academic scholars.

The expected outcome is to present a holistic view on:

a) what could be done in respect to digitization and business model transformation via leveraging relevant digital technologies.


9 b) transpose and expand this into a specific set of recommendations (blueprint) for Telco players covering the approach to the transformation of their business model, aiming at the creation of new businesses, delivering enhanced value to customers (through product and customer journeys) and improvement of internal processes and efficiency.

Based on the ontological aspects, I have chosen to apply exploratory and qualitative research methods to achieve my research objectives.

From an epistemological perspective, I have decided to take an interpretivist approach and construe my research design accordingly. The research intends to cover the following key aspects:

- What is the generic approach to the transformation of business models and digitization, explored in the business literature and academic publications?

- In what way telco industry is being disrupted by digital entrants and what are the implications for incumbents?

- What are the sources of value creation and revenue-generation mechanisms deployed by selective digital players (OTT platforms)?

- Case studies (selected examples on how digital transformation topic is being addressed by the various players in the telco industry in response to evolving industry competition and competitive threats from the digital entrants.

- Practical application: suggestions for various digitization and transformation options/

pathways that telco players may pursue in response to existing and emerging competitive threats.

The analysis of the generic approach will be based on qualitative data available from journals, academic articles, and business publications.


As part of the research, I intend to review dedicated academic publications alongside business literature on the generic approach to digital transformation and list options potentially available to telecom players (non-exhaustive).

Based on the above, I will come up with the preliminary propositions addressing the initial research question.

To validate and verify preliminary propositions in addition to the previous stages, I plan to conduct a multiple case study for selected sample within the telco industry (i.e., how selective telco groups are addressing the topic of digital transformation).

For sample selection, publicly available data from GSMA (mobile network operators trade association) (www.gsma.com) will be used. To ensure access to relevant corporate information sample is largely to be limited to publicly listed companies.

To analyze how companies from the sample address digital transformation topic, corporate publications will be reviewed (including, but not limited to annual statements, financial reports, investor presentations, analysts call transcripts, CEO or chairman's letters, conference materials etc.) and summarized in key findings.

The research will be concluded with practical suggestions for the digital transformation of telco operators' business alongside a proposed strategy blueprint provisionally covering the following areas:

- Digitization of the «core» business (i.e., initiatives in various domains, e.g., Technology, Customer Experience);

- Redesigning existing and deploying new business models, alongside launching new digital services and products (a conceptual approach based on relevant examples from the

«digital» OTT and telco world).


11 The research is expected to contribute to theory by systematizing various perspectives on what constitutes the digital transformation, corroborating those perspectives with practical insights from the telco industry to expand the notion of "digital transformation"

alongside the set of generic approaches/ initiatives within its domain.


1. Literature review (theoretical framework and hypothesis building)

Often "digitization," "digitalization" and "digital transformation" terms are used interchangeably across business literature and various academic publications.

The topic of digital transformation is quite broad and would encompass multiple diverse aspects (including such themes as disruptive technologies, business model

innovation, value proposition, multi-sided platforms, ecosystems and networked markets, value chains, digital transition, and change management.

To unwrap this broader topic, in the first place, we should probably start with the business model concept and define what this notion entails across different management theory domains.

The business model concept has been extensively elaborated in the paper "The Business Model: Recent Developments and Future Research" where researchers had established that it is often being studied without providing an explicit definition. Of 103 publications dedicated to business models they had reviewed, 37% did not define the concept, 44% only listed its main components. The remaining 19% of publications referred to other words. Definitions provided across different papers only partially overlapped, leaving much room for differing interpretations (Zott, Amit & Massa, 2011).

The above-mentioned review further revealed that the business model concept has been used mostly in attempts to address the following three phenomena: (1) e-business and the use of the information technology in organizations; (2) strategic issues, such as value creation, competitive advantage, and performance of the firm; and (3) innovation and technology management. Selected business model definitions from this research are provided in appendix A, Table 1.


13 The research field that devoted the most attention to business model concept was mostly in e-business realm by which scholars would imply business conducted electronically, encompassing e-commerce, e-markets, and Internet-based business as well as referring to the firms which transact with their customers over the Internet. For an aggregated summary of the main e-business model components, please refer to Table 2 in appendix A.

