Most of the global telecom operators expect B2B revenues to decline between 1% and 10% year on year in 2020 and which in turn is expected to put pressure on ICT investment, a GSMA Intelligence official said.
GSM Association (GSMA) is an industry organisation that represents the interests of mobile network operators worldwide while GSMA Intelligence is the publisher of its industry reports and research.
Pablo Iacopino, Director of Ecosystem Research at GSMA Intelligence, said that operators expect Covid to boost demand for a lot of services that help the digitisation of businesses and industries, especially cloud infrastructure and services, private networks, IoT and 5G connectivity for enterprises.
“Short term impact on B2B revenue is a boost for digitisation in the long term,” he said.
Most operators, network vendors and other mobile industry stakeholders agree that B2B is a key pillar of their 5G strategies and without it, the 5G business case is much more difficult to justify.
When looking at the future opportunities, Iacopino said the first thing to understand is how big the market is today and what drives growth.
The provision of B2B services to enterprises is not new to operators, he said and added that the 5G era has driven renewed interest as B2B use cases are seen as the incremental opportunity to monetise 5G networks and service deployments.
“To drive B2B revenue growth, operators need a clear proposition that targets the digital transformation of industries such as manufacturing, automotive, healthcare and energy and enterprises – one that integrates nascent 5G networks with services beyond connectivity,” he said.
Moreover, he said that nearly 70% of the telecom operators’ CEOs agree that B2B is the most important while a viable and focused B2B investment strategy is also key.
“Getting the capabilities (5G networks, cloud, edge, IoT and spectrum) and business models in place to fully service enterprises will take time, but operators are already laying the groundwork to capture new B2B opportunities and moving in the right direction,” he said.
Stagnating consumer revenues
According to a survey conducted on 100 operators globally by GSMA, half of the operators said that B2B is the only source of revenue growth as consumer revenue is stagnating or declining.
However, Iacopino said that B2B revenue is not growing significantly (at low single-digit rates for many operators); the B2B connectivity market is increasingly competitive, while new growth areas such as IoT, cloud, security and data analytics have yet to reach scale.
When looking at the B2B revenue as a share of total operator revenue, he said that it varies between 10% and 50%, with 30% being the average.
He said that four operators exceeded 40%, with M&A in the media space a key driver for AT&T, SoftBank and to a lesser extent Singtel while AT&T leads on size of B2B revenue, China Mobile leads on B2B revenue growth, driven by data connectivity, IoT and B2B products and services targeting vertical sectors.
At the current trajectory, Iacopino said that B2B’s contribution to operator revenue will grow by 1–2 percentage points per year.
However, he said that major operators are strengthening their B2B strategies to accelerate it, particularly in the context of 5G.
“It will take time, but the direction of travel is clear. The long-term deflationary nature of connectivity pricing means that expanding B2B revenues in the 5G era will require a move up the value chain to the service layer,” he said.
Nearly half the operators surveyed are already selling 5G connectivity to enterprise customers (including trials and proofs of concept), but only 13% position 4G or 5G connectivity as the main ‘lead’ service in their marketing pitches, with the largest portion (35%) leading with IoT.
Relatedly, the prevailing strategy for expanding B2B revenues is to upsell existing customers (36% of operators), most of whom will have established connectivity contracts, rather than focusing on direct greenfield sales to new customers (12% of operators).
B2B: A key market for edge deployments
“For operators now, this means a focus on B2B along with the need to roll out 5G networks. We forecast that operators will invest $1.3tr in their mobile networks between 2019 and 2025, of which $1tr (more than 75%) will be spent on 5G,” Iacopino said.
According to GSMA’s forecast, connectivity will account for 5% of the $1.1tr IoT revenue by 2025.
Iacopino said that connectivity is going to bring the bulk of the revenue for IoT.
However, he said that future growth will come from end-to-end solutions, beyond connectivity such as IoT analytics and IoT security.
As operators ramp up their IoT businesses, he said that many are deploying core networks dedicated to IoT with key drivers being ensuring service quality and meeting specific network requirements of enterprise customers, including localised coverage and time-sensitive networking.
“However, we expect to see dedicated B2B core network deployments as operators look to scale their B2B businesses with 5G. B2B is a key market for edge deployments. It comes as no surprise that a majority of the top use cases for edge computing belong to B2B, including smart campuses, smart factories, healthcare, automotive and smart cities,” he said.
“IoT, cloud and security represent new revenue drivers but are currently contributing less than 10% to total enterprise revenue. The goal is to serve enterprise requirements better, including those of SMEs. There is no single, best approach for every operator, but capturing opportunities in 5G and IoT will require a vertical-focused model,” he said.