Telcos Strategic Positioning in the New World (Slovenia Telco Day 2013)

IBM Institute for Business Value

Telco Day
Telco’s strategic positioning
in the new world
Mobile, Cloud, Social and Big Data

© 2013 IBM Corporation


Telecommunications is IBM’s #1 research focus

Dublin
Research
Labs

Industry
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c Watson

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Analytics
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Cities

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Research Lab

 Semiconductors
 Systems
(Haifa Satellite TSL)
 Software &
Services
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 Big Data &
(La Gaude &
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Research Lab
Analytics
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Web
Services
TSL China &
Research Lab
(Beijing)

Japan

 Internet of Things
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(Tokyo
Satellite TSL)

(New Delhi)

TSL India
(Bangalore Satellite TSL)

ASEAN
(Kuala Lumpur
Satellite TSL)

TSL LATAM

Centers of
Excellence

2

(Sao Paulo,
Brazil Satellite TSL)

Institute for
South
BusinessAfrica
(Johannesburg, Satellite TSL)
Value

Worldclass
Partner
Ecosystem



The IBM Institute for Business Value creates fact based thought
leadership that help clients realize business value

Future
Agendas

CXO
Surveys

3 to 10 year industry outlook
with action oriented next steps

3

Value Realization
Studies
In-depth assessment of today’s
critical issues, opportunities, etc.

Chief Officiers studies – CEO,
CIO, CMO, CFO, CHRO, etc.



What will be the Telco’s role in the new world?

Technological advances and mega’ market trends
are creating a very new world for consumers,
businesses and markets as a whole.
In this new world, Telco’s strategic positioning and
response relies on major growth plays

Prediction is very
difficult, especially if it's
about the future.
― Niels Bohr
4

Your theory is crazy,
but it's not crazy
enough to be true.
― Niels Bohr


Four key Technologies will have big impact on telecommunications
Natural
Language
Analytics
DeepQA

Program

Learn

Big Data: Realtime
Inference &
Knowable
Future

1,000,000X

Data

Workload
Optimised
Systems

5
5

Cognitive
Computing
“SyNAPSE”

1,000X

Silicon
Devices
Nano
Scale

1,000X

1 Billion
Transistors

Exascale
Software
Defined
Environments

Nano
Systems
1 Trillion Devices



Mega market trends evident today are driving re-evaluation of
business strategy
 Rise in power of the smarter
consumer
 Social media explosion driving

Market

new behaviours

Regulatory

Economic

• Slow long term growth outlook,
shifting wealth and urbanisation

Structural separation
continuing

 Increasing roles of
regulators especially

• Change in Global Hierarchy

in privacy

• Demographic shifts



 Going global for growth

 Big data and hyperdigitisation
 The 3rd platform – Cloud


Internet of Things

 Mobile first as a design point
6



Mobile saturation extending to M2M

Technology

ICT
Industry

Accelerated pressure on
revenue/costs

 OTTs and new competitors


disintermediating
Network technology
investment and change


Increasing power of the consumer/Social
Media

Internet, the mobile and social media has led to an amazing
consumer revolution as profound as any seen before

7

Today, roughly 1/3
of world’s
population is on line

And their use of
social media tools
to shop, spend and
share insights is
growing

They are
increasingly
accessing the
Internet through
mobile devices


Social Networking has become a key communication channel, in
particular among under 25s
Daily
Usage

Media

1

84%

2

Mobile Telephony

82%

3

Social Networking

72%

4
5
COMMUNICATIONS
SERVICES USAGE
UDER 25s

Email/IM/Chat

Video Streaming

58%

Fixed Voice

42%

6

VoIP

32%

2/3rd
or more of consumers
under 25 use Social
Networks daily

80%

Email/IM/Chat

75%

3

Social Networking

66%

4

Video Streaming

47%

5

Fixed Voice

33%

6
8

Mobile Telephony

2

Mature markets

1

VoIP

17%

±1/2
of consumers under 25

stream or download
video daily

Source: 2011 IBM Global Telecom Consumer Survey, 25 countries Global N= 13237 Mature Countries N=8866; Emerging Countries N=4372



Internet Search, Friends/Family and, in emerging countries, Social
Media have become the preferred sources of information

Media

What are you preferred sources of information?
70%
66%

Internet search

64%

Recommendations/ advice

51%
51%

Social media

28%
45%

Websites of communication providers

35%
31%

Traditional advertising

19%
22%

Emails/ promotional offers

9

Mature countries

13%
19%
23%

Retail stores
Shopping portals/ auctions

Emerging countries

17%
8%




Consumers now have unprecedented power to build & demolish
brand strength as they blog, text and comment via Social Media
12/29/11 Press Release:
“Starting January 15, a new $2 payment
convenience fee will be instituted for
customers who make single bill
payments online or by telephone”