Professor Michael Rappa refers to the business model as the method of doing business by which a company can sustain itself, that is, to generate revenue. The business model defines how a company makes money by specifying where it is positioned in the value chain (Rappa, 2022).

When it comes to e-business and models on the web, Rappa suggests the following typology: Brokerage Model, Advertising Model, Infomediary Model, Merchant Model, Manufacturer (Direct) Model, Affiliate Model, Community Model, Subscriptions Model, Utility Model, where each of them is characterized by its distinguishing attributes and features.

In the strategy literature, discussion about business models was centered mostly around the following three themes: (1) the nature of value creation through networks, (2) the relationship between firm performance and business models, and (3) the distinction between the business model and other various concepts from the strategy field.

In the technology and innovation management domain, the business model is seen as the mechanism that connects a firm's technology to customer needs and/or other firm resources. The business model is conceptually placed between a firm's input resources and market outcomes, and it "embodies the organizational and financial 'architecture' of the business" (Zott, Amit & Massa, 2011).


Alexander Osterwalder and Yves Pigneur have further clarified the definition of a business model and refer to it as the description of the rationale of how the organization creates, delivers, and captures value (Osterwalder & Pigneur, 2011). As per their Business Model Canvas concept, a business model consists of several building blocks: customer segments, channels, customer relationships, revenue streams, essential resources, key activities, key partnerships, and cost structure, where the value proposition is the central element. As to various business model types or "patterns", Alexander Osterwalder and Yves Pigneur, highlight unbundling business models, the long tail, multi-sided platforms, free as the business model, and open business model.

To summarize the above discussions, in a nutshell, business model would describe what specific value is delivered to the customers (e.g., value proposition, product); through which internal and external processes and networks (involving other parties), with which cost base and other required resources and how in the end the company derives its revenue (through pricing models, payment options and mechanisms etc.).

In the other research, the authors have further explored the business model innovation as an underutilized source of value creation and a tool to defend the business from competitive threats, which may prevent competitors from replicating the company's products and services. They reasoned competitors might find it more difficult to imitate or copy an entire novel activity system rather than a single product or process (Amit & Zott, 2010).

An innovative business model can create an entirely new market or allow a company to develop and exploit new opportunities in existing markets. Changes to business model design can be subtle; even when they might not have the potential to disrupt an industry,


15 they can yield considerable benefits to the innovator, like for example, delivering cost savings or improvement in processes.

In the same paper, it is assumed that business model innovation can occur in several domains: Content, Structure & Governance. The content of an activity system refers to the selection of activities to be performed. An example is IBM shifting from a hardware

manufacturer to a service provider (consulting, integrated IT solutions etc.). The structure of an activity system describes how the activities are linked and in what sequence. Finally, the governance of an activity system refers to who performs the activities.

Innovation could happen either by adding novel activities, for example, through forward or backward integration (new activity system content) or by linking activities in novel ways (new activity system structure) or by changing one or more parties that perform any of the activities; (new activity governance).

In the earlier works, the same authors have identified four major interlinked value drivers of business models: 1) Novelty, 2) Lock-in 3) Complementarities, 4) Efficiency (Amit

& Zott, 2001).

Novelty captures the degree of innovation embedded in the activity which a firm performs. Lock-in refers to those activities within the business model that create switching costs or incentivize participants to stay and transact inside the activity system.

Complementarities refer to a value-enhancing effect of interdependencies between activities constituting a business model.

Efficiency would cover cost savings derived through the interconnection of the activity system (Please refer to figure 1 in the appendix A).


The same authors in the other research suggested that managers should ask themselves the following six critical questions as they are considering business model innovation:

1. What perceived needs can be satisfied through the new model design?

2. What novel activities are needed to satisfy these perceived needs? (business model content innovation)?

3. How could the required activities be linked to each other in novel ways?

(business model structure innovation)?

4. Who should perform each of the activities that are part of the business model?

should it be the company, a partner, or a customer? What novel governance arrangements could enable this structure? (business model governance innovation).

5. How is value created through the novel business model for each of the participants?

6. What revenue model fits with the company's business model to appropriate part of the total value it helps create? (Amit & Zott, 2010).

Findings from research by Hossbach, Weiner & Saunders, suggest that different business model transformation phases relate to different value sources, questioning, in general, the appropriateness of a value source-based approach for classifying business models. The results of their case study highlight the need for online-offline business model differentiation and point to an essential distinction between service and product

differentiation (Hossbach, Weiner & Saunders, 2016).


