market driven service introduction – strategies for differentiation and expansion

Soc Classification level 1 © Nokia Siemens Networks

Market Driven Service introduction – Strategies for Differentiation and Expansion

Sofia, 2009-04-02

Wim Ketelbueters

Head of Services Solution Sales, WSE, Central East


User insights drive service provider business

Service providers can use user insights to:• Improve business

performance• Add value in a changing

business ecosystem

5 billion people connected

* Source: Nokia Siemens Networks market research and analysis

20-30% of users bring 70-80% total value to service providers. Often only 50% of users are profitable.*


Reducing churn leads to higher margins

Source: FY 2007 reports for operators with fiscal year ending December; 9m reports for operators with fiscal year ending March [marked A)]; 1H reports for operators with fiscal year ending June [marked B)] – all to the degree reported 28 Mar

Service providers fight for market share with high customer acquisition & retention costs

Churn has a negative impact on EBITDA margins

EBITDA margin


Putting customers at the heart of business

Network-centric User-centricApplication-centric

Business competitiveness

Personal, Communities and Converged Services

74% of service providers have started to move to a more customer-focused delivery model over the past 12 months

Network Features Silo ApplicationsReal time and long term user andbusiness insight


Moving towards a unified customer viewToday 87% of service providers do not have a unified view of user data

• 87% of CSPs do not possess a unified user data view

Key priorities: • Real time user profiling• Knowledge on

Customer Life Time Value through long term user trends analysis

Do you have plans to have a unified view of customers across the business?

source: Loudhouse Market Research Q3/2007, commissioned by Apertio

Don’t know

No plans

In next 12 – 24months

In next 6 months

Already

42%

14%

8%

14%

22%

5%5%

18%

13%

60%

0%

10%

20%

30%

40%

50%

60%

70%

Marketing

IT


User insights improve business performance

Cost and billingTargeted tariff plans, bonus schemes and hybrid offers help Telkomsel Indonesia improve customer loyalty and increase average revenue per user. €

Quality Data revenue increased 5M€ and voice revenue increased by 7M in home environment for a European service provider with 25 M subscribers after applying user insights understanding in service and network optimization.

Customer service 15% reduction in help-desk work orders (330 € each), and help desk solved 30% more 2G incidents and 50% more 3G incidents after a European service provider applied user insights to customer care. Estimated OPEX savings: 2.2 M€ pa

Portfolio Right time to launch new products/services and support for business decisions based on device insights – European service provider.

45% reduction in annual OPEX for customer surveys and internal efficiency gain of over 75% in market research in a European service provider’s CMO

Brand


End user insights – Business Ecosystem Will operators loose out on $1 trillion* in Web 2.0?

Broadband bit pipes

Web 2.0

Terminals Fixed/cable

POTSphone

ISDNphone

SIPphone

PCClient TV SIP SIP

Mobilephone PDA

Multiradio Mobile platform

Transform or become a bit pipe?

*LIGHTREADING, VOL. 7, NO.6, JUNE 2007


Business model is changing

Subscribers VendorsOperator

Single product delivery model

Business model is changing :

•Convergence of telecom, broadcasting and internet industry

•Role of traditional CSP’s are changing

•Partnership between end user, CSP and partners

Traditional business model


Generic Operator Ecosystem

EquipmentVendors

ContentAggregators

Corporate

clientsMVNOs

Core Network Operator

Access Network Operator

End UsersValue Added

Service Providers

Regulator

Fixedoperators

IT PartnersOutsourcing License Owner

Investors

ServiceOperator

ContentProviders

Content Producers/

Owners

Site landlords

Network Operator


Communication Ecosystem – Conceptual Framework1. Which ecosystem is it? Operator view

Rel

atio

nsh

ip C

om

ple

xity

Technological Complexity of Offering

High

HighLow

River

Coral Reef

Aquarium

Raft


Communication Ecosystem – Conceptual Framework

Rel

atio

nsh

ip C

om

ple

xity


High

HighLow

AquariumRiver

Raft Coral Reef


Evolution into different ecosystems emphasises various ”operator” roles

Re

lati

on

sh

ip C

om

ple

xit

y


High

HighLow

River

Coral Reef

Aquarium

Raft

Evolution trends

Service Operator

Content Aggregator

Network Operator

Service Operator

Content Aggregator

Network Operator Critical/

Emphasised

Network Operator

Service Operator

Content Aggregator


Evolution drivers

Market foundation(Country and industry macro-economic factors)

