CxO Insight

Cloud gives O2 Telefónica’s rivals a run for their money network-wise

Mallik Rao didn’t inherit Germany’s biggest or best network, but set out to make sure cloudcos knocked on his door first, he tells Contributing Editor, Annie Turner, as he prepares for next generation services.

Mallikarjun [Mallik] Rao joined O2 Telefónica in Germany as CTIO in November 2019. He came from Vodafone where he’d spent eight years in senior roles in three different markets. He is humorous, articulate and unfazed.

In the month Rao became CTIO, Telefónica Group’s CEO, José María Álvarez-Pallete, launched his five-point strategy for the group, underlining Germany’s importance as one of its four key markets, alongside Brazil, Spain and the UK. Germany contributes about 23% of the Group’s revenues.

Rao says, “I had the mandate to run the whole technology function.” Previously, IT and network were separate functions under two board members, and the role chief digital officer became part of his remit.

“At the time, we had a significant gap compared to our competition.” While according to the first nine months’ earnings report in 2019, the German network was improving, Rao accepted that O2 Telefónica could not match the former incumbent Deutsche Telekom’s infrastructure, “but access network aside, I wanted to give them a run for their money with everything else, whether they were Vodafone, Deutsche Telekom or whoever,” he says with relish.

 

Cloud cover

Rao identified cloud transformation as the means to do this and in 2020 O2 Telefónica in Germany “launched a three-year ‘Investment for Growth’ programme which is where I have significantly invested my time and effort. Having a good network in the market is essentially about execution: from getting the base stations done to getting customer experience [sorted], from both the point of view of customers’ perception and performance. That is one mission.”

He continues, “The second thing, as I said, is to dominate mindshare in this market compared to anybody else on cloud – both IT and network. So if AWS or Google [Cloud] or Microsoft or any cloud company wants to come to Germany, they would all knock my door first…I feel that’s one of the biggest success factors so far.”

How did he do it? “I kicked off a cultural transformation inside O2 Telefónica,” he explains. In 2020, the company had six cloud-certified architects, now it has 75. Four years ago, 51 was the average age of people in his team, which had little international diversity and only 6 to 7% were women. Since then, the telco has recruited about 375 people with an average age of 35. Women make up about 36% of the new intake and 62% of it is not German.

 

Cloudification challenges

He continues, “Most telcos’ CIOs do not want to do big transformations and most of the CEOs do not trust the CIOs or CTOs to do a technology transformation. That trust is gone because nobody has been able to execute. It was [an industry-wide] problem.”

Nothing daunted, Rao says, “You cannot scale the edge without changing the core” and three years ago established the Radical Architecture IT Transformation programme to shift the core network to 5G Standalone (SA). It is important to note that as well as being 100% cloud native, it is 100% public cloud and encompasses “the whole BSS – Salesforce, Hansen [Technologies], Nokia and several companies that participate in the best-of-breed IT programme,” he states.

Rao adds, “I have three very strong programmes running the entire IT transformation, and not even one server is on-premises, including the entire BSS, and 80% of the OSS is also on the country’s public cloud. That’s the direction we’re going. Then for our network functions, the whole packet core is on the public cloud.”

Is there anything he wouldn’t put on the public cloud? He reflects, “I might deploy the user plane on-premise or some other regional data centre because I don’t want to take the call, but that’s for a commercial reason not a technology reason. You don’t want to carry the traffic back into public cloud and then bring it back into my network. So we will split the user plane, some in public cloud, but most of the traffic functions are on-premise, even for a hyperscaler’s regional data centre.”

 

Measuring success

Rao measures success in terms of the number of customers served, how many products are on offer and the amount of revenue flowing through the platform. He says, “Today, only a small part of O2 Telefónica’s revenue is generated via the new platform and, by end of 2024, we want to scale it up significantly to several hundreds of million euros. Then I will say, ‘Yeah, we’ve successfully transformed the systems’. Otherwise, all we can say is we’ve created cloud-native technology.”

While some operators are not willing to ‘risk’ their telco cloud on public platforms due to concerns about security and data privacy, Rao says, “I’m more comfortable to drive the public cloud providers to have a sovereign cloud in each and every country. I am not the decision-maker, but I am a significant influencer. They have committed, they will invest to satisfy the regulatory environment in every country, specifically in Europe.”

When AWS announced its European Sovereign Cloud in October, Rao was quoted in the official press statement saying, “The new AWS European Sovereign Cloud can be a game-changer for highly regulated business segments in the European Union.”

 

Automation without killing innovation

How hard has network automation been in this shift to the public cloud and what role has AI played and what role will it play in the future? “Two things,” he answers. “We have a globally autonomous network which we have been building for the last two years, but we think automation and AI should not be backwardly compatible like we usually do in telecoms because that kills innovation. So I don’t have the answer [about the future of AI] but I can tell you that is our thinking is right now.

“Whatever network automation we want to do it must be forward looking. Let’s say, for example, 5G RAN. I don’t want to do automation on 4G, not even for 5G NSA, because in 2025 we strive to go to 5G SA only.” He describes 5G NSA as “neither a future nor past technology unlike 3G, which is gone. We are re-orienting.”

So while there is some relatively basic AI and automation for predictive maintenance, automating the network operations centre (NOC) and some deploy functions, for generative AI and large language models (LLMs) the build will be forward-looking only.

He says, “If I have a 5G SA in 2025, that should be the most modern, most adaptable for all these functions. We call it Network of the Future. When I say ‘network’, I mean radio, transport and core all under the BSSs because there is no point…in just automating the network. If I can’t have provisioning for the customer for any on-demand services – whether it’s slicing or anything else – if the provisioning is not automated, if my billing is not compatible, if my customer service cannot serve that particular customer, it’s pointless.”

 

Next steps

Looking forward, Rao says, “The aim in 2025 is to have at least 20% of traffic on that Network of the Future”. He and his team built a greenfield IT stack, and are now migrating customers and products to it. Likewise, they were thinking about building a cloud-based core.

He agrees that it’s disappointing that 5G SA has taken the industry much longer to deploy than expected but as telco and cloud mesh increasingly, Rao says, “Now is the time for 5G SA as a technology enabler. With cloud-native functions, you can expose your network for developers – what we call the Open Gateway in the industry – to try out our networks.

“We have been extremely cautious [previously]…we didn’t allow anybody to touch our networks because of security. We built a complete walled garden. So that walled garden now can be open via CAMARA: you’re able to open interfaces to the developer community, or even hyperscalers…That gives us much bigger hope because then networks become part of the same essential call flow whereas today, we have been bypassed by the OTTs.”

He adds, “Before the OTTs’ application servers could talk to the client device without the operators’ involvement. With the new generation of services, they have to be via me.”

 

It starts now

How far away is this new generation of services? “It starts now, Rao states. “Last year we published one or two APIs – quality of service (QoS) and location – between Telefónica, Vodafone, Deutsche Telekom and a couple of other big operators that have started implementing CAMARA. We will get momentum as we go live commercially with one or two use cases.”

Already Zoom is working with Orange, Telefónica and Vodafone on QoS on-demand. Other companies are keen to use the location API to reduce fraud by knowing the exact location of a device that wants to transact. Rao continues, “By early 2024 we will start implementing one or two use cases, then at scale in 2024-2025.” By which he means being able to handle 100 million API calls. This, he concludes cheerfully, “Is really nothing in the telecoms world across three or four operators – right now we manage billions of them, in real time, anywhere in the world”.