Telcos face post-COVID-19 risks without network resilience, says EY report

Saviour Adugba

• Revenue expected to decline in the telecom sector
• Digital inclusion to gain relevance

With the advent of the COVID-19 pandemic and the resultant shutdowns instituted by many governments across the globe, telcos saw a sharp increase in network demand with the initial lockdowns pushing up network traffic by as much as 70 per cent. While most telecom companies rose to the occasion by withstanding the increase in network demand during the period, it has now emerged that the sector faces the risk of having to provide sustained infrastructure resilience or struggling in the post-COVID-19 environment.

This is contained in a recent report by EY Global Telecommunications titled ‘The top 10 risks for telecommunications 2020’, that examines the risks facing telcos by combining consumer surveys, industry insights and perspectives from practitioners in the sector. The report states that at a high level EY Global’s risk analysis suggests that telcos will struggle in the post-COVID-19 environment unless they focus on building network resilience and reach while driving positive customer perceptions. “Overall, networks have withstood a sharp increase in home working, entertainment and schooling during the pandemic and telcos have commanded favourable customer opinion as a result. However, revenues are set to decline across most product categories and telcos must not become complacent. The journey to recovery will require new thinking and competencies, shifting the customer promise from speed to reliability, so telcos can thrive in the ‘new normal,” said Tom Loozen, EY Global’s Telecommunications Leader noted that, Reacting to the report, a top-ranking telco staff that did not want to be named told Business A.M. that for Nigerian telcos to meet the global standard in network resilience and reach, more investments need to be made in the sector.

Infrastructure still a problem in Nigeria

Locally in Nigeria, telcos have played a pivotal role during the lockdown in Nigeria with many of them creating tailored packages and tariffs for their customers during the lockdown period as well as providing free services to keep people connected thereby fostering an effective relationship with their customers. But for many of Nigeria’s telcos, experts, including Ikechukwu Nnamani, the chief executive officer of Medallion Communications Limited, have voiced the need for them to urgently bolster their network resilience and boost infrastructure to remain productive in the post-COVID-19 environment. According to analysts close to the situation, one of Nigerian telcos biggest problem is that they don’t have adequate infrastructure to serve its growing customer base. Many Nigerian telcos struggled to cope with the surge in demand for digital services during the lockdown in the country leading to widespread complaints by customers about service quality during the period. The major issue that the telcos have faced is not having the infrastructure to serve the increased demand of broadband consumers during the lockdown, as individuals and organisations adjusted to the new reality of rapid digitisation and having to conduct business over the internet. The state of infrastructure of Nigerian telcos was addressed in the Nigeria Broadband Plan 2020-2025 when it noted that:”…one of the challenges hindering broadband penetration and service coverage in the country lies in the glaring infrastructure deficit in the telecommunications sector in Nigeria as a subset of the infrastructure deficit across the Nigerian economy.” The COVID-19 pandemic has helped to exacerbate the already grave situation, but Nigerian telcos must improve their infrastructure, and boost network resilience if they are to stay profitable in the post-pandemic era.

Revenues to decline across segments of the industry

The EY report also stated that telcos revenues are set to decline across most product categories, noting that the mobile and enterprise categories are going to be the most impacted segments of telcos revenues to be affected due to travel restrictions and business closures. For telcos that must continue to operate optimally in the market, it suggests that special attention must be paid to network reliability and resilience.

Digital Inclusion to gain prominence

The report also pinpoints digital inclusion as another area that will gain prominence from the COVID-19 era, moving forward. According to the report, as more governments grapple with the reality of coverage limitations in healthcare and public services, they will tilt their attention towards employing digital infrastructure to solve those problems. As the report notes, “efforts to bridge the digital divide are likely to gain additional stakeholder attention going forward.”

Other issues

The top 10 risks that face telcos globally, according to the EY report, are –: failure to ensure infrastructure resilience and reach; inability to scale internal digitization initiatives; failure to redesign workforce purpose and inclusion; failure to improve CAPEX efficiency and network returns; underestimating changing imperatives in privacy, security and trust; poor management of investor and stakeholder expectations; ineffective engagement with industry verticals and public sector; inability to adapt to a changing regulatory landscape; failure to mitigate evolving disruptive scenarios; and failure to take advantage of changing market structures.