What happens when being disconnected?
Attempt to
redial/reconnect

Most/
sometimes Never

Always

44%

48%

7%

81%

Avoid providers with
Within 24 hours, more than 100,000
people had signed a online petition:

whom friends had bad
experiences

Greetings,
I am disappointed to learn that Verizon Wireless
plans to institute a new $2 fee for paying bills
online…. Your company should not assume that

Tell friends about my

it can do anything to your customers and
that we will allow it to happen…

12/30/11 Press Release:

“Verizon Wireless has decided it will not institute
the fee for online or telephone single payments
that was announced earlier this week.
The company made the decision in response to
customer feedback about the plan…”
10

poor experience

25%

16%

Contact customer
service

9%

Switch providers, e.g. use a different SIM

10%

My provider proactively
contact me

5% 31%

56%

19%

61%

51%

23%

41%

56%

45%

Avoid
Providers
with poor
experience

77%
Tell friends/
family bout
their poor
experience

65%

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237


Communications Service Providers (CSPs) have not kept pace with
all of the changes in today’s environment

Global CSP Marketing Priority Matrix

2

Growth of channel and device choices

3

Social media

4

Data explosion

5

Decreasing brand loyalty

6

Shifting consumer demographics

7

ROI accountability

8

Regulatory considerations

9

Emerging market opportunities

10

Financial constraints

11

Privacy considerations

Factors impacting
marketing

Media

Customer collaboration and influence

12

Corporate transparency

Percent of CMOs selecting
as ‘Top five factors’

13

Global outsourcing

6

Underpreparedness
Percent of CMOs reporting
underpreparedness

3

70
10
9
11

5
6

1
7

60
2

4
8

50
12

7

11

40
0
11

1

20

40

60

Mean



And as consumers encounter new products, services and experiences
on virtually a daily basis, they fell less loyalty towards CSP brands
Telecommunications

2011 Telecom Consumer Survey across
25 countries: Global average of advocacy
levels in Telecommunications industry

18%

22%

60%

Advocates

Apathetics

Antagonists

Customer advocacy in Retail industry is close to twice that of the Telecommunications industry
UK

Italy

France

Canada

US

Mexico

Brazil

Retail
Industry

34%

33%

25%

26%

32%

39%

52%

51%

Telecom
Industry
12

Germany

20%

16%

17%

21%

13%

20%

24%

17%



Media

The good news is that an increasing number of CSPs have started
using social media to ‘listen & engage’ with customers

Applying social approaches to listen & engage customers
59%

Respond to
customer questions

79%

Capture
customer data

47%

Solicit customer
reviews and opinions

Mine
Conversations

Crowdsource
Insights

Provide
Answers

Influence
Influencers

Reactive

Proactive

47%

Identify and manage
key influencers
Today

Groups
79%

68%
35%

Individuals
68%

Next two years

Source: Institute for Business Value, 2012 Business of Social Business Study (%
CSPs with customer-related social business activities)

13



Media

And many are planning to use social business to connect to
customers, employees and partners, and to spur innovation

A Social Business uses collaborative tools,
social media platforms and supporting
practices to engage Customers, Employees,
Business partners and other stakeholders in
an ongoing dialogue.

Create valued
customer
experiences

Drive
workforce
productivity and
effectiveness

Accelerate
innovation

Source: Institute for Business Value, 2012 Business of Social Business Study

14



OTT providers – in particular the top 4 – are expanding their
dominant position in the communications landscape

Disruptive OTT competitors

Market Value
Market
Value of
Top 25
drivers
of
Internet
traffic 70% of market cap

=

1/2

Market
Value of
Top 150
Telecom
Providers

The massive shift in value continues towards the OTTs as capital markets
prize the direct customer relationship and value provided by OTTs,
>>>>>>> reducing the CSP valuation back to utility status!
15



Consumer sentiment on future spending in Emerging Markets
exceeds Mature Markets by 26%
Emerging

