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Next Gen Telcos

Market report - 30/12/2016 Next Gen Telcos

New telco economics by 2025

This report provides an assessment of the potential futures for telcos by 2025, taking into account expected evolutions in the digital economy, with a focus on connectivity, IoT, OTT and IT markets.

It first puts in perspective the key stakes that telcos have to tackle. It then looks at how major telcos are indeed trying to address with transformation plans for 2020 through an in-depth benchmark.

A very large focus on 13 digital markets is then conducted to determine the major opportunities for telcos leveraging some of their genuine assets.

The report finally draws 4 disruptive scenarios for 2025 and assesses for each of them the likely portfolio of services, the organisation and processes, the potential revenues (with a breakdown per type of revenue) but also the EBITDA and FCF margins, showing how telco economics could be radically transformed


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1. Executive Summary

2. Methodology & definitions
 2.1. General methodology of IDATE's reports
 2.2. Specific methodology

 2.2.1. Framework of analysis of verticals per type of activity
 2.2.2. Cost model framework

3. Context and stakes
 3.1. Background on telco economics
 3.1.1. Telco revenues
 3.1.2. Profitability
 3.1.3. Demand for connectivity
 3.2. Background on the telecom regulatory context
 3.2.1. Transition from ex-ante to ex-post regimes
 3.2.2. Regulatory (a)symmetry
 3.2.3. Geographically differentiated rules
 3.2.4. Roaming
 3.2.5. Level playing field
 3.3. Key stakes for telcos
 3.3.1. Infrastructure
 3.3.2. Products and services
 3.3.3. Customer experience

4. Telcos plans for 2020
 4.1. Synthesis
 4.2. AT&T

 4.2.1. Infrastructure
 4.2.2. Products and services
 4.2.3. Customer experience
 4.3. BT
 4.3.1. Infrastructure
 4.3.2. Products and services
 4.3.3. Customer experience
 4.4. Deutsche Telekom
 4.4.1. Infrastructure
 4.4.2. Products and Services
 4.4.3. Customer experience
 4.5. Orange
 4.5.1. Infrastructure
 4.5.2. Products and services
 4.5.3. Customer experience
 4.6. Telefónica
 4.6.1. Infrastructure
 4.6.2. Products and services
 4.6.3. Customer experience
 4.7. Verizon
 4.7.1. Infrastructure
 4.7.2. Products and services
 4.7.3. Customer experience
 4.8. Vodafone
 4.8.1. Infrastructure
 4.8.2. Products and services
 4.8.3. Customer experience

5. Focus on digital markets and telcos
 5.1. Synthesis
 5.2. M2M

 5.2.1. Market description
 5.2.2. Market structure
 5.2.3. Market sizing
 5.3. Connected healthcare
 5.3.1. Market description
 5.3.2. Market structure
 5.3.3. Market sizing
 5.4. Connected Cars
 5.4.1. Market description
 5.4.2. Market structure
 5.4.3. Market sizing
 5.5. Smart Home
 5.5.1. Market description
 5.5.2. Market structure
 5.5.3. Market sizing
 5.6. Wearables
 5.6.1. Market description
 5.6.2. Market structure
 5.6.3. Market sizing
 5.7. Mobile financial services
 5.7.1. Market description
 5.7.2. Market structure 94
 5.7.3. Market sizing
 5.8. Social media and messaging
 5.8.1. Market description
 5.8.2. Market structure
 5.8.3. Market sizing
 5.9. UC (Unified Communications) & CPaaS (Communication Platform as a Service)
 5.9.1. Market description
 5.9.2. Market structure
 5.9.3. Market sizing
 5.10. Cloud
 5.10.1. Market description
 5.10.2. Market structure
 5.10.3. Market sizing
 5.11. Advertising and data analytics
 5.11.1. Market description
 5.11.2. Market structure
 5.11.3. Market sizing
 5.12. Mobile security
 5.12.1. Market description
 5.12.2. Market structure
 5.12.3. Market sizing
 5.13. Digital identity
 5.13.1. Market description
 5.13.2. Market structure
 5.13.3. Market sizing
 5.14. Video services and content delivery
 5.14.1. Market description
 5.14.2. Market size and trends
 5.14.3. Market structure and competition
 5.14.4. Opportunities for telcos

6. Scenarios for 2025
 6.1. Quick reminder on foresight methodology
 6.2. Major uncertainties
 6.3. Overall view
 6.4. The digital economy in 2025: four scenarios
   6.4.1. Mall scenario: Customer-centric
   6.4.2. Open scenario: Technology-centric
   6.4.3. Automated: Cost-centric
   6.4.4. Trust: security and privacy-centric

