Is now the right time to outsource your shops as a telecom operator !!!

UAE. Delta Partners, the leading telecom advisory and investment firm in emerging markets, released its latest 'Delta Insight' today, "Outsourcing a telecom operator's shops - can the opportunity become a threat?"

The publication discusses opportunities and potential risks for telecoms operators in outsourcing their branded shops.

Operators worldwide are looking at outsourcing models as a way to focus on the key areas of the business. One of the popular strategies is the outsourcing of the so called 'branded shops', the management of their own shops.

This represents an important sales channel for an operator and a relevant share of opex at 1-3% of an operator's revenues and capex where one shop can cost around US$100k.

MTN, Etisalat, Zain and many other regional key players have already followed this strategy.

"Next to achieving the roll out at reduced timelines, shop outsourcing also allows operators to transfer some of the roll-out costs to external partners thus reducing capex," says Josep Que, partner and co-author of the report. "On top of that, external partners typically manage the shops more efficiently and in alignment with local dynamics. In countries like Jordan operators have even opted for regionally-focused partners to manage the branded shops."

In a stage of the telecom industry development where differentiation is key as the easy days of growth are over in many parts of MENA, to have a well run sales channel is key. However, outsourcing is not without its risks.

"The benefits of outsourcing are evident and tangible but one has to bear in mind the potential threats," adds Miguel Moreira de Cruz, manager. "First, an operator can be in a potential hostage situation with a strong sales partner that has become too dominant, which needs to be carefully managed."

"Second, the outsourcing of shops does not necessarily imply cost savings, but rather efficiencies and has to be assessed in that light. Thirdly, customer service can suffer when outsourcers are chasing profits and sales and neglecting support services and last but not least it is key to ensure the proper back-end support to the sales partner in order to ensure success."

Relevant benefits have been captured by operators that have outsourced their own shops in terms of efficiencies, rollouts and costs, and although challenges exist, identifying and realizing them is the first step to reap the benefits of the model.

The current level of competitiveness in telecom markets is making this an increasingly attractive option for operators to consider, thereby following a currently popular trend worldwide.

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