Net Increase/Decrease

Utilities
Utilities

40%

Food & drinks
Food & drinks

Change in Global Hierarchy

Mature

30%

Transportation
Transportation

22%

Mobile Telephony
Mobile Telephony

21%

Clothing
Clothing

16%

Holidays

Holiday/vacation

7%

Net Increase/Decrease

UtilitiesUtilities

4%

Food & drinks
Food & drinks

-3%

Transportation
Transportation

-6%

MobileMobile
Broadband
broadband

-10%

Mobile Telepony
Mobile Telephony

-14%

Pay television
Pay television

-16%

Mobile Broadband
Mobile Broadband

6%

Sports

Pay television
Pay television

6%

Fixed
FixedTelephony
Telephony

-19%

Clothing
Clothing

-19%

Electrical appliances
Elect. Appliances

3%

Fixed Telephony
Fixed Telephony.
Going out
Going out
Sports

16

Sports

2%

-7%

-10%

-18%

Sports

Holiday/vacation
Holidays

-23%

Elect.Electrical
Appliances-24%
appliances
Going out
Going out -32%




In emerging markets, people expect net increase in mobile
broadband spending

Emerging
Markets

-32%

15%

15%

Russia

Brazil

Korea

China

8%

India

-2%

6%

South Africa

-20%
-25%

-3%

5%

Mexico

-6%

12%

Poland

-6%

31%

UAE

Netherlands

-7%

Australia

Canada.

-7%

35%

Sweden

Germany

-10%

-9%

Japan

Belgium

-13% -12%
-16% -15%

France

USA

UK

Cyprus

Spain

Czech R.

Italy

Portugal

45%

Greece

Change in Global Hierarchy

Net Increase / Decrease Consumer spending
MOBILE Broadband
(2011 – 2014)

-43%

Mature Markets
17

Q05 Compared to previous years, are you likely
to spend less, the same or more on the following
products / services in the next 2-3 years?




Many CSPs have increased their footprints outside their home
markets by expanding to emerging markets

Going Global

15 multi-country (10 or more countries)
companies now control ± 3 billion subs

18

Number
Market
Subs 2011
Company (HQ)
of
(mio) Rev $B Value $B
Countries
05/01/2012
France Telecom (France)
32
217
59.6
36
Telefonica (Spain)
25
238
84.8
63
Bharti (India)
21
243
11.9
22
MTN (South Africa)
21
165
15.8
33
Vodafone (UK)
20
439
76.1
144
Singtel (Singapore)
20
146
15.0
40
Telia Sonera (Sweden)
19
160
15.6
29
Vimpelcom (NL)
19
205
20.3
16
America Movil (Mexico)
18
236
52.9
104
Etisalat (UAE)
18
135
8.8
17
Deutsche Telekom (Germany)
17
128
77.7
48
Millicom (Luxembourg)
13
43
4.5
10
Tele2 (Sweden)
12
35
6.2
8
Telenor (Norway)
11
140
17.5
29
STC (KSA)
10
139
14.8
22
Axiata (Malaysia)
10
199
5.4
15

Challenges:
 How can the multi-country
CSP leverage their scale and
identify the right synergy
potential for their company?
 How can the single-country
CSP compete against global
CSPs in their own market?
Emergence of multi-country Giants



The Cloud trend has now reached a tipping point where it can create
and deliver business value
Business Value can be
created in

3 main areas:

Cloud

Performing current business
more efficiently and effectively

Creating new business
models for delivery of current
services
Creating entirely new

businesses
2015
19



CSPs clearly intend for Cloud to improve their business capabilities,
in addition to enhancing internal efficiencies
How Important are the Following Objectives for Adopting Cloud?
(% of Telecom Respondents)
New/enhanced revenue streams
New/Enhanced Revenue streams
Competitive/cost advantages thru vertical integration
New delivery channels/markets
New delivery channels/markets

52%

19%

34%

39%

31%

35%

29%
27%
34%

27%

35%

38%

Increased collaboration with external partners
Increased collaboration with external partners

Cloud

CompetitiveCompetitive differentiationspecialization
differentiation thru thru specialization

26%

38%

36%

Flexible pricing models
Flexible pricing models

25%

Rebalanced mix of products/ services
Rebalanced mix of products/services

22%

Business Capabilities
20

Internal Efficiencies

32%
44%

Very Important

Source: The IBM Institute for Business Value study: The natural fit of Cloud with Telecommunications, 2012 Survey selections

Important

43%
34%
Neutral to not important


Cloud

CSPs can help cities use cloud to integrate data across city
operations enabling delivery of citizen services

Rio de Janeiro Cloud-based data solutions
emergency response system planning.
ibm-takes-smarter-cities-concept-to-rio-de-janeiro
21



CSPs can spur the development of ‘smart home’ appliances using
Cloud technology

Cloud

Vodafone and IBM team up on ‘smarter home’ initiative

Enabling consumers to use their smartphones in
a variety of remote activities including viewing
their home’s utility consumption; controlling
security, heating and lighting systems; and
activating home appliances.

Enables manufacturers and service
providers to collect data fro appliances
for product development and
maintenance, and to rapidly introduce
related new consumer services.

