The Next Generation of Telco-Data Enabled Ventures

Throughout history, innovation has come in waves and has been directly responsible for massive economic value creation in its times. Looking at just the last 300 years – from the invention of the steam engine and the First Industrial Revolution, through to 20th Century military advancements and the development of enterprise computers and mobile phones – we see how each ensuing cycle of innovation is accelerated and exponentially increases global GDP. The latest waves in technological innovation have been due to the explosion of available data and what that data means for different industries and economies.

Innovation in connectivity, and its ecosystem of online applications and services, has resulted in the production of massive amounts of data, herein creating tremendous opportunities to generate value from this data.

Figure 1: Value Creation Opportunity from New Technologies
Source: Mckinsey Global Institute

Data has been the at the heart of the latest digital innovation wave. Connectivity and its ecosystem of online applications and services, especially in the media, retail and commerce sectors, has resulted in an explosion in data generation in recent years.

In addition to creating new digital native players, this has also spurred traditional industries to undergo digital transformation to develop new platforms and services and fundamentally shift the way they do business. As innovation progresses at an exponential rate, we are also now seeing traditional industry – including asset-heavy industries such as manufacturing, logistics and agriculture – utilize technologies such as IOT to streamline and optimize their operations. In the next few years, we will see technologies such as 5G, that will continue to generate increasing amounts of data, enable a new wave of technological innovation for many industries, such as mobility, infrastructure and agriculture.

Figure 2: Telco Enabled Digital Innovation can benefit multiple sectors
Source: FutureLabs Ventures

Telecommunication operators (telcos) have been a great platform for underpinning this latest digital revolution especially due to their connectivity infrastructure and huge data assets. In an investment-driven industry such as telecommunications, optimizing investment decisions has always represented a key competitive advantage for operators. However, as telco products and services have become commoditized over time, keeping up with changing consumer preferences and the latest technological innovations have become increasingly challenging. Operators are therefore facing new challenges in making investment decisions: Identifying the most commercially attractive investment while catering to the needs of consumers beyond basic connectivity.

As active participants in this latest wave of digital innovation, telcos have been investing in new areas of potential growth, including branching out from traditional connectivity services through monetizing their assets and setting up new digital businesses to capture the value of the data on hand. This has yielded mixed results so far, and the limited success of these ventures has made it evident that telcos cannot do it alone. Telco data and assets are no longer enough to drive this value capture.

Figure 3: Key Investment areas by Telcos outside their core business
Source: KPN Ventures (2016 – 2018)

Telcos and other industry players must partner up, to develop or join an ecosystem where they can serve the changing needs of consumers. By leveraging their combined data and capabilities they can truly unlock new opportunities which could not be realized by going solo.

Telcos possess key assets that make them a natural partner for new digital platforms:

  • 24/7 365 connectivity
  • Population-sized customer bases
  • Deep data on customers (identity, demographic, consumption, marketing & sales, etc.)
  • Real-time location and mobility data
  • Regular billing relationships (daily in some geographies)
  • Online and offline distribution channels (grassroots-level reach)

We see three horizons where clear opportunities are emerging and becoming catalysts for a new level of digital transformation, which is a multi-trillion-dollar market:

Figure 4: Three Horizons of Telco Data Enabled Opportunities
Source: FutureLabs Ventures

HORIZON 1: Turning Data into Revenue Drivers

Telco data and analytics capabilities can be leveraged to develop solutions that provide a better user experience and convenience – something consumers are willing to pay more for. Intelligent use of data combined with strong data management capabilities can form the basis of hard-to-replicate platforms that can turn data into new revenue streams.

Deriving further value from data will enable telcos and other organizations to transform this from a cost center into a revenue & profit center. Organizations that lack the internal capability needed for data analytics need to take steps to address this through partnerships in the short-term, and investing to build this as an internal capability in the longer term.

There are many ways to monetize data. Telco data can play a huge part in either complementing the data of other organizations or providing valuable insights that would otherwise be very difficult to acquire. E.g., credit scoring, KYC/identity, location/mobility information and advertising.

Horizon 1 involves telcos monetizing external data – business models range from providing customized aggregated “data-as-a-service” to developing productized analytics use-cases for third parties. Footfall analytics to track whereabout of customers and use them for location-based marketing is one of the most popular monetization examples for telcos.

Several telcos ply the location-based targeting value chain; Telefonica, for example, has engaged in multiple partnerships with leading brands such as Linio, Heineken and United Colors of Benetton. In 2017, it acquired leading UK geolocation data start-up Statiq. Statiq processes billions of location data signals to identify the places people visit and build consumer profiles. This allows advertisers to better target ads based on a user’s physical location, and track whether the user visited a retail store after seeing a mobile ad.

