A new report from Arthur D. Little (ADL) forecasts that the telecoms industry will become more varied over the next five years, highlighting a significant opportunity in the B2B2x (business-to-business-to-x) market.
The study, titled “Major strategic choices ahead of telcos: Reconfiguring for value,” is based on interviews with more than 100 executives worldwide. ADL predicts overall revenue stabilization for many European markets and only modest growth in most countries. However, the firm expects the B2B2x segment to represent around 8% of global ICT spending by 2020, describing it as an “untapped opportunity” for telecom operators.
ADL explains why this emerging market matters. B2B2x differs from traditional B2C, B2B and wholesale models because services become embedded in the customer’s value chain. Unlike many Internet of Things models, B2B2x excludes pure B2C scenarios but includes services that require human delivery.
The consultant notes that B2B2x is not entirely new—it was pioneered by IT companies—but argues that telecom operators, leveraging their networks, customer relationships and operational assets, can now secure a larger slice of the broader digitisation trend than they have historically achieved.
Capturing this opportunity requires telcos to gain a deeper understanding of how enterprises need to digitalise their products and services. ADL frames the shift as a series of strategic choices for operators. “The digitalisation of the telco industry has made possible a variety of strategic choices,” said Béla Virág, partner at Arthur D. Little. “Some operators will benefit from synergies tied to globalised production models, while others will become exceptionally lean local players. Some will pursue asset-light models; others will remain asset-heavy. Some will successfully exploit the B2B2x opportunity; others may choose to ignore it altogether.”
Virág adds that these choices will lead carriers to diverge from one another. “Ultimately, there are multiple forces that will drive operators to take on much greater design responsibility for their IT, network and services,” he said.
Looking specifically at European telcos, ADL reports that conditions are better than its 2015 outlook had suggested. The decline in fixed telephony has been less dramatic than expected, which, together with other trends, produces a somewhat more positive outlook. ADL identifies five service categories: mobile data, fixed broadband and pay TV are expected to grow, while mobile voice and messaging and fixed telephony will lag. Overall, European operators are forecast to experience a modest compound annual growth rate (CAGR) of about 1.2% through 2021.
The report points to VoIP and over-the-top (OTT) services as primary drivers of declining traditional voice revenues. Growing subscriber counts for mobile services will not fully offset decreases in average revenue per user (ARPU) associated with voice.
ADL concludes that as operators redesign their offers—either proactively or out of necessity—different business models will emerge, each with distinct risk profiles and scaling potential. Operators will be able to differentiate by pursuing a variety of strategic positions: becoming truly global players, embracing partnerships and new customer segments, focusing on highly efficient domestic operations, adopting asset-heavy or asset-light models, or acting as pure infrastructure owners and operators.
Despite the variety of paths, the report stresses a common expectation: each path anticipates a new wave of efficiency gains, this time driven on a more global scale than previous cycles.