The GCC region is experiencing the dual economic shock of the COVID-19 pandemic and plummeting oil prices. However, despite the many challenges arising from the crisis, the telecom industry has experienced an upsurge in demand for connectivity. Beyond the dual economic shock, telecom operators must move quickly to build a sustainable strategy and take advantage of what is likely to be a continuing acceleration of digital activity.
The crisis has weakened demand across multiple sectors and disrupted supply chains. In the GCC, its effects have been exacerbated by oil prices hitting their lowest levels in decades. If the oil price remains at around $20 per barrel for the rest of the year, the region’s GDP could experience a severe contraction.
During the lockdown, however, people have been relying on the telecom sector to communicate, consume content, and perform online transactions. GCC operators have already experienced a boom in connectivity demand from consumers who need greater bandwidth, and from enterprises expanding their use of virtual private networks and remote working solutions. There has also been a major increase in digital channel adoption, and a reduction in customer churn.
“During the lockdown, however, people have been relying on the telecom sector to communicate, consume content, and perform online transactions.”
Notwithstanding these positive developments, the dual economic shock has created significant challenges for GCC operators. There has been a significant decline in sales due to closure of stores, upheaval to call center operations, a broken supply chain for devices, regulator-imposed free data and calls, struggling customers and distributors, network congestion, and lower quality of service.
To date, GCC operators have responded to these challenges with immediate tactical measures. For example, Saudi Telecom Company has introduced aggressive discounts and promotions to stimulate demand and compensate for a sales slowdown. It has also increased its focus on digital sales and deliveries. Du is repurposing retail outlets to support critical activities, for example as call centers or delivery warehouses. Du is improving and promoting its digital customer care to alleviate the burden on call centers.
Aside from these responses, GCC operators must consider the big picture, devising a comprehensive set of actions to minimize disruption in the short term, and build the relevant capabilities to capitalize on growing digitization over the longer term.
Operators first need to act to protect their existing subscriber base through in-depth analytics of customer usage and behavior, followed by targeted offers. This action is particularly urgent because operators lost significant income when many expatriate customers left the country at the onset of the pandemic.
“GCC operators must consider the big picture, devising a comprehensive set of actions to minimize disruption.”
With regard to operations, they must secure additional spectrum and the capacity to handle increases in network traffic. Operators should also safeguard their short-term cash position and develop remote operations management capabilities appropriate for the current economic disruption. This would include getting the most from their resources, reorganizing teams and optimizing their operating model. From a financial perspective, operators should maintain only essential investments to keep the business running, while increasing capacity and minimizing congestion.
At the same time, operators need to mitigate any disruption. They should launch promotions and publicity campaigns to attract customers and raise awareness of digital subscriptions and upgrades. More importantly, operators should expand their digital channels to serve customers seamlessly. This entails revamping their website and self-service applications by adding functionalities, payment methods and expanding delivery services.
Once stability is secured, operators must seize opportunities. The rapid growth of digitization, which many anticipated for coming years, has arrived. To respond to this sudden change in circumstances, GCC operators need a three-pronged strategy.
First, they need to accelerate digitization of their core business fully to meet customer expectations in a highly digital world. This involves portfolio simplification and innovation, revamping digital journeys and channels, and enhancing digital platforms and application program interfaces.
Second, operators must build vertical capabilities to enable the digitization of other sectors, such as data centers and IT services. They should also develop capabilities to provide differentiated digital solutions for traditional sectors, such as education and healthcare, which will continue their digitization after the recovery begins.
Third, operators should assess their contribution in driving growth of emerging technologies, such as blockchain, drones, connected cars and artificial intelligence, which are rapidly becoming mainstream and proliferating. Telecom operators can play a major role in providing the critical connectivity for these technologies. They can also act as a driving force of the platform economy by exploiting strengths such as infrastructure, applications and customer insights.
By taking decisive steps now, telecom operators can prepare for the recovery and maintain their long-term growth agenda. They can lay the foundations to lead the digital future and help other sectors to thrive.
This article originally appeared in Telecom Review, May 2020.