17 In the book "Ten Types of Innovations" authors suggest that there is an exhaustive set of different innovation domains, which any firm can use to develop its innovation tactics, such as: Profit Model, Network, Structure, and Process, collectively constituting

“Configuration”; Product Performance, Product System, constituting “Offering”, and Service, Channel, Brand, Customer Engagement, constituting “Experience” (Keeley, Pikkel, Quinn &

Walters, 2013).

By “Profit Model” they would imply different aspects pertaining to various pricing tactics such as premium, cost leadership, predictive analytics, metered use, forced scarcity, subscription, membership, installed base, switchboard, auction, user-defined, freemium, flexible pricing, float, financing, microtransactions, volume, ad-supported, licensing, multi- level marketing.

“Network” covers such items as mergers & acquisitions consolidation, open innovation, secondary markets, supply chain integration, complementary partnering, alliances, franchising, and coopetition.

“Structure” includes organizational design, talent systems, incentive systems, IT integration, outsourcing, crowdsourcing, social network, shared back-office, corporate university, decentralized management, and knowledge management.

“Process” encompasses flexible manufacturing, standardization, localization, process efficiency, process automation, on-demand production, lean production, logistics systems, strategic design, and intellectual property.

“Product Performance” entails feature aggregation, added functionality, superior product, ease of use, engaging functionality, environmental sensitivity, safety,

simplification, customization, focus, conservation, styling.


“Product System” engulfs cross-selling, extensions/plug-ins, product bundling, modular systems, product/service platforms, and integrated offering.

“Service” extends to "try before you buy", guarantee, loyalty programs, added value, concierge, total experience management, supplementary service, superior service,

personalized information, user communities /support systems, lease or loan.

“Channel” covers expansion, flagship store, "go direct" non-traditional channels, pop- up presence, indirect distribution, cross-selling, and on-demand.

“Brand” expands to co-branding, brand leverage, private label, brand extension, novel branding, component branding, transparency, values alignment, and certification.

“Customer Engagement” includes process automation, simplification, curation, experience enabling, mastery, autonomy and authority, community and belonging, and personalization.

In one of the publications, other researchers conclude that business models change not only when managers innovate, but also when firms engage in more mundane

adaptation in response to external changes. Additionally, authors argue that the past strategic orientation of a firm creates dependencies that influence the propensity of the firm to adapt its business model (Saebi, Lien & Foss, 2017).

In another paper, different authors conclude that when value rapidly migrates across industries and between firms, proactively substituting key elements of the primary business model provides a better fit with the new value landscape rather than launching secondary business models in parallel (Hacklin, Björkdahl & Wallin, 2018).

Research conducted by another collective of authors suggests a methodology for digital business model design. The key characteristics of digital business models are

represented through Digital Business Model Innovation Loops (Figure 2-3, Appendix A). They


19 are validated by looking at digital initiatives in different established companies

(Sathananthan, Hoetker, Gamrad, Katterbach & Myrzik, 2017).

When it comes to disruptive technologies which could leverage innovation Lois Lamoreux in his book "Doing Digital Right," suggests that there are three principal waves of digital technologies adoption. The first one occurred around 1954, when enterprises began automating, the second digital (2000-2015) was characterized by technologies such as social, mobile, big data analytics, and cloud. Finally, third digital wave started from 2016 and continues onward, being characterized by the following 5 key technologies: Internet of Things (IoT), Machine Learning, Natural Language Processing (NLP), machine vision and Robotics. Please refer to the appendix for further details (figures 4-5, tables 3-4 in the appendix A).

In the same book, the author introduces a framework for consideration and

deployment of digital technologies with the aim of business model innovation consisting of 6 elements: Vision, Digital Technologies, Business Uses, Business Outcomes, expanding Business Uses into three other sub-domains, such as Products, Processes, Customer Journey (Figure 6 in Appendix A).

It is suggested that after a company has developed a digital vision and decided on which relevant technologies it wishes to deploy, the further process for development of digital initiatives would entail considering different business uses and then either adding

“Digital” to company's products, and/or digitizing operational processes, and/or improving customer journey.