7. Impacts of scenarios for telcos
 7.1. Telcos in 2025
 7.1.1. Telco activities in 2025
 7.1.2. Telcos and Mall
 7.1.3. Telcos and Open
 7.1.4. Telcos and Automated
 7.1.5. Telcos and Trust
 7.2. Market sizing and perspectives
 7.2.1. Digital markets in 2025
 7.2.2. Telco revenues
 7.2.3. Telco margins
Tables
Table 1: Typical European telco cost breakdown
Table 2: Cost model: network costs
Table 3: Cost model: general and administrative costs
Table 4: Overview of key digital markets
Table 5: Telco potential assets to develop in the digital markets
Table 6: M2M market segmentation
Table 7: Telcos' positioning on cellular M2M technologies
Table 8: Carrier positioning out of connectivity
Table 9: Application features including usage and ARPU
Table 10: Main applications in the automotive industry
Table 11: Connected car strategy regarding module implementation (except for electric cars)
Table 12: Summary of key elements for telematics development
Table 13: Main mobile payment services by telcos
Table 14: Types of cloud services sold by different players
Table 16: Key players in the video market
Table 17 : Telcos portfolio of services by 2025
Table 18: Orange network sharing deals
Table 19: Types of digital identity services offered by telecom operators
Table 20: Ranking of total market size and telco market size for the four scenarios
Table 21: Ranking of total digital market size and of that generated by telcos, for the four scenarios
Table 22: % of EBITDA, CAPEX and FCF to revenues, compared to 2016 for the four scenarios

