Operators' digital transformation: unlocking EUR15 billion through partnerships with OSPs

Analysys Mason has conducted a study examining the Internet ecosystem, and the impacts and opportunities for telecoms operators that arise from interactions and partnerships with online service providers (OSPs). We have reviewed existing literature, undertaken extensive research, and conducted interviews with industry leaders to develop a thorough view of the future benefits telecoms operators can receive through innovative partnerships with OSPs. These partnerships can have a crucial role in the digital transformation of telecoms operators.

Over the past five years, telecoms operators have seen impact from the greater use of the Internet. This has been positive for many operators: fixed operators benefited by providing super-fast broadband and content. For mobile operators, the story has been mixed, although growth in developing markets remains robust as more people come online and disposable incomes grow. Whilst competition from online services has played a role, the industry has seen impacts from many factors, such as difficult economic conditions and increasing competition.

Looking forward, telecoms operators are aiming to reposition themselves as digital service providers, rather than communications service providers. OSPs have a clear role in this through direct partnerships and indirect influences. They have developed technology and platforms that have been proven to work highly reliably at scale. These can be brought to bear to transform the business of telecoms operators to be more efficient, more flexible, and remain highly reliable. OSPs have also developed rich content and apps for which telecoms operators can act as a valuable sales and service channel.

Our work has suggested that the future impact of these interactions and partnerships on operating free cash flow (OFCF) could be significant. We have estimated that under a scenario where operators and OSPs collaborate more directly and intensely, telecoms operators could see an annual OFCF impact in 2021 of EUR8 billion in Western Europe, and potentially EUR15 billion in EMEA.

Our analysis shows that the 'digital service provider' ambition of many operators can be significantly furthered by working alongside OSPs: designing services around content, or bundling it; adopting technology proven at scale by large OSPs to improve network reliability, the agility of IT processes and the efficiency of operators; and making full use of the Internet's unique ability to break down barriers between markets to launch new services, bolstered by some of the most valuable consumer brands in Europe.

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