Smart capital: keeping telco operators ahead of the connectivity curve

28 May 2021

The COVID-19 pandemic has and continues to super charge the demand for connectivity and the financial challenges for the telecom providers and technology partners who need to supply it.

Despite vaccine programs allowing countries to open back up, there’s been a long-term shift in working patterns and expectations are that many people will continue to work remotely to some extent. This means providing better connectivity for homes will become a permanent necessity rather than a short-term requirement. 

It also accelerates the need to move quickly to fully exploit the benefits of 5G and the Internet of Things (IoT) technology that could increasingly drive gross domestic product (GDP) and greatly improve profitability and efficiency for individual businesses and larger enterprises alike.

For organisations able to utilise this technology through more advanced connectivity, operational cost is reduced, efficiency improved, data analytics may be scaled in a real time agile way and customer centricity will be enabled like never before. For instance, by employing IoT, instead of having to wait for a piece of equipment to fail and then have it repaired, that equipment can itself warn about imminent problems and arrange for the necessary overhaul.   

There is a growing recognition that the only way to deliver the wide-spread connectivity required, is with cross-industry co-operation, competition in the market, and an end-to-end vision shared by industry and government alike. The various elements of digital infrastructure simply do not work in isolation – their combined capability is not only contingent on one another, but essential to create the network itself.

However, in addition to the necessity of this industry wide coordination and shared mindset, firms are struggling to find the necessary investment.  Operators are constrained with their existing capital commitments and mounting pressure on their balance sheets. Conversely suppliers are saddled with legacy research and development costs, making the ability to offer new ‘CAPEX light’ business models problematic.

As well as selling their services to consumers at home for entertainment and, increasingly for business use, they are also having to meet rapidly growing demand from enterprises.  Most consumers of technology are used to paying for products and services on a subscription, or OPEX basis only.

Across all sectors, there is a discrepancy between new technology becoming available, the demand for it, and the time it takes to achieve a return on the investment required to offer it.  For instance, providers need to offer 1G bandwidth for domestic customers, but then rely on monthly subscriptions to pay for the large initial capital outlay - thus putting their balance sheet under considerable pressure.  

In many cases technology suppliers have been forced to offer significant discounts, simply to get to an acceptable price point for their customers.  This is where smart capital can help.

To roll out 5G, operators need a substantial volume of capital and technology partners need to be paid within a reasonable time frame – almost certainly less than the time it takes for operators to recoup their investment from monthly payment plans.   

Moreover, the operators need these funds allocated as efficiently as possible, in other words employing a smart capital solution. This allows faster access to the latest technology for the operators and a quicker route to maintain healthy balance sheets.

The result could be commercial success for them – and more competitive, advanced, and agile economies globally.