One of the leading consultants on the topic of digital transformation, a consulting company called "Ionology" came up with a digital transformation framework consisting of 5 building blocks:


1. Digital Business Strategy & Culture.

2. Staff & Customer Engagement 3. Process & Innovation

4. Technology

5. Data & Analytics. (Please refer to figure 7 in the Appendix A)

In the book "Driving Digital Strategy" the authors discuss business scope, business model, platforms, and ecosystems as essential pillars for reinventing the business. The other critical elements are value chain, customers engagement, and organization (Gupta &

Henning, n.d.).

David L. Rogers also refers to Customers, Competition, Data, Innovation, and Value as the key five domains of digital transformation in his "The Digital Transformation Playbook"

(Rogers & Heitsch, n.d.).

In a relatively recent article, Michael Porter talks about the implications of smart, connected products on competition and the transformation of organizations.

According to Porter, the changing nature of smart products is disrupting value chains and forcing companies to rethink how they conceive, design, and source products; how they manufacture, operate, and service them; how they build and secure the necessary IT

infrastructure at the same time also raise a new set of strategic choices about how the value is created and captured, how companies work with traditional and new partners, and how they secure competitive advantage. In contrast, the new capabilities reshape industry boundaries (Porter & Heppelmann, 2015).

The same article focuses on the impact of smart products on companies' operations and organizational structure, reasoning that these products are changing the way firms interact with their customers (driving them towards more continuous and open-ended


21 relationships), reshaping the work of every function in the value chain, including product development, IT, manufacturing, logistics, marketing, sales, and after-sale service.

In recent years, many research attempts have been aimed at coming up with a more unified definition of digital transformation phenomena.

George Westerman refers to digital transformation as rethinking how the organization fundamentally uses technology, people, and processes to change business performance (Westerman, Bonnet, McAfee & Ross, n.d.).

Satya Nadela, a Microsoft's CEO, in one of his interviews, argues that digital

technology affects how an industrial company reaches its customers, and how it empowers the people inside of the organization. In addition, the core business processes become increasingly digitized, which helps optimize operations. And the most critical transformation is that business models themselves are being changed (Nadella & Euchner, 2018).

Cheng Gong and Vincent Ribiere argue that although digitization, digitalization, and digital transformation are intertwined and associated with digital technologies, they should be kept distinct at the conceptual level. Based on a systematic literature review and experts' feedback they came up with a more precise definition of a digital transformation: "A

fundamental change process, enabled by the innovative use of digital technologies

accompanied by the strategic leverage of key resources and capabilities, aiming to radically improve an entity and redefine its value proposition for its stakeholders" (Gong & Ribiere, 2021).

On the contrary to Cheng Gong and Vincent Ribiere, another collective of authors believe that digitization, digitalization and digital transformation are not distinct notions, but simply characterize different phases of the process, where digital resources,


organizational structure, growth strategy alongside metrics and goals are the essential components (Verhoef et al., 2021).

Gregory Vial in his article, has further elaborated on essential digital transformation process building blocks, reasoning that disruptions trigger organizations' responses in form of digital business or digital transformation strategy that rely on the use of digital

technologies and enable changes on value creation patterns also affected by various organizational parameters (culture, structure, employees skills) that produce positive impacts in terms of improved organizational efficiency and performance (Vial, 2019).

Another collective of authors posits that digital transformation consists of 3 major areas: user experience, operational processes, and business models (Guarda et al., 2021).

Several other authors argue that digital transformation could be aimed at various objects (business model, services, products, processes, relationships, technology), and through digitization of these objects, results in new or improved services, products or customer relationships that in its turn positively impact creation of value (Mergel, Edelmann

& Haug, 2019).

As regards to digital transformations typology, Zejko Tekic and Dmitry Korotev assert that specific digital transformation strategies can be characterized in terms of: (1) level of mastery of digital technologies relevant to the sector in which the company competes (high or low) and (2) level of business model readiness for digital operation (high or low).

These define four generic digital transformation strategies: disruptive, business model-led, technology-led, and analog (Tekic & Koroteev, 2019).

According to the same authors, disruptors are usually the industry newcomers characterized by high levels of digital technologies mastery and business model readiness for digital operation (digital entrants or tech companies).


23 For business model-led digital transformation, a low level of mastery of digital

technologies and a high level of business model readiness for digital operation are typical.