IBM and Vodafone Advance Smarter Home Initiative
22



Much more than any other industry, CSPs define big data by the
capabilities needed to do analytics on information real-time
Defining big data
Real-time information streaming
• Digital feeds from smart devices,
sensors, social and syndicated data
• Instant awareness and accelerated
decision making

Real-time information
Non-traditional sources of
information

Big Data

A greater scope of information

For CSPs the real time aspect is
extremely important as locationbased services, smarter network
operations, intelligent marketing
campaigns, next best actions,
and fraud detection require a
more contextual real-time view
of information.

The latest buzzword
New kinds of data and analysis
Data influx from new
technologies
Large volumes of data
CSP respondents

21%
13%

11%
18%

11%
8%

9%
16%

8%
13%

0%
8%

All-Industry respondents

Source: Analytics: The real-world use of big data, a collaborative research study by the IBM Institute for Business Value and the Saïd

23 Business School at the University of Oxford. © IBM 2012

40%
15%



Two-thirds of CSP respondents identified customer-centric objectives
as their organization’s top priority
Big data objectives
Customer-centric outcomes
Understanding behavior patterns
and preferences provides
organizations with new ways to
engage customers

Customercentric
objectives

Big Data

New Business
Models

24

Providing a greater customer
experience, every time, is vital for
limiting churn, building loyalty, and
for competing against overthe-top players, including
Google, Apple, Facebook,
WhatsApp and Skype, companies
that have proven adept at
dreaming up compelling online
experiences for consumers.

Risk/Financial
management

66%
49%

15%
14%

CSP respondents
All-Industry respondents

11%
15%

Operational
optimization

8%

Employee
collaboration

0%

18%

4%


Advanced analytics will help CSPs to gain customer insight from the
Big Data in their network, social media and other customer information

Draw Insight
from data

Acces to data

Translate Insight
into Decisions

Telecom Industry CEOs identify customer insights as the most critical investment
area (Global CEO Study 2012)

Big Data

Customers

83%

Sales

67%

Operations

55%

Markets and competitors

47%

Supply chain

40%

Human resources

39%

Risk management
Financials
25

32%
25%

In which areas do you plan to improve your ability to draw
meaningful and executable insights from available information?”



Celcom Axiata Berhad uses cognitive (Watson) technology to
transform customer care experience
Celcom, part of the Axiata group of companies, the oldest mobile telecommunications
company in Malaysia. Throughout the evolution of their business, the company has
adapted to changing technologies and standards. It’s Celcom’s top priority to use
outstanding customer service as a differentiating factor in its drive to market leadership.

Big Data

Challenges

26

Digitization

 Resolve customer issues
during their first contact
with customer care, in this
way reducing churn
 Support customer agents
in responding to queries
on Smartphones as well
as in recommending data
plans, given the
complexity and frequent
device refresh cycles.

Source: Forbes,May 2013

X

 Cognitive technology to help contact
center representatives provide faster,
accurate, and consistent responses
to customer questions and requests.
 Eventually give customers direct
access to the system for text-based
chats whereever and whenever from
their smartphones, tablets or
computers. For trouble-shooting and
support through business processes
like account opening, review, or
changing plan features.

Celcom’s aim is to provide consistent, high-quality support to
customers across channels and agents to deliver richer customer
experiences across all touch points


Smarter cities
Smarter cars

Big Data
27

SMARTER CITIES

SMARTER CARS

Smarter traffic

There are many possibilities how CSPs can partner with other parties
in the area of big data

SMARTER TRAFFIC

New technologies like big data, sensors, mobile, smart grids are
changing the way cities operate. Big data can help finding parking
spaces, avoid traffic jams, get instant help when emergencies happen.
Megacity Rio de Janeiro is already using this technology by
participating with IBM and Brazilian CSP Oi, among others.

Tomorrow's motor vehicles will communicate with each other, with their
drivers, their manufacturers, their surroundings, and with a variety of
service providers. Data volumes related to vehicle usage are
skyrocketing. Several German automakers have teamed up with
Deutsche Telecom to find a solution in big data analytics.

French CSP Orange recently participated in Traffic Zen with highway
operator Autoroutes du Sud de la France to create traffic forecasts.
Orange brings the quality and robustness of its mobile network to
inform citizens and decision-makers, enhance information broadcasts,
reduce CO2 emissions, and more.


CSPs can be a key enabler of the new economy, but must embrace
the digital opportunity or risk becoming utility providers of bandwidth
Social
Social media, social business – all
the time, respond, solicit, collaborate

Contextual

Perfect experience

New contextual services
to improve lives

All the time – know,
connect, serve

Everything Connected
Internet of Things, Multiple
devices controlling multiple
devices (TV, heating, car
kids, etc.)

