Unravelling Telcos into Servcos and Netcos - The Talent Perspective

There's been significant disruption in the telecommunications industry for the last few years. Large incumbent companies have moved to break up their network (netco) and customer-facing (servco) sides of the business into two distinct legal entities. 

The reasons for unravelling into separate entities are compelling. A streamlined netco business brings greater telco value maximisation, with netcos being worth more than 15 to 20 times their margin versus the six to seven times of a traditional telco. This is down to the lessened risk of not operating as a vertically integrated behemoth, allowing the new entities the ability to build more significant economies of scale.

There’s also the lure of hyper-focus on the core business - netcos plan infrastructure projects that can take 50 years to complete, while a servco can operate more nimbly with responsive marketing campaigns.

The split can also lead to more significant cost savings through an efficiency drive. Following the separation of O2 Czech Republic from its netco, O2 prioritised reducing operating costs through the simplified processes and replacements to key IT systems, ultimately bringing its EBITDA margin – the best measure of an operating business – between 2015 and 2019 from 27.1 to 32.6 percent.

Crucially though, where does this highly disruptive process leave talent teams? People are your major asset and are crucial to the company's future success when unravelling. How can you ensure that high-performing teams aren’t split up needlessly and that you maintain a collaborative work culture?

The challenge for talent teams

For the separation to bring long-term gains, you need to plan well ahead of time, considering how the business will run after breaking up its netco and servco functions, and identifying potential risks.

One initiative is to create a modular service organisation – one or several independent teams that can rearrange and work with other departments as needed. Sitting between the two companies during the transition phase, this team of talent professionals can respond directly to any immediate issues, as well as helping to maintain the company culture across the two companies. They can also take the time to understand how various teams work, so you can better assess who would be best placed in which company.

In addition, it’s a good idea to assign someone to be the key talent-facing contact, issuing communications and fielding questions. This helps keep employees informed during the transition, and putting to rest any worries they might have. If your staff feel out of the loop, they will feel removed from your culture and may be more likely to leave.

How telcos can turn this into an opportunity

HR and talent teams need to be involved right from the exploration stage for the transition to thrive. Start by identifying the key stakeholders within the HR team, then organise a kick-off meeting to lay out the scope of the transition.

By understanding the potential risks of the unravelling process before they come up, you’ll flag anything that requires special attention beforehand. Your team should also schedule regular check-ins to ensure red flags aren’t ignored and that the talent is kept top of mind.

The unravelling process is also a time to embrace the skills opportunity across all stages of the talent lifecycle. For instance, how do you split one marketing team of 50 across two companies and optimise for outputs? How do you split engineers who enable others like front-end engineers and devops? Rather than treating it as just a splitting up of teams, with the right planning, it’s an opportunity to build new teams whose skills are best suited to the challenges they’ll face in the newly created servco or netco.

The optimal answer to this will require a skills taxonomy to measure current skills and skill gaps in both companies and how certain people would be best placed to fill them. With a taxonomy and strategy in place, you can influence the splitting up of the organisation to maximise final impact whilst also being mindful of what your employees want from their role. Having this taxonomy available across a single, central platform for the entire talent team will stop information silos, aiding in hiring internally and externally.

Consideration should also be given to the use of talent marketplaces to host internal job postings, offering transparency to those looking for a move within your company that matches their skills and interests. Internal mobility is a key ingredient of a healthy company culture, giving employees room to grow within your company and allowing you to best use their skills and knowledge across both companies.

Key takeaways

Unravelling is a huge opportunity to bring significant gains, but it’s never an easy transition. Too often, talent teams are sidelined while the decisions are being made and then left to pick up the pieces.

This is the time for HR and talent teams to be involved right from the start and be proactive in their decisions on how the company’s biggest source of competitive advantage, its people, is split up.

With proper planning, awareness of skills within the company and encouraging internal mobility to those best placed to fill any gaps; you'll be able to maintain a healthy company culture and reap the benefits of your company's transition.

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The last two years have thrown up a host of new challenges for talent teams, but it's also created a big opportunity for those willing to take it. By taking the time to understand talent at the level of skills, and consider its whole lifecycle, you can create a long-lasting talent strategy that moves beyond just a tactical response to the pandemic – a strategy built on understanding what each individual wants and working out how to help them get there, and helping you to turn attrition into attraction and retention. To learn more about talent lifecycle management and how it can help you attract and retain the best talent, download our Talent Lifecycle Management Whitepaper.