African Telcos Need to Servitize Their Physical Assets for Growth

African Telcos Need to Servitize Their Physical Assets for Growth

I recently read an old book; in one of the chapters, the author gave a scenario where the following dialogue took place between the founder of McDonald’s and a group of MBA students.

Founder: What business am I in?

MBA Students: Everyone laughed. Who does now know that you are in the hamburger business?

Founder: That’s what I thought you would say. I’m not in the hamburger business, rather my business is real estate.

The founder then went on to explain that even though his main focus was to sell hamburgers, he never lost sight of the land and location of the franchise, which were no doubt the most significant factors in the success of his franchise. Today, McDonald’s own some of the world’s most valuable street corners and intersections.

Telcos have constantly complained of increased competition and dwindling revenues from their connectivity businesses. Infact, telcos have constantly been advised to consider other digital offerings like data analytics, cyber security, cloud services, 24/7 connectivity etc to complement their traditional connectivity offering.

Even though these digital offerings would benefit telcos, they are yet to unlock value from their physical assets. Across Africa, it is common for telcos to own, manage and operate various cloud and data centres, retail outlets, antenna locations, offices, etc. These range of physical assets across various locations could be used to unlock value and therefore lead to significant commercial opportunities, just in a similar manner to the McDonald’s franchise model.

In order to unlock value from the physical assets, telcos need to servitize their physical assets to organisations in need of such offerings (leading to a business model of physical assets-as-a service). This no doubt requires innovative thinking.

In essence servitization is a transformation journey – it involves firms (often manufacturing firms) developing the capabilities they need to provide services and solutions that supplement their traditional product offerings.

Also, telcos need to start looking at their physical assets as commercial opportunities, rather than capital expenditures necessary for their connectivity business. The physical assets-as-a-service model, if implemented, would help to reduce the expenditures currently incurred by telcos on these assets as well as unlock significant value which would no doubt benefit their businesses.

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