Telcos are the arteries of the digital economy. Amid the sound and fury of emerging business trends such as Industry 4.0, virtual reality and driverless cars, the truth is that many of such technologies would not even exist without corresponding advances in telecommunications technology. With the impending advent of 5G connectivity amid a paradigm-shifting global pandemic, it seems that telcos have become more than ever before an essential industry.
Yet, the telcos themselves are not rolling in money — far from it. “The forecast for traditional telcos is for low revenue growth and shrinking margins, because of increasing competition from OTT and technology players,” says a McKinsey report way back in 2017 as over-thetop (OTT) entrants like WhatsApp and tech firms like Zoom and Microsoft slowly encroach into their value chain.
While Covid-19 saw a 40-fold spike in demand for data, most local telcos struggled to translate this into additional profit. “The telco industry has helped industries transform,” says Malcolm Rodrigues, CEO of Singapore-based telecommunications firm MyRepublic, in an interview with The Edge Singapore. “But telco still hasn’t transformed itself.”
Nik Willetts, CEO of global telco industry association TM Forum, urges telcos to update their businesses to become “digital enablers” and double down on their mission to help other industries realise digital transformation. This involves, he says, developing new platform-based business models and work as an enabler of digital ecosystems rather than be that ecosystem itself. He believes that telcos must be more involved in the work of their clients, offering core enabling services required rather than just communications solutions.
For established telcos willing to change, the rewards are not insignificant. A 2017 World Economic Forum White Paper estimates that successful digitalisation could unlock US$2 trillion ($2.74 trillion) worth of value for the telecommunications sector. There are also significant positive externalities for emerging countries; telecommunications themes are seen to generate more than US$800 billion in value for society and consumers, mostly from people and communities not connected to the internet.
Playbooks and chipsets
Seeking to achieve digital transformation, MyRepublic has heeded Willet’s call to be a digital enabler for their clients. But what’s unique about its approach is that instead of looking to service firms in other industries, it sees other telcos within Southeast Asia as its core addressable market.
Having successfully achieved digital transformation of its own, MyRepublic wants to sell these telcos its playbook for doing so, as well as access to its telco management cloud platform to aid the digital transformation journey of regional telcos.
“When we started the company, we needed a software platform to do all our billing, our customer management,” says Rodrigues. Finding solutions by established tech names like IBM and Accenture too expensive, the firm recruited some students to help develop a software in-house, which eventually transformed into the TM Forum-compliant cloud-based BOSS platform — an acronym for Business/Operations Support System. BOSS is configurable and modular, delivering an automated order-to-cash experience and performing billing, payment reconciliation and reporting functions in MyRepublic’s markets.
The cost-savings and efficiency gains derived by the cloud has seen MyRepublic achieve profitability in Singapore as of 2017, and group-wide in 3Q2020. This gave it the confidence to use the system abroad as it pursued a joint venture with Indonesian telco MQM, implementing both its BOSS platform as well as its Go To Market playbook after acquiring a 39% operational stake in the company. Average revenue per user (ARPU) increased from US$8 to US$25 and the company moved from fifth to third in Indonesia in terms of domestic market share, according to self-reported data from January 2015 to June 2019.
In one notable project undertaken by MyRepublic, it helped Brunei’s incumbent telco DataStream Technology (DST) reinvent its business when the government took over all telecommunications infrastructure in the sultanate to build economies of scale. Besides deploying BOSS, MyRepublic also helped restructure DST from a legacy firm into a leaner one. From 750 workers, it now has just 120.
DST had earlier braced itself for a 25% fall in its customer base as competition intensifies. But, following its engagement with MyRepublic, DST managed to arrest a two-year-long downtrend in subscriber numbers and instead enjoyed a 10% increase in its postpaid mobile subscriber base and a 5% net addition of prepaid customers. DST also captured a 20% market share in fibre broadband, which it had previously not been allowed to sell.
In MyRepublic’s search for new markets with a new business model, Rodrigues has borrowed a concept from the semiconductor industry: “chipset”, the set of electronic components and microchips, seamlessly integrated, to help run computers or machines.
In MyRepublic’s case, its “chipset” is an integrated offering of BOSS and its unique operating playbooks, as it goes about searching for new markets in broadband, enterprise and mobile services, and helping the telcos delivering these services be more efficient. It also plans to work with private equity firms to acquire “second- and third-tier” telcos in future, buying the service providers’ side of the business to create more value while leaving the infrastructure business to private equity.
Rodrigues is not worried about competitors imitating MyRepublic’s business model, even though he notes that many are already trying to copy it. He says that the in-house and bespoke nature of the cloud platform makes it difficult and expensive to replicate; it is difficult to fully implement the playbook without the cloud platform. Established firms, he adds, may struggle to make the necessary operational overhauls without help.
His way to beat potential competition is to innovate constantly and not stay still. “We have to continue reiterating the products, how we source our customers, the partners we bring in whom we can work with,” says Rodrigues. The firm organises “innovation renovation” seminars every six months to reinvent its processes.
But he senses no real competition from other telcos in MyRepublic’s attempt to make a business out of helping other telcos transform. “The main competitors are traditional software providers who charge tens of millions of dollars and who are not motivated to transform,” he explains. He believes that incumbent telcos, facing declining margins and valuations, will soon wise up to the need for digital transformation and make MyRepublic their first port of call.
The allure of Southeast Asia
From its Singapore base, MyRepublic has operations as far as Australia and New Zealand. Nevertheless, for Rodrigues, Southeast Asia is MyRepublic’s new horizon, where he sees significant opportunities to apply the MyRepublic playbook in legacy operator environments. He believes that MyRepublic can help telcos in these countries realise up to 80% efficiency improvement in headcount, cost to serve and cost to acquire line items.
“Southeast Asia is super interesting…people went from no internet to mobile broadband and then connected homes with fibre. Twenty years of copper that happened in other countries got skipped in Southeast Asia,” says Rodrigues, who observes that it is rare to see fibre-optic internet cables providing connectivity directly to homes even in Europe and North America. Using fibre connectivity to link up homes and businesses allows MyRepublic to expand more quickly in the region, reducing overhead costs by sharing network infrastructure with existing operators.
And this connectivity will improve with time. In December 2019, Indonesia completed its US$1.5 billion Palapa Ring project, which will provide network capacity of up to 100Gbps in even the furthest reaches of the country. China wishes to invest in ICT infrastructure in Southeast Asia under its “Digital Silk Road” initiative, with Japan and South Korea in hot pursuit with their “Free and Open Indopacific” and “New Southern Policy” strategies respectively.
"5G could add 6% to 9% to consumer revenues and 18 to 22% to enterprise revenues by 2025. Indonesia is expected to capture the biggest share, followed closely by Malaysia, Singapore, and Thailand,” say AT Kearny partners Hari Venkataramani and Nikolai Dobberstein in a report. They see operators pouring in approximately US$10 billion into the region’s 5G infrastructure by 2025 to achieve this additional value.
Ultimately, however, such grand designs can be achieved only if the country in question is friendly to foreign competition, says Rodrigues. Fibre networks should also be generally available; should these be in private hands, wholesale should be available at a reasonable cost to maintain a good profit margin, he adds. He fears that governments — especially those in emerging economies — would look to protect their telco industries from foreign competition that he says is necessary to ensure sufficient capital investment in telecommunications.