Coordination

Complexity

Collaboration

Convergence

Saturation

General Influencers/Drivers

Regulatory evolution

Technology

End-user behaviourand preferences

Competition

Growth

Profitability

Internalcapabilities

External Influencers/Drivers

Internal Influencers/Drivers

Ecosystem position

Environment


How to ensure growth?R

ela

tio

ns

hip

Co

mp

lex

ity


High

HighLow

Segmentation

Typically, a Raft operator has to excel at meeting the

market demand and its buying criteria

Price

The River operator ultimately grows by

competing on (market) price for network capacity

Service

By offering new services, the Coral Reef operator

grows the market and its market share

Quality

The Aquarium operator grows by offering high quality and extensive

service portfolio


How to ensure profitability?R

ela

tio

ns

hip

Co

mp

lex

ity


High

HighLow

Operational efficiency & Premium services

(Specialisation in operations and/or in market offering)

Capacity utilisation & Volume

(Optimisation of network capacity and maximisation of

volumes)

Premium services & Risk distribution

(High(er) margin on service offering AND distribution of risk

through partner collaboration and coordination)

All

(The Aquarium operator ecosystem implies that an

operator excels at everything, unless a regulated monopoly

limits the number of operators)


Risks and barriersR

ela

tio

ns

hip

Co

mp

lex

ity


High

HighLow

RAFT

Dependency on external supply of network capacity reduces the available margin for competition (and error)

RIVER

The large investments in combination with falling prices risk pushing profitability downwards

CORAL REEF

The coordination needs may lead to higher costs and slower market response than required

AQUARIUMA large integrated operation risks being less flexible in a deregulated fast-moving market and may have difficulties staying competitive


Communication Ecosystem


What can the efficiency calculator show?

Highly inefficient

Least Output

Highest Output

Least Input

Highest Input

Highly Efficient

Efficiency Zone Inefficiency Zone

ILLUSTRATIVE analysis of the

GLOBAL market. This analysis can be

created at a regional level

KT CorpTelenor

AT&T

VerizonCommunications

DeutscheTelekom

Telecom ItaliaNTT DoCoMo

KDDI

PCCW Group

Vodacom GroupMTN Group

BT Group

KPN

China Telecom Corporation

France Telecom

TeliaSonera

Telstra

Telefonica

VodafoneGroup

Comcast

All operators should aim

to be in the yellow zone.

From our analysis there are few if any operators currently in the top left quadrant of

the diagram which is the highly efficiency area.

Nokia Siemens Networks analysis on how efficient operators are


Nokia Siemens Networks helps to structure our wealth of information to facilitate knowledge sharing, discussions, and the decision-making process

• Communications Ecosystem: Position your business in the industry and analyze your options for moving ahead

• Differentiation Benchmark: Benchmark your differentiation profile to better understand your current market situation

• Community Finder: Discover the best ways to profit by offering new services to communities

• Customer Value Indicator: Compare your average customer profits against the regional benchmark. See the impact that loyalty has on your bottom line.

• Operational Efficiency Benchmark: Compare your operational efficiency against the top performers in your market

• Consumer Total Cost of Ownership: See how much consumers need to spend to be connected in the low income markets

• Connectivity Scorecard: Compare how well different countries have put communication technology in use

• Business Modeling tools:• Base station energy efficiency comparisons• Hosting (use case: MMS)• Mobile TV• Fixed-Mobile Convergence• Integrated Provisioning• Village Connection / NGM


Fit for Business – market radarA unique way of looking at the market dynamics

Drawing on our accumulated consumer, operator and market knowledge and research, our Solutioneers are dedicated to understand and find solutions for your changing business needs.

