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A short article by Jan Hruska, Chief Technology Officer at O2

Telcos are lucky compared to the majority of industries: demand for data grows double digit! In the same time, more and more customers of all segments enjoy unlimited tariff plans and capex invested into the network to ensure the throughput and quality are growing. Is it sustainable?

I have just recently recalled, how back in 2008, we were brainstorming in the marketing and sales team on incentives to drive data adoption across the customer base. The demand for mobile data was close to zero and we had hard times to make the 3G business case profitable.

Today, telcos are resolving the different profitability puzzle. Data demand is unprecedented, accelerated by pandemic lockdowns and home office remote collaboration, data consumption grows double digit for home internet and almost doubling every year in mobile handsets. Looking at other commodities, we should be happy, there is no such demand dynamic seen in energy, petrol, grocery, and other industries.

There is one little catch there though, in the chase for ARPU growth, many telcos have upgraded customers to unlimited tariff plans in recent years. By doing so, we have basically challenged ourselves – top line revenue is stable while network investments grow, capex to sales ratio exceeding 15% globally in the sector. Where all this money goes? We simply keep building the capacity to serve the growing demand: buying additional frequencies and deploying fibre optics to provide access networks, modernizing backbone and transport networks, keep adding more and more routers, increasing core systems infrastructure and licenses.

So far so good. We have benefited from Moore’s law that says (with some generalization) that the performance of electronic devices doubles every two years (assuming for the same price, of course). This modernization trend has been helping us for many years to keep pace with data demand while controlling the cost.

Now, looking at the post-pandemic (or I should rather say inter-pandemic) situation, with significant labour market changes, production issues, R&D quality impacted by lockdowns, logistics crashes and cost increases, and other challenges, we should be very cautious when it comes to Moore’s law validity, especially in the economical sense,  going forward. We still keep our KPI’s set on “stable cost per customer” whenever we tender for new equipment for access, transport, or core network elements. And it is harder and harder to achieve.

Let me conclude the optimistic way: one of the things that I love on our civilization, probably the most, is the incredible ability to overcome all the challenges and crises. It may be painful, take time, cost resources. But I believe that all the shakes connected to pandemic happening now, together with technology modernizations and business and investment models reinventions (I mean mainly expanding ComCo and InfraCo separations, and growing appetite for network sharing), will eventually contribute to long term sustainability in the sector.

If you admit that there might be positive things about pandemic, the recognition of the entire telco sector belongs to them. We turned from the bad guys charging horrible fees into close-to-heroes, resilient enough to carry all the home office e-meetings and remote school lessons.

Good job! Kudos to my excellent team in O2 Czech, kudos to all telco colleagues in CZ, kudos to all telco folks on the planet. You are great! And actually, you are among the winners of the battle!

Jan will be also joining our Future Global Network Development Summit on September 2022, where he will present a case study on O2 Tech Digital Journey.

Jan HRUSKA is a Chief Technology Officer at O2. He graduated in Computer Science at Charles University in Prague in 1994. After 8 years in management consulting, he moved to Telefónica O2 Czech Republic. Within his 15 years with Telefónica, and later O2 Czech Republic, Jan went through many positions, mainly Fixed-Mobile convergence program manager, E-shop manager, Director for distribution strategy and sales performance, Fixed services marketing director, to his current role of CTO, covering responsibility for IT, Network, and Product management areas. Jan’s latest focus is FWA, 5G, IPTV platform, IT modernization, and agile at a scale of big organization.

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