ADL report outlines US$227bn digital transformation opportunity for telecom sector

telecommunication tower 3064834 1920Arthur D Little (ADL) has published a new research report highlighting the need for greater digitalisation in the global telecoms industry

The TIME 2018 Flagship report has outlined the scale of the digital opportunity, with analysis estimating that a ‘digital dividend’ of more than US$227bn free cash flow awaits telecoms that can successfully transform.

Industry executives surveyed for the report, confirm the findings. Seventy-three per cent of the respondents said that digital will add value to their businesses, with important benefits including greater agility, increased subscriber growth and cost savings.

CAPEX spending on areas such as 5G infrastructure and the Internet of Things is expected to require a seven per cent CAGR increase from 2017-2022, outpacing forecast revenue growth. Failing to digitally transform risks commoditisation and disintermediation will leave telecoms unable to invest sufficiently. As one senior executive noted, “Digitalisation–there is no other choice if we want to survive.”

The report highlighted that acting now is vital if telecoms want to guarantee future success. However, becoming digital will require a substantial shift, focusing on two important areas:

· Enabling digital–investing appropriately to become more digitally mature

· Embracing digital–making significant structural changes to the organisational design and corporate culture as well as how they do business, attract talent and develop the right skills

The majority of telecoms are still at an early stage of digital maturity–33 per cent of the respondents see themselves at the 'digital basic' stage, with just 3 per cent at the most advanced “digital expansion” level.

Jonathan Rowan, partner at Arthur D. Little and lead author of the report, explained, “Telecoms are self-acknowledged digital laggards, despite our survey highlighting an overwhelming awareness of the benefits of digital transformation.

“Until now there was little quantitative evidence of these benefits, but our extensive financial analysis highlights that it can deliver a ‘digital dividend’ of more than US$227bn in operating free cash flow benefit, or put another way, up to an additional 10 percentage points of EBIT. To enjoy this dividend, telecoms must balance technology and organisational/cultural change, as well as adopting an agile and holistic approach,” he concluded.

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