Telcos are now veering away from their traditional business of voice and data, and future-proofing themselves by embarking on new cutting-edge digital ventures, like fintech, internet of things (IOT) and artificial intelligence (AI).
Survival mode
This transformation by the telcos is more of a survival strategy. As discussed in my earlier column, this pivot to a techco is driven by the maturity and saturation of the voice and data market; with telcos registering negative growth and for the lucky few, a mere single-digit margin.
Likewise, telcos have found an excess network element capacity, brought about by the over-promise of 5G.
Lastly, the pandemic has shifted the customer behavior, with the latter’s preference now on anything remotely-done and access to information within their fingertips and within a tab of the gadget. For most telcos, you transform now or you die.
Global trend
Best example is the largest telco in India, Jio. Jio launched Jio-Mart for e-commerce, JioMeet for video conferencing, Jio HealthHub for telemedicine and JioPages for small business. They even launched JioPhone to bring the internet to millions of Indians.
Today, Jio is not just a telecom company but a digital services conglomerate, offering Indians access to advanced customer-centric services (“How These Four Telcos Became Techcos Through a Digital Ecosystem”, hey Innovations, Maqy 21, 2024).
The Vodaphone Group has made substantial investments in digital services, such as cloud and cybersecurity. AT&T is transforming itself into a modern media and technology company with emphasis on cloud migration and AI integration. (LinkedIn, The Telco to Techco Transformation, March 18, 2024; Forbes, May 17, 2024 From Telco-To-Techco Evolution)
Here in our home soil, the most successful shift to techco is Globe’s fintech arm: GCash. With the recent entry of MUFG of Japan as an investor, plus an added investment from Ayala Corp., Gcash is now valued at $5 billion. In fact, GCash has now contributed more than 7 percent of Globe’s pre-tax profits.
Transformation at home
Not only is the Gcash story an industry success: it has contributed in nation-building by giving access to the unbanked Filipinos to financial services like digital payments, GLoan, GSave; GGives and a host of other services. GCash is so pervasive that it has become an everyday catch-word for Filipinos.
Philippine telcos PLDT and Globe are also banking on data center services as part of its transformation. Globe has its 917Ventures which hosts its subsidiaries like KonsultaMD on telehealth; Brave Connect on digital marketing services, and Gogoro on e-bikes.
But this transformation to techco is not a walk in the park. Hardest to deal with is embracing this itself as the way of moving forward, from the boardroom to the lowest bottom of the organization.
Changing company culture
The shift in focus from the usual network investment to these new and untested services is placing a strain on the company’s board. The management has to do a 360-degree turn on the company culture – from the incumbent mindset to an upstart; shattering and disrupting established processes and beliefs in the name of innovation, asking for sacrifices as well as demanding more from their employees.
The telcos, now the techcos, are dreaming of returning to double-digit and unparalleled returns of the years 2000 to 2010, and the bets are on by becoming techcos.
We are now just like in the 1990s when telcos were betting on the mobile technology - CDMA, GSM or continue on analog – telcos are betting which digital technology will boost it to the future. And the current telco incumbents have their own track record of winning on technology bets, and they believe the odds are still in their favor.
This opinion column represents the personal views of the author, and not necessarily those of his employer or InsiderPH News.
General Counsel of the Globe Group and president of the Philippine Chamber of Telecommunications Operators
