Seven urgent innovation priorities for telecom CEOs

In PwC’s 27th Annual Global CEO Survey, 52% of telecom CEOs said they believed their company would no longer be economically viable a decade from now if it continued on its current path, compared with 45% of all CEOs globally.

To ensure the continuation of telecoms’ value-creating potential, leaders need to fundamentally rethink the utility of a vertically integrated carrier model, with a core focus on examining, optimising and potentially separating the distinct business layers. The traditional telecom bundles together an array of very different businesses and activities. Some, such as building the network infrastructure, are capital-intensive and have long-term, utility-style payback profiles. Others, such as innovating products and services, are higher-value and higher-risk but offer a faster payback. Still others, such as operating commerce and service channels, require skills and capabilities that have more in common with retail businesses. Each business requires different management skills, has different capital needs and operates on different planning horizons. Running them together creates inefficiencies and dilutes leadership focus—factors that cause investors to apply a “conglomerate discount” to their valuation.

As the chart below shows, the business can be disaggregated, or delayered, into distinct components, such as “InfraCos” focused on operating passive infrastructure; “NetCos” designed to deliver network utility services; and “ServeCos” offering services to consumers. Doing so can sharpen leadership focus on the primary sources of value, provide greater clarity on strategy, and offer optionality to investors and strategic partners to contribute the necessary capital or capabilities.