Technology-led digital transformation is characterized by a high level of mastery of digital technologies and a low level of business model readiness for digital operations. As a result, companies with these characteristics tend to invest more eagerly in the new


“The proud to be analog” strategy appears less relevant for this research. The main characteristic of these companies is that customers value their key products because they are analog.

Having reviewed the literature, I can assert that there appears to be no clear consensus on what the digital transformation is, however in context of digital transformation efforts, the focus is likely to be placed on whether the particular

components of the business model could be transformed by the deployment of relevant digital technologies to achieve the advantage over the competition and improve the value delivered to both customers and shareholders. In addition, the companies pursuing digital transformation could also benefit from copying and deploying novel business models (e.g., multi-sided platforms, free or open business model) that are actively utilized by the newer generation of digital competitors.

In the context of my research question and listing of options potentially available to telco players to digitize and transform their business based on common theoretical themes, I believe the following assumptions could be used for hypothesis building:

- Telco players may deploy digital technologies to adjust various components of their business models to improve their competitive position and performance.


- Telcos may experiment with different novel business model types, usually deployed by the digital rivals, to change how they derive revenue and deliver value to their


- By implementing digital technologies, telco companies may digitize their products or launch new products and services underpinned by relevant digital technologies.

- Telco players may deploy digital technologies to reduce the cost base, and improve internal operations and user experience.

- To effectively deploy new digital technologies, launch new products and experiment with novel business models certain adaptations may be required to telcos’ organization domain that extends to governance, adjustment in ways of doing things, employees’

competencies, and skills.

- Various telcos are likely to differ in their level of digital technology mastery and business model readiness for digital operations, hence as suggested by Zejko Tekic and Dmitry Koroteev in their article different players may pursue distinct digitization strategies (disruptor’s strategy, business-model led transformation, technology-led transformation) (Tekic & Koroteev, 2019).



2. Data and method

2.1 Research design

Specific research question: How do telco players digitize and transform their business in response to evolving industry competition and threats from new entrants?

Research objectives:

• Identify a generic methodological approach to the digital transformation of business and list potentially available options.

• Develop propositions for practical application of the generic framework and prepare recommendations for telecom players' business digitization and transformation.

To answer the research question and achieve its objectives, it is planned to use exploratory and qualitative research methods.

The conceptual framework and research process are depicted on Figure 1 below.

Figure 1. Visualization of research process and conceptual model


The research would cover the following key aspects:

What is the generic approach to the transformation of business and digitization?

• How are digital entrants disrupting the telco industry, and what are the implications for incumbents?

• What revenue-generation mechanisms and value-creation sources are deployed by selected digital players (OTT platforms)?

• Case studies (selected examples of how selective players within the telco industry address digital transformation topics).

At the initial research stage, it is planned to assess how exactly digital entrants disrupt the telco industry and what implications are for the incumbents based on available business publications in the media, academic sources, and business literature.

Further, the research focused on sources for value creation and revenue-generation mechanisms deployed by selected digital players (OTT platforms). The analysis will be based on qualitative data from journals, academic articles, and business publications.

At the following stage, it is planned to review dedicated academic publications and business literature to formulate a generic approach (framework) to digital transformation and list options (non-exhaustive) potentially available to telcos.

Based on the stages outlined above, it is planned to develop the preliminary propositions addressing the initial research question.

To validate and verify preliminary propositions in addition to previous stages, it is also planned to conduct a multiple case study for selected examples within the telco industry (how some telco groups are addressing the topic of digital transformation).


27 For the selection of companies, publicly available data will be used from GSMA

(mobile network operators trade association) (www.gsma.com). The sample would be limited only to publicly traded companies to ensure access to relevant financial information.

To analyze how companies from the sample address digital transformation topic, corporate publications will be reviewed (including, but not limited to annual statements, financial reports, investor presentations, analysts call transcripts, CEO or chairman's letters, conference materials, etc.) and summarized in key findings.

The research will be concluded with practical suggestions for the digital transformation of telecom players' business with a proposed high-level strategy, provisionally covering the following areas:

• Digitization of the «core» business (provisional initiatives in various domains, e.g., Technology, Customer Experience);

• Launch of new digital businesses (a conceptual approach based on examples from telco and «digital world»).


