Disruption in the Telecom market: Building cost leadership and flexibility

Disruption in the Telecom market

Turning supply chain inefficiencies into competitive advantages.

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Excerpts from Dr. Volker Pyrtek

   

The Telecom sector is being squeezed by declining prices and increasing investments

Most important challenges for the telecommunication industry is that, on one side, our prices are dropping in the markets all over the place, in all countries, basically, due to deregulation and fierce competition in all markets, and on the other hand, we are ahead of a big investment curve, so we, there’s a strong demand for broadband coverage, broadband mobile, broadband fixed, and this has to be managed at a time where revenues go down, so practically, we are in a squeezed cash and profitability situation.

Decreasing subsidies are exposing the inefficiencies in a supply chain

Big retail chains like Amazon will play a bigger role in our business, and in the past, the device business was a highly subsidized market, so the operators subsidized the device so that you could get an Apple iPhone for €99, which is significantly below the purchasing value of this device, so subsidies somehow saved also the operator from the real fierce retail competition.  But with many markets now operating without any subsidies, like the Belgian markets, or the markets in Spain, subsidies are going down, you see the real competitive advantage or disadvantage you have, because you cannot hide the inefficiency of your supply chain behind high subsidies.

Disruption in the device market is also forcing operators to streamline

When we built the joint venture, the device business was one major area of scaling our business.  So we have a huge device business, mobile terminals from Samsung, Apple, and the big suppliers in the world.  Three years ago, there was a pretty calm market.  Right now, the market is in complete disruption.  So now we are faced, we have a situation where we compete directly with all three tech chains, like Amazon.  That is a particular challenge for Deutsche Telekom and France Telecom and our operators.

CPO’s must provide cost leadership for the C-level and flexibility for the consumer

Looking at the cost structure of companies, in most industries, we recognize that spend to third party plays an essential role, and so if an industry is in a disruptive situation and is really looking, how can I achieve in that situation additional, or how can I achieve in that situation cost leadership, then C-level is knocking at the door of the CPO.  The other thing is, value chain, supply chain has to become much more flexible because consumers are asking for that, and to really ensure that companies will be able to have highly performing, very agile supply chains, they need to have a CPO which is able to build that with key suppliers’ office company.

About Volker Pyrtek, BuyIn

Volker heads BuyIn, the 50:50 Procurement Joint Venture between Deutsche Telekom and Orange with offices in Paris and Bonn. He is responsible for strategic procurement activities in the customer equipment, network and service platforms areas of both operators, covering a spend of approximately 13 billion euros in almost 50 countries. Volker has more than 20 years of experience in various executive positions and sectors. He joined Deutsche Telekom in 2002, as Head of Procurement for T-Mobile International, Bonn. In 2007, he became Chief Procurement Officer for Deutsche Telekom. Before that, Volker held various management positions at Bayer in Leverkusen. In 1997, he became CEO of Investment Bank Spütz, Düsseldorf, and simultaneously became Chief Finance Officer (CFO) of Tullet&Spütz, London. He was co-founder of the E-Procurement marketplace Goodex in 1999 as CFO and Director for Central Europe.

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