From connectivity to customer connections
by Christopher Schlaeffer
The old telecom business model is broken. New competition, technological advances and the growth of OTTs are eating into traditional telecoms revenue streams, and all have the potential to negatively impact legacy business models.
The changes we are seeing, however, will not mean telecom companies will disappear. The telecom industry, ultimately driven by customer’s digital demands, is resilient and adaptable and will remain of vital importance to customers and businesses around the world as the internet reaches more and more of the global population. Not all is lost for operators that can recognize where the world is going.
Indeed, there is potential to ensure that the telecoms of today play even more of a central role in customers’ lives. But in order for this to happen, a dramatic change of mindset is needed. Telecom companies have to strive for something different – to be a companion of customers as they navigate the digital world.
Historically, telecom companies have remained relatively distant from the customer, often seen as purely infrastructure providers. The business model has been led by technological developments, rather than by customer needs. The industry needs to radically reshape its business model to center it around customers, first working out what customers demand, and then working out how best to provide this through technology and innovation.
Netflix, Uber and other OTTs are developing increasingly close, sticky relationships with their customers. The ease and agility with which OTT brands like these deliver services makes customers see them as invaluable ‘friends on the net’ rather than simple service providers. It’s time for mobile operators to find a way to become as appealing to customers as these OTT providers, in order to win back customer relationships.
One way this could be achieved is by creating partnerships with OTTs to create tailored, shared service propositions. Could you imagine what could happen if mobile operators start sharing data with Uber?
The value that mobile operators can add comes from their knowledge of customer needs based on proprietary customer data – at VimpelCom we have over 200 million customers interacting with us on a daily basis!
Therefore telecom operators have privileged relationships with customers, with insights into identity, activity and interests. Unlike OTT providers who often rely solely on advertising revenue, we can improve the service we offer our customers while also developing new revenue streams for the group.
So, how are we doing this at VimpelCom? And what will the industry look like in five years’ time? At VimpelCom, we are investing like no other telecom to completely renovate the digital engagement for our customers. In particular, we are aiming to capture the untapped opportunities in emerging markets where there are lower levels of international competition from OTT players and a strong need for localization to succeed.
VimpelCom’s digital strategy is built from the customer experience outwards – it is customer first, not mobile first. The way we as an industry currently interact with customers is a legacy model, which is simply not acceptable for consumers today. Long waiting times in call centers, no digital service options – this doesn’t work anymore. We are overhauling all our customer processes through the introduction of new digital service opportunities. We also announced the overhaul of our digital IT infrastructure for BSS at VimpelCom recently, which is the primary foundation for globalization, simplification and digitalization for the Group. At the same time as improving our operations, this will reduce our IT costs.
Our services are also becoming designed to be ‘easy in, easy out’. Telecom companies have historically worked with long, fixed subscription periods (e.g. twoyear contracts), but customers nowadays are used to testing services, and appreciate the flexibility of being able to switch them on and off. In Pakistan, for example, our customers want to hook on a music service for a day and cannot afford to buy a music service for US$10 per month, such as Spotify. So we’re making this possible.
We are also entering into new services and products. This can be done through a partnering approach, an acquisition approach or a ‘building ourselves’ approach. There are particular opportunities in the areas of messaging, entertainment and mobile financial services, where we see high demand in our often “under-banked” markets. The initiatives we are launching will open up new revenue streams and, along with the work we are undertaking to transform our cost structure, will ensure that VimpelCom is a significantly more nimble and efficient operator. To this end VimpelCom has committed to generating an additional $750 million in cashflow by 2018. And this is likely to be just the start of our journey.
So, while the telecom industry is changing rapidly, operators now have more of an opportunity to becoming increasingly important to people’s daily lives. The companies that will succeed and be around in five years’ time will be the companies which develop new businesses and services to meet customer demands, leveraging their mobile customer base, data insights and existing backbone infrastructure.
I am sure that in the next five years we will see a completely different, even more integrated telecom industry, where customer engagement is king, and simplification, digitalization and globalization are critical to the telecoms’ operating model.
This article first appeared in Citi CPS Report: Re-birth of Telecoms into a new digital industry – Time to Dump the Dumb Pipe