Figures
Figure 1: Cost model framework (CAPEX vs OPEX)
Figure 2: Telecom revenues in EU28, USA, Japan, 2010-2020
Figure 3: Mobile ARPU in EU28, USA, Japan, 2010-2020
Figure 4: Telecom revenues as share of GDP in EU-5, 2001-2015
Figure 5: Revenues by service in EU28, 2010-2020
Figure 6: Share of mobile voice and data revenues in EU28, 2010-2020
Figure 7: Change in the top European telcos' EBITDA to revenue ratio, 2010-2015
Figure 8: CAPEX/sales ratio in EU5, 2010-2015
Figure 9: Access lines in EU28, 2010-2020
Figure 10: NGA penetration by technology in EU28, 2015-2020-2025
Figure 11: Level-playing field concerns in the draft ECC
Figure 12: The IDATE framework for digital transformation
Figure 13: Global fixed and mobile CAPEX
Figure 14: Significant capacity promises of fibre
Figure 15: Performance objectives for 5G and associated use cases
Figure 16: Role of SDN and NFV in the future carrier network
Figure 17: Regression of mobile revenues and GDP
Figure 18: Summary of the OECD communication price benchmarking baskets
Figure 19: Top mobile apps worldwide
Figure 20: Industry offering the best customer service according to consumers
Figure 21: Comparison of Net Promoter Scores for Netflix, Comcast and Time Warner Cable, 2013-2015
Figure 22: Personal data hierarchy
Figure 23: Integration of innovative technologies in customer relationship channels
Figure 24: Changes in the number of points of sale of several operators between 2013 and 2015
Figure 25: Telcos strategy plan names and priorities
Figure 26: Domain 2.0 key principles
Figure 27: Cloud networking architecture
Figure 28: AT&T strategy
Figure 29: AT&T's approach to IoT
Figure 30: AT&T end-to-end M2M offering
Figure 31: AT&T US connected cars projection
Figure 32: An AT&T store designed like a home
Figure 33: BT's strategy
Figure 34: Evolution of BT's CAPEX (year ended 31 March)
Figure 35: Products and services offered by BT within BT Global Services
Figure 36: BT's Cloud of Clouds vision
Figure 37: Creating synergies between fixed and mobile, a part of BT's strategy to grow in the UK
Figure 38: BT customer interaction through "My App"ť
Figure 39: DT's superior production model
Figure 40: OPEX savings for the early 2020s
Figure 41: Deutsche Telekom's ambitious goal for LTE and fibre by 2018
Figure 42: Key elements for the transformation
Figure 43: Pannet objective
Figure 44: Magenta One for consumers
Figure 45: Growth in Pay-TV market
Figure 46: B2B revenue transformation
Figure 47: Business customers activities
Figure 48: Customer experience evolution
Figure 49: Digitalisation of customer experience
Figure 50 : Orange transformation in line with new customer expectations
Figure 51 : Orange CAPEX breakdown
Figure 52 : Orange effort in CAPEX
Figure 53 : Orange 5 pillars to deliver agile networks
Figure 54: Orange strategy around connected objects
Figure 55: Orange's Polaris interface and multiscreen offering
Figure 56: Smart Store concept
Figure 57 : The six foundations of Telefónica's Telco Onlife programme
Figure 58: Telefónica's mobile network ambitions
Figure 59: Telefónica's roadmap
Figure 60: Vision on IoT
Figure 61: Telefónica's position on smart cities
Figure 62: Video platform
Figure 63: Monitoring of the Customer Experience Index
Figure 64: Verizon's three-tier strategy
Figure 65: LTE coverage comparison in the US
Figure 66: Go90 offering
Figure 67: The ThingSpace IoT platform
Figure 68: Key areas covered in IoT
Figure 69: Lifestyle zones in Verizon superstores
Figure 70: Vodafone's strategy vision by 2020
Figure 71: Efficiency improvements
Figure 72: Project Spring started in 2013
Figure 73: Vodafone's infrastructure goals
Figure 74: Vodafone realisations
Figure 75: Network and IT efficiency-cost control
Figure 76 : Vodafone's options for growth
Figure 77: Acquisition of Cobra by Vodafone
Figure 78: Vodafone's position in communications
Figure 79: Vodafone CARE internal project
Figure 80: Current positioning of telcos on digital products (2016)
Figure 81 : Telco assets per type of activity
Figure 82: M2M value chain
Figure 83: Connected health, as part of healthcare
Figure 84: Healthcare value chain
Figure 85: Key positioning differentiation among carriers in the healthcare market
Figure 86: Global installed base of connected healthcare devices 2014-2020
Figure 87: Worldwide revenue of connected healthcare services, 2014-2020
Figure 88: Value chain of the connected car market
Figure 89: Key positioning differentiation among carriers in the automotive market
Figure 90: Business model of connected cars
Figure 91: Concept of Smart Home
Figure 92: Broad landscape of the smart home market
Figure 93: Key positioning differentiation among carriers in the smart home market
Figure 94: Common architecture for most wearable devices
Figure 95: Value chain of wearables
Figure 96: Key positioning differentiation among carriers in the wearable market
Figure 98: Mobile payment segmentation
Figure 99: Value chain of the mobile financial services market
Figure 100: The HCE NFC architecture
Figure 101: Monthly active users of the most popular social platforms (social networks and messaging apps)
Figure 102: Social networks and messaging services as part of a broader platform strategy
Figure 103: The value flow with and without OTT communication providers
Figure 104: TU Go for Web interface, by Telefónica
Figure 105: OTT IP messaging market worldwide, 2012-2020
Figure 106: OTT VoIP market worldwide, 2012-2020
Figure 107: Overview of players on the professional unified communications market
Figure 108: The CPaaS market structure; increasing involvement of major traditional communication players
Figure 109: Unified communications market size 2014-2020
Figure 110: CPaaS market size 2014-2018
Figure 111: UCaaS (Unified Communications as a Service) market and leading companies
Figure 112: The three types of clouds (IaaS, PaaS, SaaS)
Figure 113: Cloud computing industry structure
Figure 114: Growth potential for telcos in the SaaS and IaaS markets
Figure 115: Growth of the global enterprise cloud computing market, by segment, 2015-2020
Figure 116: The technologies within programmatic advertising
Figure 117: Expected market size and growth to 2020 for online ad sub-markets and competition levels
Figure 118: Player shares of online advertising revenue, in 2015
Figure 119: Player shares of mobile advertising revenues, in 2015
Figure 120: Share of Facebook's advertising revenues between fixed and mobile, 2012-2015
Figure 121: Types of data gathered by telcos
Figure 122: Online advertising revenues worldwide and regional breakdown, 2010-2020 (Billion EUR)
Figure 123: Facebook's announcement on ad control tools and overriding ad block
Figure 124: Overview of mobile security solutions
Figure 125: Security in the mobile value chain
Figure 126: Global mobile security market (2015 - 2020)
Figure 127: Overview of digital identity technologies and solutions
Figure 128: Digital identity value chain
Figure 129: Types of digital identity services offered by telecom operators.
Figure 130: Global digital identity market (2016 - 2021)
Figure 131: Principle of a CDN
Figure 132: The video market
Figure 133 : Key uncertainties for 2025 scenarios
Figure 134: Examples of dominant Internet companies under each scenario
Figure 135: Key characteristics of the various scenarios
Figure 136: Google Fiber coverage
Figure 137: Orange store in Poland
Figure 138: Telcos' SDN/NFV deployments (as of August 2016)
Figure 139 : Role of OpenStack in telcos' projects
Figure 140: Advertising to share data with third parties
Figure 141: Ibbu platform
Figure 142: The DT Cloud VPN concept
Figure 143: Customer care portal
Figure 144: Example of online help for iPhone 6
Figure 145: Swisscom security offering
Figure 146: Swisscom customised advice in shop
Figure 147: Total digital and telco market forecast in 2016, and for the four scenarios in 2025
Figure 148: Share of telco revenues within total digital and telco markets in the four scenarios
Figure 149: Top 5 digital markets for telcos for the four scenarios
Figure 150: Revenues, EBITDA and FCF for the four scenarios in 2025 and for 2016
• AT&T
• BT
• Deutsche Telekom
• Orange
• Telefónica
• Verizon
• Vodafone
Context and stakes
 • Current telco economics
 • Telco assets to expand in digital technologies & services
 • Stakes for telcos
 • First reactions of telcos with 2020 plans

Digital markets
 • A large addressable market
 • Different options for telcos
 • Telcos assets to expand on digital markets
 • Telcos trailing behind currently on most markets

2025 scenarios
 • Major uncertainties
 • Four scenarios for 2025
 • Scenario characteristics

Impacts for telcos
 • Telcos' activities in 2025 - Digital products and services
 • Telcos' activities in 2025 - Traditional products and services
 • Digital markets in 2025
 • Telco economics in 2025
 • Telco economics in 2025
See full list of publications related to Telecom Strategies



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