How digital transformation will drive telecoms growth

As we enter a fully connected era, digital infrastructure is facilitating economic growth. The telecoms industry is in a crucial stage of digital transformation as new technologies emerge to drive a high-quality user experience. A better connected world is dawning, and the potential opportunities for the telecoms industry, which is the primary enabler of industry digitisation, are beyond our imagination.

There’s no question that connectivity is now a basic necessity. Carriers are enablers of the digital transformation, which is often referred to as the fourth revolution, as they join hands with various industries to build a better connected world.

By 2025, there will be 100 billion connections globally. Eighty-five percent of all enterprise applications will move to the cloud, 100 per cent of enterprises will use cloud services, and the penetration rate of industrial intelligence will exceed 20 per cent. The strategy of global telecom operators is changing from being ‘investment-driven’ to being ‘value-driven’.

Opportunities for growth in emerging markets

As we enter a fully connected era, digital infrastructure is facilitating economic growth and emerging markets are on the cusp of a major transition towards digital economies. The Global Connectivity Index (GCI) published by Huawei in 2016 reported that for each GCI score point increase a country improved its innovation capacity by 2.2 per cent, competitiveness by 2.1 per cent, and productivity by 2.3 per cent. Operators around the world are in a unique position to invest in these emerging markets to capitalise on huge ICT industry potential, untapped demographics, and national ICT strategies.

Back in the day, for operators, the voice market was worth about $800bn, and the data market was worth $1.2 trillion. Looking forward, the video market will potentially generate additional revenue of more than $1 trillion for operators. This includes about $650bn from entertainment video and $18bn from communications video. Vertical industries will have video everywhere, and that market will be worth about $350bn. In the future, video will become an integral part of our lives and our work, opening up enormous market potential for operators.

Content and video are redefining the telecoms industry. For operators, video is not really a matter of choice; it’s clear now that video is becoming a new basic service. It’s a matter of fact, and it will open the doors to huge growth potential. Operators have to get it right with their video business.

2016 was a watershed year for mobile operators. On average, data accounted for more than 50 per cent of total operator revenue from mobile services. Video and video-related traffic contributed 25 per cent. We estimate that, by the year 2020, video’s contribution to operator revenue will surpass 50 per cent, and will drive up the revenue generated from all data to more than 70 per cent. For mobile operators, that means their role needs to change. They can no longer limit themselves to being mobile network operators, but be digital content players, too.

Telecom operators face a lot of challenges when developing their video business. The biggest challenge is fragmented content. Around the world, there are more than 1,000 content providers, 600+ telecom operators, and 100+ content operators. Video content is diverse and abundant, but it’s very difficult to aggregate and distribute to consumers in a given country or region.

If we ever hope to address the demand for universally available content for all consumers and households, then content providers need to change, telecom operators need to change, and content operators need to change too. Everyone needs to make some changes. Only by becoming truly consumer-centric can they make content universally available to all mobile and household users.

Road to 5G

On the Road to 5G, telecom operators need to focus their preparations on three areas: infrastructure, operations, and ecosystem development. The formula for success in the telecom industry: Success = infrastructure x operations x ecosystem. 5G will require two major changes: Going from network-centric to application-centric, and from person-centric to thing-centric—a significant paradigm shift. To prepare their infrastructure for 5G, operators need to begin the end-to-end cloudification of their architecture.

Huawei is fully prepared to lead a key role as an all-round strategic partner to customers in their digital transformation journey, and to countries looking to advance economic and social development.

Charles Yang is president of Huawei Middle East