05 December 2023

Sumedha Tatke, director – marketing and product management, Tarantula

The business environment has been challenging for the past two years, with inflation affecting economies globally. Towercos have faced issues like price increases, weak consumer demand, declining margins, and supply chain disruptions. To adapt, towercos have focused on optimizing operations and reducing costs.

However, cost-cutting measures alone are not enough. Towercos must embrace opportunities like 5G, prepare for 6G networks, utilize digital twins, and explore new revenue streams and business models in the evolving digital landscape. Digitalization is becoming a strategic approach for towercos due to market, internal, and technological pressures.

Digitalization drivers

Towercos are no longer asking why they should embrace digitalization but rather when. Digitalization is revolutionizing the industry, prompting towercos to seek innovative ways to enhance efficiency and reduce costs. Identifying and acknowledging the driving forces behind this transformation is relatively straightforward.

The market imperative

The EY report, ‘Digital InfraCo – unlocking the tower power,’ highlights market opportunities towercos should pursue. Towercos will be compelled to explore these opportunities soon. The report presents the following key areas:

• Strengthening the core: Towercos should focus on meeting the increasing demand for high-speed, high-bandwidth traffic. The rollout of 5G calls for network densification through small cells and a robust fibre backhaul network, which towercos are well positioned to address.
• Adjacencies: Leveraging their infrastructure strength, including a widespread tower network, real estate expertise, and power management capabilities, towercos can generate additional revenue through adjacent services like EV charging, warehousing, and advertising. Adopting a digital-first approach can enhance efficiency in managing these services.
• The Digital InfraCo: This opportunity represents a bold transformation for towercos. By becoming a Digital InfraCo, towercos evolve from providing tower infrastructure to becoming network providers. This shift allows for avoiding duplication and achieving better economies of scale. Successful transformation into a digital infraco depends on the digital maturity of existing incumbents.

In summary, the EY report outlines the market opportunities for towercos and emphasizes the importance of embracing digitalization and expanding their service offerings.

Internal impetus

Several internal factors drive digitalization within towercos. Firstly, the initiation of digital transformation by some companies prompts others to follow suit. The competitive landscape among towercos further fuels the adoption of digitalization as organizations strive to keep up with one another. Consolidation in the towerco industry through mergers and acquisitions also acts as a significant driver, with digital maturity in operations facilitating smoother due diligence and expediting proceedings.

Changes within the telecom sector impact Towercos’ approach to digitalization as well. Consolidation has resulted in fewer competitors, necessitating strategic adaptations. Telecom companies prioritizing a ‘digital first’ approach with technologies like data-driven business intelligence, AI, machine learning, and generative AI create a bandwagon effect, compelling Towercos to take digitalization seriously and integrate it into their operations.

Technology suppliers

Tech suppliers play a significant role in the towerco industry, offering cloud computing, big data analytics, AI, machine learning, automation, and IoT solutions. They contribute to the growth strategy of towercos, providing digital solutions to maintain competitiveness. Alongside co-creating tech solutions, tech suppliers also offer go-to-market (GTM) strategies, allowing towercos to stand out from the competition.
This collaboration creates a win-win situation for both parties.

Digitalization - various journeys

Towercos are increasingly adopting digitalization to enhance efficiency and profitability. This initiative is driven by factors like improved customer service, operational efficiencies, market responsiveness, competition, and better data management. Digitalization allows towercos to optimize asset utilization, streamline operations, and reduce maintenance costs using technologies like predictive analytics and AI. It also enables them to offer robust services by leveraging trends such as 5G networks and IoT solutions.

Towercos have multiple paths to embark on the digitalization journey. However, it’s important to understand the distinction between digitization and digitalization. Digitization involves converting analogue information into digital formats, making it easily accessible and shareable. Digitalization, on the other hand, uses digital technologies to transform business processes, leveraging data for automation and improved performance. Both concepts are crucial for maximizing operations in the digital era, with digitization being a part of the broader digitalization process.

Path 1 - big bang digital transformation

The path towards digitalization is demanding for towercos. It involves technology-enablement not only for tower infrastructure and operations but also for all business and support functions, including administration. It’s a comprehensive approach where towercos go ‘all-in’ with their digital transformation efforts.

Path 2 - digitalization > point solution or platform

There are two sub-paths in the digitalization journey:
Point solution approach: This involves using specific software solutions to address individual problems. Point solutions focus on solving specific issues and can be integrated with other systems or platforms for a more comprehensive solution.

