Time to incorporate ‘coopetition’ in telecom

The liberalisation of many economies has resulted in numerous growth areas; and none of them has been more impressive than in the telecom sector, particularly the mobile business. However, the industry is witnessing challenges that can potentially slow the pace of further growth: eroded ARPU and increasing churn rates. Telecom operators are currently striving to work out differentiated offerings in an attempt to reduce their own subscriber defection and acquire new users from rivals

Mohamed Jamoussi is a senior technical consultant with Saudi Telecom (STC). The views expressed in this article are his own

Given the looming, and in some cases actual slowing down in growth, traditional competitive approaches are being rendered obsolete. Consequently operators should be looking to adopt more collaborative business approaches in the future, and should operate in a ‘coopetition’ manner.

‘Coopetition’ aims to find win-win business relationships through partnering with competitors in a manner that benefits both parties. To this end, both parties need to break free of traditional thought processes and realise that their ‘coopetition’ has the potential to expand their market opportunities and value creation. However, both parties need to also be clear on their areas of collaboration and those of competition.

The main goals of ‘coopetition’ include embarking on ambitious business opportunities and sharing risk in so doing. Reduction of costs and the maximisation of margins is another aim, all the while impacting the viability of the operations as little as possible.

For this relationship to work it is imperative that the parties to it have unified objectives and perceive that working with one another has identifiable benefits that mitigate potential risks. The collaboration between competitors should evolve into natural business behaviour between them.

Though some studies highlight ‘coopetition’ as a strategy for value creation, the concept remains unpopular for many operators that believe they stand to lose more than they gain by entering any such arrangements.

Below, I propose a number of different ‘coopetition’ models that do offer potential win-win interactions, including:

Network sharing – Ranging from tower sharing to full network sharing, this has proven to be a successful ‘coopetition’ alternative in some markets under certain circumstances. Numerous studies have identified cost savings through network sharing could reach as much as 40 per cent of total network expenditures, which are typically the greatest contributors to capex and opex items.

It has also been proven that the advantages of such ‘coopetition’ outweigh drawbacks, especially when considering future network investments such as 4G LTE. In network sharing arrangements, each operator retains control of its spectrum, intelligent network and customer data; and will continue to develop and offers its independent products, services and value propositions.

Selling towers to independent tower companies and leasing back services is another form of network sharing ‘coopetition’ that has been successful in helping operators to convert capex to opex in a bid to preserve EBITDA margins.

Mobile number portability (MNP) – Introduced in many developed countries and currently being contemplated in many developing ones. MNP helps operators focus on consumers and buffers them somewhat to the entry of new players. Operators should ensure that the benefits of MNP are maximised by focusing on their customers’ demands. Prior to MNP’s introduction, operators should work on raising churn barriers by offering advanced bundled service plans, enhancing network coverage, providing personalised customer care, and launching advanced services.

Jointly creating new market segments and/or niche markets – Taking advantage of each other’s strengths, leading to the creation and/or winning of new market segments, which neither of the two operators could achieve in isolation in the same time frame or at the same level of investment.

Cost sharing / economies of scale – Working jointly on infrastructure investments in a bid to force down each operator’s capex and opex, while broadening their service offers. However such an arrangement should not jeopardise the operators’ unique attributes such as deploying equipment from more than one vendor. Savings may be driven by setting up joint purchasing centres, and working out joint maintenance contracts.

Integration for market alliances – Working on similar products that could complement the other’s and result in the offer of integrated bundles or new products. Operators may also ‘coopetively’ establish new business standards for a common market.

Cross endorsement – Operators referring business to one another without either party losing subscribers, particularly if they are not really competing in each other’s direct markets.

Risk sharing – Cooperating in sharing resources and spreading the risk of investment in new emerging technologies.

Interconnected billing – Assigning the calculation of settlements to a trusted and neutral third party, which avoids resource duplication, reduces processing time and allows a more efficient, accurate and seamless calculation processes.

In summary, traditional competitive strategies will not be enough to halt the slowing of growth in the telecom industry. Today, operators should “coopetively” work together in order to secure the sustainability of their businesses and meet stakeholders’ expectations.

Thus, I believe that the adoption of a ‘coopetition’ approach should be on decision markers’ agendas and ought to become one of their strategic scenarios for growth. ‘Coopetition’ should be perceived as an avenue to risk-limited business opportunities.