The competitive landscape for telecommunications companies is rapidly changing, but which of them has the mindset, culture and capability to move with the change in the industry? Declining margins on voice, competitive pressures from OTT players, reductions in fixed line demand, all move to compress the measures most telcos refer to when measuring success. But are these the right measures to be paying attention to?
StarHub recently announced they will be cutting 300 jobs as they move to focus on enterprise solutions and digital services, but is this a sign of an enlightened leadership group? Or the move of a desperate business that acts on one of the few things they can control - cost?
It’s no huge secret what my thoughts are on the future of telcos, I wrote a cutting piece some time back when Google announced the Pixel 2 with embedded eSim, a move that would give Google all the pieces they need to shift the telecommunications space closer to an ecosystem model, where players like Google, Facebook and Apple subsidise connectivity in a mutual exchange of value. Based on my rough calculations using Google’s buying power, most telcos globally would take a 45-47% hit on retail ARPU, and a 85% plus hit on roaming revenue, a hit few telcos can survive while they cling to legacy thinking.
In the case of StarHub, whose revenue is split across telecommunications and media, two industries facing equally strong change, StarHub is left to deeply reconsider their value proposition in a world where the majority of their role is as a middleman. Let’s face the truth, greater than 90% of StarHub’s media and entertainment business could be delivered without set-top boxes, from global OTT players. Even more frightening, is this would be seen as a positive step for the average consumer as their entertainment and media habits change rapidly. Global payers don’t have the legacy cost of yesteryear infrastructure, and their scale enables prices well below what a domestic player is capable of. But the hardest, and most cutting part of the equation is the depth of data and insights OTT players like Netflix, Amazon, Apple and more have on both individual (not household) discovery and consumption habits, this plus the overlay of a content library puts them over ten years ahead of a SingTel or StarHub.
Like most of the regional media companies, StarHub is heavily dependant on sports and premium soap operas, that if lost would dissolve the need for subscribers to use their service. It’s really only a matter of time before English Premier League or FIFA negotiate a global OTT deal with someone like YouTube or Amazon, at which point for local broadcasters its too late. In recent years they’ve made moves to defend their licensed content, which has only resulted in further declines in brand sentiment amongst consumers.
Cost cutting may help to improve some currently known metrics on the business, but deeper transformation is required if players like StarHub and SingTel are to survive. Can they make it happen in time?