Platform approach: A platform is a set of tools and services that enable the development, management, and delivery of point solutions. It provides the infrastructure for point solutions to run and integrates various functions, creating a unified user experience. In the context of telecom site management software, a platform approach would encompass centralized site lifecycle management, incorporating lease management, field service management, analytics, and more.

The platform approach allows for the deployment of multiple point solutions, such as location, site inventory, tower acquisition, O&M, and billing. This integrated approach improves executive decision-making by providing smarter data and faster analysis.

Path 3 - digitization

Towercos, along with companies in other industries facing technological disruption, often confuse digitization with digitalization. As previously mentioned, the distinction between the two has been highlighted. However, for towercos, digitization serves as a crucial initial step, building confidence to invest in future digitalization initiatives and embrace digital transformation.

Risk vs return

The ‘all-in’ Path 1 approach carries high risk as it requires significant resources in terms of time and money. Path 2 takes an evidence-based agile approach, addressing point problems incrementally, resulting in lower risk since only a portion of the business undergoes the change.

Assess digital maturity with DAI

BCG conducts an annual Digital Acceleration Index (DAI) study, a global survey of thousands of companies across various industries.

Referencing their 2021 study can provide towercos with ideas (note: this is not a recommendation, but a line of thought for towercos to consider). The survey covered 2,300 companies in 27 countries and 10 industries, assessing their digital maturity in 36 categories on a scale of 1 to 4. The scores were then normalized on a scale of 0-100 to determine their placement on the BCG Digital Acceleration Index (DAI).

The DAI categorizes companies into three groups based on their digital maturity:

Bionic companies (score: 67-100): These companies exhibit the highest level of digital maturity, excelling in technology, customer experiences, and innovation.

Digitally proficient companies (score: 44-66): These companies are making progress and investing in digital capabilities with the aim of continuous improvement.

Digital laggards (score: 0-43): These companies have limited digital maturity and face challenges in leveraging technology for desired outcomes.

Although the survey doesn’t explicitly mention tower companies, it does include telecom companies, which were identified as bionic companies with high digital maturity. Telecom companies are strategic customers of tower companies, and the bandwagon effect is evident.

To assess their own digital maturity, towercos can refer to the self-assessment points below. Scoring themselves will provide insights into their current digital maturity, helping them identify strengths, areas for improvement, and prioritize digital transformation initiatives. The assessment presents representative criteria and corresponding questions, and towercos should consider which criteria are most relevant to their business situation. Assigning appropriate weights (in %) to the criteria will help calculate overall scores and guide progress in the digital transformation journey.

Press the four accelerators

The BCG study identifies four accelerators for enhancing digital maturity and driving value creation in tower companies:

Technology, data, and human capabilities:

• Analyze self-assessment results to identify strengths and areas for improvement.
• Create a roadmap for investing in technology, improving data quality, and upskilling employees.
• Promote unified data models and API integration for efficiency.

AI integration:

• Assess current AI investment and focus based on self-assessment results.
• Highlight benefits of AI integration and training employees in AI.
• Encourage prioritization and resource allocation for AI initiatives.

Governance and platform operating model:

• Evaluate governance structure and assign ownership for digital initiatives.
• Explain benefits of a platform operating model for collaboration and autonomy.
• Strengthen collaboration between business units and technology functions.

Technology and human capabilities connection:

• Assess culture and integration of technology and data into operations.
• Promote a culture of continuous improvement and human-tech augmentation (HTA).
• Leverage technology to automate processes, foster innovation, and design.

Regularly monitoring progress, reassessing digital capabilities, and adjusting strategies are crucial for staying competitive in the evolving digital landscape.

Shifting gears in telecommunication

In the telecommunications industry, the story unfolds with telcos building and managing their own network infrastructure.

Towercos emerged, specializing in managing and leasing tower infrastructure, allowing telcos to focus on core services. Infracos, the latest stars, take towercos to new heights by becoming network providers themselves through digitalization. However, the circle of life reminds us that things can change. Infracos may blend back into telcos or evolve into technology giants, driven by regulation, market dynamics, and technology. Only the digitally forward will survive, adapting to constant transformation.

The telecom industry teaches us the importance of adaptation and seizing opportunities to stay ahead.