At a recent FutureLabs Innovation Circle Roundtable event – where we convene a small group of influential guests for a meaningful discussion on best practices and key drivers for innovation – one use case mentioned was how a social media platform can share information with telcos as to which SIM cards or handsets are preferred for which communication/online activities, especially in markets where users use multiple SIM cards/handsets. This is an interesting example of how telco data can be augmented using data from other partners to develop better suited products for their customers.

Another use case that stood out was how an infrastructure and OOH (out of home) advertising player was deploying machine learning in their OOH advertising to create passer-by identity to track and generate mobility patterns and understand user behaviour. Were they to combine the offline data with online activity and mobility data from a telco, the proposition becomes a lot more compelling and data accuracy goes up significantly. There are a number of use cases that can be developed on top of such a proposition.

There are various models of data monetization, but the platforms that will extract maximum value are those that develop end-to-end (E2E) platforms. This means data + infrastructure + embedded workflow software. These will come together to achieve an “unfair” advantage.

Figure 5: Range of Business Models for Data Monetization & Related Value Capture
Source: Mckinsey & Company

For many organizations Horizon 1 “data monetization” opportunities are not new, as they may have been involved in Horizon 1 in some way or form for some time now. But for those who have yet to move on this, this is absolutely a clear and low-hanging opportunity that must be capitalized on now.

HORIZON 2: Building New Ecosystems Enabled/Enriched by Telco Assets

While Horizon 1 may represent opportunities with low barriers to entry, we have seen that telco data alone is not enough to create value at scale. There are very few examples of telcos unlocking value at scale with their data monetization platforms alone. However, as we see in Horizon 2, there are clear opportunities for telcos and other enterprises to partner up and fully utilize their data assets, infrastructure, industry expertise and capital together to co-create new business models and ecosystem ventures.

The opportunity in this Horizon 2 spans across sectors. Leveraging telco data and other assets, corporations can co-create new digital ventures that can become future growth engines in insurance, financial services, logistics, retail and other sectors, e.g., health and wellness, hyperlocal logistics and social-commerce.

Opportunity favours the bold. Organizations need to be open to exploring new business models and be willing to step out of their industrial silos. Consumers’ changing preferences and expectations of their service providers, along with blurring of lines between industries, bring about opportunities to capture new value. Using online and offline assets, data and customer reach, new services and platforms can emerge which can scale much faster and more efficiently than spending precious marketing dollars to acquire customers.

These new co-created ecosystem ventures should focus on addressing key customer pain points that are not addressed by traditional products and services. There are already many inspiring examples in unbanked, cash-based, infrastructure-poor markets where telcos have partnered with others to create the ecosystem for payments and remittances for previously underserved populations. Similar telco-enabled innovations have been seen in digital banking, insure-tech, hyperlocal e-commerce, tele-health, risk intelligence, urban and mobility planning, among others.

Telcos are strategically placed to be the core enabler of a portfolio of new ventures. The guiding principle here is deep client-centric focus, platform-based business model, and focus on owning key control points such as data and customer relations; and fast-tracked market entry via curated product, data, and GTM strategies.

HORIZON 3: Catching the Next Wave – Opportunities Made Possible by 5G

5G has the ability to go well beyond simply increasing connectivity speed and bandwidth; it will serve as a vehicle for a new wave of capabilities and innovations. We will share the early proof-points we are already seeing with respect to what a high-speed network and low-latency edge technology can enable in terms of new opportunities, and best approaches to capitalize on some of these new capabilities.

Unlike previous versions of radio transmission technology such as 2G/3G/4G, 5G requires a whole new infrastructure setup with a much denser deployment of transmission nodes. This requires a significant amount of investment, the return on which cannot be expected from end consumers. We know – based on existing and planned 5G rollout – those consumers are unwilling to pay for a marginal improvement in their internet consumption experience.

According to GSMA, by 2025, it expects the following 5G penetration in the Asia-Pacific region:

  • Australia: 54% 
  • Indonesia: 5% 
  • India: 7% 
  • Malaysia: 20% 
  • Singapore: 34% 
  • South Korea: 67%

While 5G promises big opportunities, justifying these investments will rely on the significant scaling up of use cases. Most of the 5G opportunity lies in the enterprise and industrial space where it has the opportunity to offer transformative change. This is something enterprises are willing to pay for and the 5G investment returns can be expected.

It’s early days but we are already seeing proof points in the enterprise and industrial sectors of how 5G can help unleash a new wave of innovative services that were previously not possible under the constraints of 4G. According to A.T. Kearny research, various enterprise use cases can be supported by 5G, ranging from agriculture (drones to monitor weather and soil) to urban planning (autonomous vehicles in the public sector to monitor and aid public safety) to automated financial services and retail, etc.

Figure 6: 5G Supported Enterprise Use Cases
Source: A.T. Kearney Analysis

The market opportunity is vast: GSMA estimates that 5G will generate $700 billion in economic value, with enterprises representing 68% of the market, led by retail, government, and finance applications.

