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February 14, 2013

What is Telco Core Competence, These Days?

By Gary Kim, Contributing Editor

VimpelCom has signed a five-year managed services contract with Ericsson (News - Alert) that has Ericsson managing network operations on VimpelCom's behalf at more than 10,000 sites.

Ericsson will be responsible for network operations and field maintenance for active and passive network components, for the operator's mobile, fixed and transport networks.

As part of the agreement, over 400 VimpelCom employees spread over 41 locations across Siberia and the Urals will be transferred to Ericsson in April.

The deal suggests that network operations are not viewed as a core competency by VimpelCom. It isn’t that the network is unimportant; simply that it is not the unique source of perceived value.

Reliance Communications signed a similar deal with Alcatel-Lucent (News - Alert) in India. Such developments might have been unthinkable back in the monopoly era of telecommunications, when executives might have argued that network operations were the core competency. The phrase can be misunderstood.

In common usage, a core competency might be understood as “something we do well.” That is not quite what business strategists might mean.

A core competency is a single, specific competence that not only is essential, but offers a key way of differentiating from other contestants in the same market. A core competence therefore is a subtle thing. It is not just “something we do well,” not only the “singular advantage” a company might possess, but a capability that also distinguishes a firm from all others in the same business.

That is what makes a “core competence” hard to pin down. Firms might have key skills in the regulatory area, for example. But other leading firms might also have such skills. That means skill at managing the regulatory process is not a “core competency.”

What is a bit shocking is that “running a network” is no longer seen as a “key competence,” much less a core competence. That is not to say the network is unimportant, only that it is not uniquely important.

In similar fashion, one might argue that licenses to use spectrum, though foundational, are not core competencies either, as in most markets multiple contestants have such licenses. Spectrum (News - Alert) provides a crucial business advantage, to be sure. But it might not be a core competence.

Granted, core competence is a subtle thing. What is shocking, though, is the extent to which “running a network” no longer is seen as the core competence.


Edited by Brooke Neuman
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