2.2 Case study and research setting

2.2.1 How telco industry is being disrupted by the new digital entrants?

Typical telecom operator receives a predominant part of its revenue from the following set of core consumer services:

• Voice calls

• Messaging

• Mobile data (i.e., Internet access) ("GSMAi Research & analysis", 2022) In addition to the above, some telcos (so-called "integrated operators") may also provide fixed Internet access over the cable or fiberoptic line and pay-TV service (content), among other services.

With the evolution of technologies, networks, consumer equipment, and proliferation of access to Internet it became possible for companies from adjacent markets (Internet, software, and hardware) to develop and provide messaging, voice, video calls as well as video content streaming services over the Internet through apps, without the need to own and maintain the network (telecom infrastructure) or have access to the customer other than Internet (so called OTT-services) ("Kleiner Perkins Internet trends", 2022).

Largest technology companies have launched their substitutes allowing to make calls, send messages, and share files, such as for example, Facetime and iMessage by Apple, WhatsApp, Facebook Messenger, and Instagram by Facebook (Meta holding), Skype and Teams by Microsoft, etc. ("Joyn them or join them", 2022)

In addition, many companies have entered the content streaming market, including a few: Netflix, Amazon, Apple, Disney, Hulu, and others ("Disney, Netflix, Apple: is anyone winning the streaming wars?", 2022).


29 Evolving OTT services have started to replace traditional telecom operators’ services, in the first-place voice calls and messaging, alongside pay TV, leading to emergence of so called “cord-cutting” term, referring to situation when telco clients terminate their pay TV subscriptions in favor of streaming services ("Cutting the cord", 2022).

These trends have put massive pressure on telecom market players’ topline and led to a decline in revenues from voice, messaging, and pay-TV services.

Data traffic, on the other hand, has exploded, but due to intense price competition within the telco industry, mobile operators failed to increase their revenues proportionally to the data consumption growth ("Telecoms chiefs urge EU lawmakers to press tech groups on internet investment", 2022).

The main hurdle for telco players now lies in the fact that exponential data growth requires significant investments in network capacity. In contrast, incremental revenue growth from data services does not match the investment requirements ("‘Squid Game’ hit raises stakes for Netflix in broadband battle", 2022).

Declining or stagnating topline, on the back of growing capital expenditure

requirements, reduces operators Free Cash Flow and Return on Invested Capital which leads to suppressed valuations and poor share price performance, especially when compared to Technology and Internet companies as illustrated on the figure 2 on the next page ("Why telecoms groups have fallen out of fashion with investors", 2022).


Figure 2. Telecom groups revenue and capitalization change vs. FANG (Facebook, Amazon, Google and Netflix)

Source: ("‘Squid Game’ hit raises stakes for Netflix in broadband battle", 2022)

Apart from the strain on the networks and substitution of traditional telecom services there is also an increasing competition between telcos and digital players (OTTs) or the new revenue opportunities ("Technology firms are both the friend and the foe of competition", 2022).


31 2.2.2 Selective digital entrants and their business models

Before moving ahead with the actual telco players' case study, it also makes sense to review which business models some digital disruptors deploy and discuss how they generate revenue (i.e., create and capture value) to expand the hypothesis framework.

Applications that consume the majority of mobile data traffic and operators’

bandwidth could be placed in the following categories:

• Video streaming ~ 49%

• Social networking ~ 19%

• Web ~13 %

• Messaging ~ 7%

• Gaming ~ 4%

• Marketplace ~ 4%

• Others ~ 4%.

In the video streaming category largest share belongs to YouTube 45% (owned by Alphabet, Google’s parent company), TikTok 16%, Facebook video 15% (part of Meta holding; former Facebook), Instagram 12% (part of Meta holding), and Netflix 4%.

When it comes to social networking, Facebook takes 51% share, with another 42%

attributed to Instagram (all owned by Meta holding).

In Web category, Google takes 41%.

In messaging, WhatsApp takes 31%, Facebook VoIP 14%, and Skype (owned by Microsoft) takes another 4%.

In Marketplace, Amazon is one of the dominant players. ("The World’s Most Used Apps, by Downstream Traffic", 2022)


Based on the above, we can conclude that a few companies, such as Alphabet

(Google), and Meta (Facebook), dominate in mobile data traffic consumption. Revenue and business models of these companies, alongside the other few most prominent technology players, such as Amazon, Apple and Microsoft, would be of primary interest for further analysis.

