Cloud & Automation: Changing CSPs' outlook

Communications service providers (CSPs) have grown comfortable talking to their investors about digital transformation programs, but they have a tough time explaining how transformation will impact their bottom lines. This has made investors cautious about building assumptions into CSPs’ future financial performance.

There are three main drivers for telco transformation: delivering a stronger customer experience, generating new revenues and achieving efficiency gains. In this research we are focusing on efficiency gains because they are the easiest way for operators to demonstrate the benefits of transformation. Importantly, we have chosen to focus on OpEx rather than CapEx. There is already plenty of research available about the evolution of the network, which makes up the majority of CapEx. However, little information is available about telco OpEx trends, even though operators spend close to $1 billion annually.

In this report, we show the status of current telco OpEx through detailed analysis of publicly available financial results from five CSPs operating in Europe, the Middle East and Africa: BT, MTN South Africa, Ooredoo, Orange and Telenor. We have used the data published by these companies to highlight the most important categories of OpEx and show their expenditure in these areas as a percentage of total revenues and total OpEx. Read this report to understand:

• Which categories make up telco OpEx
• Why CSPs and their investors use EBITDA (earnings before interest, taxes, depreciation and amortization) margins as a key performance indicator
• How CSPs have been cutting costs up to now, and why new technology will impact costs in the future
• Which CSPs are cost-cutting leaders
• How investors feel about CSPs’ efforts to transform, and whether they believe operators can cut costs further
• How BT, MTN South Africa, Ooredoo, Orange and Telenor categorize OpEx, and how their spending compares
• How much CSPs collectively spent on CapEx and OpEx in 2020
• How deployment of cloud, AI and automation will impact OpEx