All this knowledge has been collected in our

unique Fit for Business tool. We can scan and evaluate opportunities together with you for your competitiveness in the areas of both immediate operational effectiveness, and longer-term strategic positioning.


Our proven track record

Over 500 systems integration projects globally

More than 160 consulting engagements for over 70 operators globally

More than 200 2G/3G commercial networks optimized,

and more than 80 multi-vendor optimization projects

More than 360 service management CSP installations globally – mobile and fixed

250 charging CSP customers globally – mobile and fixed

Over 45 subscriber data management customers

HLRs serving more than

1 billion subscribers every day


Thank You !


Appendix


Defining the ecosystem type 1/2: defining factors

• Relationship complexity

• Level of dependency on external contributors to deliver its product & service offering to its customer segments:

– Content creation

– Service providers

– Technology platforms: outsourcing

• Granularity of customer segmentation

• Technological complexity of offering

• Technical platforms and;

• Service platforms in operator network

• Degree of ownership of technical & service platforms


Defining the ecosystem type 2/2: the viewpoints

Technology • Operators ownership and attitude towards different technologies.

• Approach to research and development (in-house or outsourced).

• % of headcount in network operations & management.

Licensing

• To have the license or not.

Content and value-added services (VAS) • Operators attitude towards content and VAS creation and delivery.

Customer segmentation

• Number and types of segments addressed.

Marketing, retail network and distribution

• Operators means to approach its customers.

• % of headcount in M&S.


River

Technology & Licensing• License/no license

– Radio capacity retailer & network manager, or– Radio capacity retailer only, or– Network manager/platform only

• Focus on basic-technology core & access networks– Wide coverage– Flexible platform (neutral to access)– Neutral to packet- or circuit switched

• Lets customers take care of application layer solutions

• Highly adaptive to new access technologies

Content & Value Added Services• No or minimal content & applications

Segmentation • B2B

Marketing, Retail Network & Distribution• B2B• Minimal visibility to individual end-users• Very low personalization

“Offers an environment (or parts of it) for everyone that is willing and able”

River

Examples:

Network providers


Raft “No infrastructure, moves easily about its ecosystem ”

Examples:

Resellers, service operators, MVNOs & MVNEs

Technology & Licensing:• Minimal infrastructure (if any)• No license ownership• Indifferent or adaptive to new disruptive technologies

Content & Value Added Services:• Capacity buyer• Content buyer & provider• Focused on parents brand & customer service

(e.g. Wal-Mart)Segmentation

• Highly focused segmentation• Segmentation on distribution (internet users)

Marketing, Retail Network & Distribution• Very aggressive push mode• Maximising visibility to chosen customers segments• Marketing & sales oriented organization• Diverse retail network

(or through main business outlets, e.g. Tesco)• Diverse service offering• Moves quickly and easily in the market • High personalization• Internet as distribution channel• Brand

Raft


Aquarium “Solid infrastructure, sets circumstances for its surroundings”

Technology & Licensing•License owner•Own network

–New service platforms–Possibly proprietary solutions

•New disruptive technologies threat

Content & Value Added Services•Restricted outsourcing•Own portal•Own content development•“Gatekeeper”: firm control over external content

Segmentation•Volumes to masses: addressing all segments

Marketing, Retail Network & Distribution•Low personalization•Typically firmly integrated subscriber/retailer network

Examples:

Walled-garden

Aquarium


Coral Reef “Neutral to infrastructure and highly prospering and colorful ecosystem”

Technology & Licensing• License owner• Neutral to infrastructure & technology• Network/infra outsourcing• Neutral or adaptive to new disruptive

technologies

Content & Value Added Services• Has highly advanced & open business

network• New innovative cooperation methods

– Revenue sharing– Hosting– Managed Services– Content outsourcing

• High number of agents in its ecosystem

Segmentation• Focus on key segments• Maybe several brands for different

market segments• High personalization

Examples:

Traditional innovators

Marketing, Retail Network & Distribution

•New & innovative service orientation•Diverse subscriber/retailer network

– Few flagship stores– Franchising & partnerships– Very selective on retailers

•Brand

Coral Reef

market driven service introduction – strategies for differentiation and expansion

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