Meta, which owns Facebook, Instagram and WhatsApp, provides a wide range of digital consumer services (video streaming, social networking, messaging, marketplace, and gaming) for free. To generate financial proceeds that fund and maintain its free business lines, the company collects users' data and offers paid advertising services to various businesses, which constitute 97.5% of its revenue ("How Do Big Tech Giants Make Their Billions?", 2022)

Similarly to Facebook, Google primarily offers its services to consumers for free and earns most of its revenue from advertising (69% is attributable to Google properties Advertising, another 12.3% to Google network members advertising). In addition, Google has developed “Android” mobile operating system and earns a considerable part of its revenue from hardware manufacturers that use Google’s software in their devices. In further attempts to diversify its portfolio, Google is actively investing in and developing the Google Cloud Platform for Enterprise customers.

Amazon is predominantly an online retail/e-commerce company with online stores representing 47.3% of its revenue alongside third-party services representing 22%. The company is attempting to diversify its portfolio and actively grows its share of other services: Cloud (Amazon Web Service) now represents 13.2% of revenue; Subscription and Content (Amazon prime) 6.8%, advertising services 6.6%.


33 Apple is predominantly a hardware company where sales of hardware (iPhones, iPads, Macs and Wearables) represent 81.3% of its topline, and another 18.7% are attributed to services extending to digital content, Apple pay, and licensing fees.

Microsoft is a leading cloud service (31,3% in revenue) and software provider (38%), which also has other business lines such as search ads (5.1%), gaming (9.1%), devices (4%), and social networking (6.1%).

As a conclusion, technology companies offer messaging services that directly compete with telecom products for free while earning their revenue from other business lines

(advertising, hardware, e-commerce, and software). In addition, premium content (Amazon Prime, Apple TV etc.) is offered on a paid basis (subscription fee) and Cloud and business software/applications for enterprise clients.

In the context of my research question and elaborating on potential digitization and business transformation options available to telcos based on selected digital entrants’

examples, we can now expand the theorical hypothesis framework with the following assumptions:

• Depending on their capabilities and particular market setting, telcos may expand beyond core telco products and attempt to replicate some of the digital players’

service offerings, such as messaging, content (video, games), marketplace, payments, cloud, and business applications.

• To monetize the services that digital entrants offer for free, telcos may need to leverage their user bases more actively; develop and provide advertising and customer analytics services to third parties on a paid basis.


2.3 Telco players case selection, methods of analysis and process

For the selection of research sample, I have used GSMA intelligence open database which estimates the total number of telecommunication groups that consolidate more than one subsidiary and standalone operators (e.g. population size) at 459 with 9,113,222,838 of total mobile connections as of Q1 2022 ("GSMAi Research & analysis", 2022).

For my sample selection, I have used non-probability purposive sampling to select those operators that are better positioned to answer research questions.

Since I needed to ensure that the data required for analysis was available in the public domain, non-publicly listed companies were excluded.

The final selection is provided in the table below.

Table 1. Telco Groups Research Sample

# Group

Designation Geography covered (footprint) Position in the in the ranking by the number of mobile connections

Number or mobile

connections (as of Q1 2022)

1 China Mobile China 1 966,638,000

2 Bharti Airtel Bangladesh, Chad, DRC, Gabon, India, Kenya, Madagascar, Malawi, Niger, Nigeria, Congo, Rwanda, Seychelles, Sri Lanka, Tanzania, Uganda, Zambia, Channel Islands

2 455,336,269

3 Reliance Jio India 3 410,200,000

4 China Telecom

Group China 4 379,540,000

5 China Unicom China 5 318,549,204

6 Vodafone Group Azerbaijan, Albania, UK, Hungary, Germany, Greece, Ireland, Spain, Italy, Malta, Netherlands, Portugal, Romania, Turkey, Czech

7 270,997,890


35 7 MTN Group Afghanistan, Benin, Botswana,

Cameroon, Republic of Congo, Ghana, Guinea, Iran, Nigeria, South Africa, Sudan, Syria, Yemen, Zambia

