Digicel: telcos are not positioned to make ROI on their 5G launches

It is not just in the early 5G markets like the USA that telcos are agonizing over the business case. Digicel, which operates in the Caribbean and other emerging economies, says telcos are not even getting enough return on investment from 4G, let alone being ready to capitalize on 5G.

Telcos need to transform their business models if they are to take advantage of the opportunities enabled by 5G, Jean Yves Charlier, member of the board at Digicel, told the recent Total Telecom Congress in London.

“When we look at what investors think of our industry at the moment, they are clearly voting with their feet. The telecoms sector over the last three, five or even 10 years has been the worst performing sector for stocks. That is particularly true here in Europe,” he said. “Investors see that, fundamentally, we are no longer a growth industry. We are no longer an industry that provides the appropriate set of returns.”

He added: “Growth is eluding telcos – ARPU is down across the board. In spite of all of our investments in 5G, in spite of the investments we have made in fiber, ARPUs are constantly coming down. Telecoms is no longer the growth sector that it was 10 years ago.”

Charlier said that telcos are investing enormous sums in their networks, but their business models leave the door open for others to monetize these and address the most profitable revenue streams.

“While we’ve seen huge year-on-year traffic increases on our networks – sometimes by as much as 30%, 40% or even 50%, fundamentally we are not translating that increase in traffic into revenue growth,” he continued. “We’ve poured billions of dollars into new 4G networks but today analysts believe that the return we are seeing on those investments are less than the costs of deploying the initial capital for operators in Europe. What we’ve seen is that Silicon Valley and the tech giants are essentially coming in and eating our lunch.”

Will 5G enable telcos to change this pattern? Charlier believes it provides a real opportunity, but “telcos are going to have to evolve to capitalize on this opportunity – and quickly. Are we just going to provide SIM cards with low ARPUs to our customers, or are we going to capture the heart of the value chain?”