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ARTICLE: The Covid-19 crisis has fundamentally established the fact that industries, organizations, and people must change in order to remain relevant as the global world is experiencing the shock of coronavirus. In this regard, the telecoms must re-envision themselves in terms of new realities. They have to re-think and re-imagine their working models to keep up with the consumer's changing demands and preferences. The Corona crisis has eroded business activity and sales and distribution channels of many telcos, which has affected them adversely since their major revenue driver is voice.

On the other hand, Covid-19 has helped telecoms in increasing data sales but that is not because of the telcos' own innovation or ingenuity but rather, an output of the circumstances. This crisis has made a deep impression in the minds of the Pakistani telecom CEOs that they must adapt rapidly; in order to do this, it is necessary that the hegemonic models of bureaucracy within the telecoms must be eliminated to provide much needed agility, as well as establishment of new ecosystems and providing digital platforms which fulfil the needs of the customers who are evolving at a rampant pace.

This will require reallocation of funds, establishment of new working methodologies, re-designing the business processes, a close analysis of the cost structure with regards to operational activities, and creation of a new vision which is all-encompassing. This in turn means reducing cost of operations in areas which are not providing a comparative advantage, rather are a source of revenue leakage.

In this regard, the capital cost of network infrastructure, its operations, its maintenance, and its security are tremendous costs which are being borne by these telcos.

The creation of a massive network infrastructure provided a strategic advantage in the beginning to telecom companies in Pakistan. However, 70% of geographical area has now been covered, so the differentiating factor has now switched to quality of service, and simple tower coverage is not sufficient anymore. Instead, marketing and branding, and an efficient distribution network is required, and within this, innovation and technology will be paramount.

The solution is simple. The sentimental aspect of retaining the infrastructure needs to be let go, and an objective decision must be made. Telecoms should outsource their network infrastructure, so that their concentration should be on understanding customer preferences, and bringing smart technology that makes them leaner and more responsive. The relevant Chief Technology Officers, Chief Information Officers and Chief Commercial Officers need to raise this awareness within their organizations. To make their case, they can study countries like India and Indonesia, where tower sharing has been implemented, and where companies have experienced a subsequent cost savings of more than 40%. In outsourcing, this cost may be further reduced, and the company will also gain revenue from selling its towers to the relevant third party.

It is important to note that the levels of cost savings achievable through tower sharing can be substantial, but arguments can be made that it may require some compromise in terms of service or coverage. It is vital to consider that significant cost savings will come from the removal of some base stations or other infrastructure where coverage is largely duplicated. We must understand that the scale of the available savings and the overall economic rationale greatly outweighs any compromise that may be required. Clearly, the level and mix of cost savings will differ from case to case, reflecting the deal characteristics and each operator's unique positioning, assets, and coverage. In pursuing and realizing such savings, the challenge for established networks is that much of the capex is already sunk and recovering the migration costs through opex savings alone may result in an exceptionally long payback. However, previous industry experience shows that capex is always ongoing with upgrades, changing architectures, and now even obsolescence. Each ensures that savings from tower sharing can be achieved throughout the investment cycle. Furthermore, as already mentioned, a successful tower sharing deal delivers other benefits, quite aside from lower costs. First, by recognizing that coverage is no longer the differentiator, it enables the operators involved to focus on the attributes that really do make a difference in the eyes of today's customers, such as the brand, service portfolio, pricing, and responsiveness to customers' needs. And second, tower sharing helps operators respond to the environmental pressure for a more efficient use of infrastructure and lower carbon emissions.

The four mobile telecom operators in the country today have around 34,000 towers. However, with the advent of 4G and 5G, the tower requirements could increase substantially by 2023, and around 18,000 more towers may be needed to accommodate the users. Over 40% of these 34,000 towers are just 300 meters apart, which results in a wastage of around $1 billion worth of capital for the industry as the towers could be shared by the companies. A collaborative approach is the need of the hour and the most cost-effective solution to meeting the growing demands of data consumers.

Yet, despite these benefits and arguments, successful tower sharing deals are currently almost nonexistent in Pakistan, and efforts to set them up remain fraught with pitfalls and barriers. For Pakistan, 5G is two to three years away, in terms of real deployment. The ground reality is that under the circumstances, the deployment of 5G network rollout will prove even more of a challenge since the cost of licensing and the network rollout is so immense. If and when it does arrive in Pakistan, telecoms should have a partner ready who specializes in infrastructure and swift deployment of new networks as the sheer magnitude of requirements for 5G will be exceedingly high and cost intensive. If the telcos have developed an understanding with the infrastructure company over the next few years, when 5G arrives, the company will have an in depth understanding of telco requirements and will have prepared accordingly.

It is a fact that the Covid-19 crisis will create a prolonged, worldwide depression and unfortunately, the global economy will need a few years to bounce back, no matter how resilient. We have seen this in past economic recessions which were not even as severe. This will also affect the buying power of the Pakistani consumer as the economy will shrink, and unemployment will increase. This will have direct effect on the average revenue per user for the telecoms (ARPU) and hence, the revenue streams of the telecom companies will certainly be affected. The data consumption may increase, as may corporate business revenues, but this will not offset the overall decline in profits, unless radical steps are taken and comprehensive strategies are carved out to reduce operational costs and increase efficiency through out of the box ideas, such as outsourcing and tower sharing.

Tower sharing is a relatively new concept for the Pakistani market, and at present the true possibilities of this service have not been utilized to their full potential. Tower sharing companies in Pakistan are in the infancy stage and they will need to mature quickly to meet the needs of the post COVID-19 world. These companies need to ready themselves to meet the challenge of rolling out a massive infrastructure upgrade and managing the existing infrastructure efficiently. But times and market dynamics are changing. More diverse network technologies, and the emergence of new business models, among other trends mean that tower companies need to be more agile, more data driven, and more focused on pursuing new revenue streams. As companies across industries have discovered, the best catalyst for these things is digital transformation. The leadership of tower companies must thoroughly understand the company's starting point, assessing not only its capabilities but the competition's as well. From there, leaders can introduce an end-to-end framework covering the key elements of digital transformation and adapt it to the company's needs. This approach requires substantial changes in capabilities, processes, technology, and ways of working. Although assessments and paths forward will vary from one company to another, most tower players will probably need to devote particular attention to three elements of the framework: digitizing the core, developing new digital growth, and changing ways of working.

Government organisations such as PTA should help in bridging the gap between telecom and infrastructure companies, by designing policies that reduce risk for telcos and their CEOs, thus enabling them to outsource without any qualms. Financial rules and regulations regarding how network assets are incorporated into a telecom company's financials will also play a role in this decision. An aggressive approach and open mind are required by the telecoms, infrastructure companies, and the governmental bodies. The opportunities are clear. CEOs who create a bold vision and execute ruthlessly against that vision can break away from the pack and become market leaders in the cutthroat telecom landscape of the country.

(The writer is former Deputy CEO, ZONG, as well as a business strategist and management consultant. He can be reached at [email protected] The views expressed in this article are not necessarily those of the newspaper)

Copyright Business Recorder, 2020

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