For ASEAN telco operators, 5G promises to fuel the next wave of growth, adding up to $3.5 billion to consumer revenues and up to $2.5 billion to enterprise revenues.

Figure 7: 5G Enabled Monetization Potential for ASEAN Operators
Source: A.T. Kearney Analysis

One way to fully exploit 5G opportunities is a shift in the operational paradigm. Daimler’s Factory 56 is one example of how this can be achieved Factory 56 uses a private 5G network combined with automation, using ML/AI for predictive maintenance supply chain management and real-time problem resolution tracking​, operations critical data transfer and tracking. The heavy use of IoT enabled a fundamental change in the deployment of resources and efficiency, and completely reinvented the production process. This will serve as a blueprint for Daimler’s new production factories globally.

While the jury is still out on which use cases will scale up and justify huge capex investments in 5G, there are still ways to take advantage of this new technology and get in early in the game. 5G Open Innovation Labs (5GOIL) is an example of a consortium-based approach, which can help de-risk investment into 5G. 5GOIL, a consortium of MNOs, multi-stage start-ups, investors, enterprises and other partners, is building a community of founders focusing on developing a variety of applications and infrastructure solutions through a structured program. This helps to develop new use cases with ready access to corporate partners and investors to scale it up quickly if needed.

Figure 8: 5G Focused Open Innovation Lab (5GOIL)
Source: 5G Open Innovation Lab

Innovation is simply not an option. Organizations must innovate to address the existential challenges to their long-term business strategy brought about by disruptive new business models. Depending on the industry and organizational setup, each organization must take a conscious call as to which opportunities they have the best chance of capitalizing on, and execute them.

Monetizing internal data and augmenting it through partnerships is the lowest hanging fruit. However, the focus must to be to scale it into an E2E platform to create maximum value and for it to become an engine for future growth opportunities. Determining where an organization has the right to play can be a daunting task; but organizations must be bold enough to identify and validate new opportunities in the market. Promising opportunities should quickly be built iteratively and tested in the market and scaled.

Organizations must drive their stake in the ground building on existing capabilities and assets which could be complemented by telco data and the possibilities stemming from potential telco-enabled ecosystems. And as technologies such as 5G enable new possibilities, organizations should keep an eye on the horizon for transformative opportunities which could give them a competitive advantage in the long term.

We hope this provides a reference framework on how to approach some of these opportunities, what steps can and must be taken immediately, which require a longer-term view; and how to ultimately create value. As the effects of COVID19 have only served to reiterate, business as usual will not work – there will be survivors and losers.

Key Takeaways

  • Data and customer connectivity have opened unprecedented opportunities to innovate by creating new scalable digital ventures.
  • Telcos are well positioned to become a central player in this new innovation paradigm – leveraging their captive customer connectivity and 1st-party data at scale – and build an ecosystem of new scalable ventures in adjacent & new sectors – from promotion & advertising, to logistics, financial services, health & insurance and more.
  • Doing this well requires a significant mindset and capability shift – from recognizing that telcos are no longer only in the business of connectivity commoditization, to adopting a number of key venture building best practices (see infographic below) to proactively collaborating with industry and venture building partners rather than doing everything alone.
  • The risk for those telcos that are not proactively embarking on this journey may well mean being relegated to managing back-end infrastructure as a utility for the benefit of other customer-facing apps that will free-ride on telcos’ (capital intensive) infrastructure and capture the largest part of the value creation


Figure 9: Key Venture Building Principles
Source: FutureLabs Ventures


Mario AQUINO, Managing Partner – FutureLabs Ventures

Founder & Managing Partner of FutureLabs Ventures, a corporate venture builder and VC firm. Former Managing Partner of McKinsey Ventures, and founder of McKinsey Solutions in Asia-Pacific (McKinsey’s corporate VC & innovation groups). Spent 20+ years in digital & advanced analytics space across Asia, the US, and Europe as an entrepreneur, advisor to tech companies and VC funds, executive, and investor. Core expert on Fintech, Artificial Intelligence, and Advanced Analytics. Built and scaled 10+ “new tech” companies that have become regional and global players, including two unicorns. Extensive network in the innovation & corporate ecosystem globally.

Usman Khan LODHI, Venture Partner – FutureLabs Ventures

Entrepreneur and senior executive with 16+ years’ experience in digital consumer, telecommunications and software sectors in Europe and Asia. More than a decade of leadership experience (as Co-founder/CEO) in launching new digital businesses and taking them to market leading positions across South-East Asia (in both start-up and corporate settings). Focused on product innovation, building high impact teams and unlocking new revenue streams. Mentor and advisor to several regional start-ups.

This article is written as part of the Corporate Venture Launchpad — the S$10 million pilot programme by EDB New Ventures aims to enable large, established companies new to corporate venturing in Singapore to incubate and launch a new venture within six months, supported by venture studios experienced in corporate venture building.

FutureLabs Ventures is proud to be an appointed venture studio of the programme.