9 223,798,000

8 VEON Group Russia, Ukraine, Algeria, Pakistan, Bangladesh, Kazakhstan, Uzbekistan, Kyrgyzstan, Georgia

10 222,756,930

9 Telefonica Group Austria, Spain, Germany, UK, France, Argentina, Brazil, Chile, Colombia, Costa Rica,

Dominican Republic, Ecuador, Panama, Peru, Venezuela

11 222,429,154

10 Orange Group France, Belgium, Botswana, Cameroon, CAR, DRC, Egypt, Guinea, Jordan, Luxembourg, Madagascar, Mali, Moldova, Morocco, Poland, Romania, Saudi Arabia, Slovakia, Spain, Tunisia

12 211,028,508

11 Deutsche

Telekom Austria, Croatia, Czech Republic, Germany, Greece, Hungary, Montenegro, North Macedonia, Poland, Romania, Slovakia, USA

13 206,122,103

12 Telenor Group Norway, Denmark, Finland, Sweden, Bangladesh, Malaysia, Pakistan, Thailand

16 172,244,249

13 Axiata Group Bangladesh, Cambodia, Nepal,

Indonesia, Malaysia, Sri Lanka 17 162,081,448 14 e& UAE, Saudi Arabia, Egypt,

Algeria, Pakistan, Afghanistan, Benin, CAR, Mali, Mauritania, Morocco, Niger, Chad

18 134,303,717

15 Verizon wireless USA 20 128,487,526

16 AT&T USA 21 126,384,000

17 KDDI Japan 27 73,806,454

18 NTT DOCOMO Japan 29 71,270,658

19 MTS Group Russia, Armenia, Belarus 31 70,866,810 20 Millicom Guatemala, El Salvador,

Honduras, Paraguay, 37 62,664,083


Nicaragua, Costa Rica, Bolivia, Colombia, Panama

21 Ooredoo Qatar, Oman, Kuwait, Iraq, UAE, Algeria, Tunisia, Maldives, Indonesia, Myanmar

40 54,438,386

22 Turkcell Group Turkey, Azerbaijan, Kazakhstan,

Georgia, Moldova, Ukraine 47 44,858,940

23 SoftBank Group Japan 51 41,745,031

24 SK Telecom South Korea 60 27,016,931

25 EE (British

Telecom) UK 65 22,453,581

26 Digicel Group Caribbean region (28 countries

and territories) 80 15,193,581

27 Singtel Group Singapore, Australia 85 14,158,946

28 KPN Group Netherlands 100 10,443,000

29 Rakuten Mobile Japan 132 5,435,599

Total 5,125,248,998 Source: ("GSMAi Research & analysis", 2022).

The sample is well balanced and includes diverse groups from a business scale

perspective (e.g., number of mobile connections): 8 players are from the top-10 tier, seven players fall in the segment between top-11 and top-20, three players are from the top 22-30 range and the rest 11 represent distribution's "longer tail".

The sample covers a broad geographical footprint, representing all continents, and extends to countries with varying levels of economic development.

The number of mobile connections serviced by telecom groups and operators in the sample represents 56.2% of all mobile connections worldwide (as per GSMA data).

Data for the research was collected from operators' websites (Investor relations section) and included quarterly and annual results presentations, annual reports, investor day presentations, investor calls transcripts, and other materials representing operators' official disclosures over the period from 2017 to 2022 (where available) intending to not


37 only analyze the current digitization and business transformation initiatives but also to review the evolution of these over the last 5 years period.

In the course of the research, 3 GB of qualitative data has been downloaded from open sources, consisting of 970 corporate and media publications.

Based on the review of available data, each operator's digitization and business transformation initiatives have been summarized (see Appendix-B) prior to further analysis.

Based on summaries and ancillary information, common themes pertaining to digitization and business transformation have been identified and listed.


3. Results

In most cases, telco players' digitization and business transformation initiatives in the corporate publications and disclosures are positioned as elements of their strategy.

There is little reference to business models as the overarching rationale of how these organizations create, deliver, and capture value in the context of digitization efforts.

However, many companies do refer in their publications to certain business model

elements, such as customer segments, value proposition, channels, customer relationships, resources, and partnerships.

Based on the approach to digitization/ business transformation, players from the sample could be assigned to three distinct groups/ categories:

i. Telco centric with incremental digitization (5) ii. Digital-centric (16)

iii. Radical disruptors (8).

Figure 2. Telco operators’ typology based on approach to digitization


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


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).




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