The
New
World

28

Extensive use of avatars,
concierge services, virtual
interfaces

Behavioral profiling

Personalized
Create own service
portfolio according to their
own needs, sourced from
multiple providers

Alternative me

Continued virtualization
Functions, services, enterprises

Continuously providing insights
and recommendation to the
consumer to improve their
lives, experiences and well
being


CSPs have a key opportunity to play a central role in the new world

Natural
Resources

Government

Healthcare

CPG

Transportation

Retail

Telecom?

Finance

Cities

IT

Education

Energy

Traffic

The DATA CSPs own enables them to add context
and meaning to the data they deliver
CSPs carry all the SOCIAL traffic
29

As providers of connecting networks, CSPs are
uniquely positioned in the CLOUD marketplace
CSPs owns the MOBILE networks


The emerging ‘two sided’ business model becomes the majority
service delivery vehicle; this is a key opportunity for CSPs

Consumers

In 2020 up to 60% of today’s ICT market
is addressable through this delivery model

Business

Example Players in the services
economy today
Service providers
and partners

CSP solutions

$1.5B revenue of10K+
Affiliates

ISVs

Personal
comms

Expecting $10B
transactions on mobile
in 2012

Banking

Security

40% total units sold by
outside sellers

Policy

40% new business
comes from non-CRM
offerings

Consultants/
SIs
Healthcare

Managed
customer
interface,
services,
platforms
and networks

Analytics

Media

M2M

Developers

Social
business

Etc…

Etc…

API only company
reaches 150,000
developers and 1.5M
calls a day
4.5M API invocations
per month
Promotions and
loyalty programs

30



Telco’s must align growth initiatives to new strategic beliefs, incorporating
emerging trends, new technology & the two sided business model
Growth initiatives

2

Evolving beliefs
•

Imperative to create and
acquire IP

•

Customer experience
excellence

Move the source of
value

•

Lead in the new era
services ecosystem

•

•

Accelerate shift to higher
value

•

Strategic beliefs

Deliver integration
and innovation to
clients

•
•

Dramatic
simplification
Take ‘stop’ decisions
early

Strategic Growth Play
-Create Smarter ecosystem
-Build Integrated ICT
engine of scale

3

Expand
internationally

Critical success
attributes

New technology

1

Strategic Operational
Play
Be brilliant at the core

Future
uncertainties

Current trends

31



The telco must first perfect its strategic operational plays: “be brilliant
at the core”
1

Strategic Operational Plays

Examples in other industries – all (except
cablescos) with NPS > 60%

Customer intimacy
Emotional connection
Virtual channels
Dramatic simplification
Low cost operating model
Optimised heterogeneous network

32

Intense personalization


Telco’s must create a smarter ecosystem, and put themselves in the
centre of the ecosystem
2a

Consumers
Sales

Service
providers and
partners
ISVs

Banking

Sales
partners
Solution
partners

Component
partners

Consultants
/SIs
Healthcare
Media
Developers
Etc…

Business

Delivery
Smarter
ecosystem core
Managed
customer
interface,
service
creation,
Open
APIs.
utilities
Managed
infrastructur
e platforms,
Core
network

CSP to create a
Sales
CSP
solutions
Personal
comms
Security
Policy
Analytics
M2M

‘two sided’
business and
operating
model and
partner
ecosystem to
power business,
government and
consumer
services

Social
business
Etc…

Smarter Ecosystem core
IP creation and
exploitation
33

Clean business
model

Partners in
control of own
destiny

CSP excels at
horizontal

Secure, open,
standardised

Specialist skill
sets


The integrated ICT engine of scale underpins this ecosystem
2b

Business

Consumers

Delivery
Service
providers and
partners
ISVs
Banking
Consultants
/SIs

Smarter
ecosystem core

Personal
comms

Managed
customer
interface,
service
creation,
Open APIs.
utilities

Security
Policy

Healthcare
Media
Developers
Etc…

CSP
solutions

Analytics

Managed
infrastructure
platforms,
Core
network/
virtualisation

M2M

CSP to build
underlying
capabilities of
scale to power
business,
government
and consumer
ICT needs

Social
business
Etc…

ICT engine core
Large scale,
Low cost
34

Integrated IP
comms
services

Partners
‘inside’

Simplified
technology
platforms

Secure, open,
standardised

Specialist skill
sets


Thank you

www.ibm.com/iibv

35

Rob van den Dam
Global Telecom Industry Leader
rob_vandendam@nl.ibm.com


Telcos Strategic Positioning in the New World (Slovenia Telco Day 2013)

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