A COMPLEX BUT PROMISING FUTURE

The Mobile Telco sector is at a turning point. Operators around the world are shifting from rapid growth to maturity at a surprisingly fast rate. Every region of the world is experiencing a fall in blended ARPU, as mobile data fails to attract enough revenue growth to make up for declining voice revenues. This is placing greater pressure on innovation as an engine of growth, bringing with it a change of focus in the C-suite from customer acquisition to customer value growth.

This renewed impetus of marketing innovation requires business model transformation, and we already have seen this manifesting in interesting ways. SKT in South Korea, for example, launched T-Freemium, a catalogue of video and music content services in 2012 with a zero introductory price point, and used a targeted vouchers scheme to attract over 2m subscribers within 7 months, converting over 550,000 of those into paying subscribers by the end of the year. There are many more examples around the world of operators using context awareness, loyalty or quasi-loyalty schemes, partnerships and innovative charging models to generate significant revenue from non-core services. Informa forecasts that by 2015, for Telefonica and Deutsche Telecom, these ‘digital services’ will reach 8% of total revenues.

The key battleground as operators progress towards this business model transformation will be personalisation. Customers will see the variety, flexibility and quality of services as more important factors in their choice of provider, and operators’ revenues will be much more dependent on how effectively they can lead customers up the value growth path from entry to high value. Big Data technology will be an important enabler in this process, by supporting marketing strategy and operations through improved visibility and dynamic segmentation. From an execution perspective, policy, charging and user engagement are the essential tools necessary to convert customer insight into revenue.

Monetizing MBB requires a new business model

The emerging strategic imperative of customer value growth is yielding some interesting successful case studies, but is still proving to be a major challenge for many. Why is it so hard to generate more revenue from increased usage? After all, the rapid proliferation of affordable laptops, smartphones and tablets is putting MBB connectivity in the hands of a growing share of global consumers. This has led to a huge increase in the volume of data flowing through mobile networks, but the rate of revenue growth for operators is low in comparison to the other participants of the internet value chain. Content providers in particular, are benefitting the most.

OTT, particularly streaming content providers, are profiting the most from the growing internet economy, taking a more prominent place in the value chain at the expense of connectivity providers.

One reason operators are struggling with this is that speed-sensitive scenarios, such as streaming video and audio, have not been reliable enough in 3G networks suffering from congestion and limited theoretical speeds. This has left customers unconvinced of the value of streaming content offerings, choosing to rely on free but less comprehensive OTT services. LTE connectivity therefore offers a genuine opportunity for operators to address this challenge by enabling a wider range of new use cases for consumers with high reliability. But converting these new usage scenarios into revenue, requires a fundamental change in two things: the offerings catalogue, and the engagement model.

Offerings Catalogue: Operators must shift from a data volume-based charging model towards a content-based charging model. Otherwise they risk continuing the race to ever-cheaper data plans with ever-larger quota volumes. In the current status quo, customers have few opportunities to spend more money because they already have more than enough data quota to cover their requirements. But content-based charging brings with it a number of characteristics that operators must tackle effectively in order to remain competitive:

Variety: To use an analogy, the future mobile service proposition is like that of a supermarket, where the customer builds up a basket of products that precisely meet their needs. For Mobile Operators, this basket contains video channels, audio tracks, cloud storage quota, GPS navigation, roaming day-passes, social networking, e-commerce and other services. Clearly, knowing the customer and promoting the right packages at the right time is crucial to success.

Partnerships: With the emergence of video traffic, comes the necessity to provide exclusive content in order to stand out from the OTT video crowd. We also see partnerships already playing an important role for operators in advertising, music and e-commerce use cases.

Rapid & Flexible: Mobile operators need to react quickly to new monetization opportunities as they arise. Both emerging trends and key events such as the upcoming world cup, could generate significant new revenue for operators if they can precisely identify the target customers’ preferences, and deliver a service that meets their needs (for example, identifying supporters of a particular football team and delivering them live content and updates).

Engagement Model: Operators must change the way they interact with customers, from the occasional visit to a store or web portal, to a regular, personalised interactive experience that includes a wide range of transactions:

Segmented: With an expanding range of services on offer, customers need to be segmented precisely and dynamically, so that the right services can be matched up to the right customers.

Contextual: Marketing messages must be delivered at the right time and place; when the business traveller is in the departures lounge, the football fan’s game is about to start, or the shopper is sitting down for lunch.

Engaging: Subscribing to top-ups or add-ons over SMS is not an intuitive experience, particularly when the range of services on offer is wider and more complex. However many operators know first-hand the challenges of convincing subscribers to install, and then disrupt their mobile experience to actually use, a mobile app portal. Customers need a middle-ground, where they can easily respond, enquire and subscribe without having to install anything or interrupt what they are doing.

Case Studies from Leading Operators

What was once a theoretical topic of discussion, is quickly becoming a reality in the mainstream of mobile operators across a range of diverse markets and scenarios. Advanced analytics, charging, and user contact management (UCM) technology solutions are already supporting some innovative success stories:

Maxis Mydeals: Maxis developed its BIG (Best Integrated Go-to-market) platform, starting with its MyDeals SMS and MMS promotions platform in 2010, the MyLaunchPad web portal in 2011 with news, music and games, and in 2012 launching BIG to facilitate advertising partnerships. In 2013 they added a Location-Based advertising capability. At the end of 2012, Maxis had over 5m opted-in customers.

China Unicom, China Mobile and Alibaba: In 2013, Alibaba partnered with two major operators to provide zero-rated access to its ‘Taobao Mobile’ e-commerce platform on ‘singles day’ (11/11, a key shopping day in China). Within 70 minutes, transaction value reached $163m, more than the whole 24 hours of the singles day 2012. The operators used targeted promotions to raise awareness of the offer among customers, delivering significant benefits to Alibaba, customers and themselves, a true ‘win-win-win’ scenario.

ePlus Whatsapp SIM: In 2014, e-plus launched a SIM with integrated Whatsapp. Any data usage on Whatsapp is free of charge, and non-whatsapp traffic, SMS and voice calls are charged based on a credits system rather than a pure volume system.

End-Game: The target scenario for Mobile Operators

The case studies above, along with many other global examples, are signposts on the path towards a paradigm of integrated and overlapping industry sub-sectors. Mobile operators are key stakeholders in this paradigm, but the question is how much they will be able to add to the value chain, and how much revenue they will be able to extract. Adding value here means creating bigger, more profitable markets for their partner content providers and advertisers, and themselves in the process.

To achieve this, mobile operators must leverage their unique information assets and network ownership to support a mutually beneficial multi-sided business model. Sharing of information and differentiated network connectivity are two key ingredients to achieving this. Better informed marketing operations will yield bigger monetization opportunities due to more precise and personalised promotions; and better customer experience through more tailored, relevant and intuitive interactions. Smart networks will deliver a better quality, more integrated service portfolio through content-based charging and better QoS.

By leveraging these assets effectively, mobile operators can add significant value to an evolved internet value chain, delivering a result that is bigger than the sub of its parts.

KEY TECHNOLOGY CAPABILITIES TO REALISE THIS VISION

Realising an integrated business model requires some key capabilities to enable a flexible, systematic and low TTM solution.

Dynamic customer segmentation: Standard static segmentation based on demographic factors such as age and address are no longer sufficient. Operators need to be able to rapidly segment customers based on a range of dynamic factors, such as location and frequently visited websites;

Real-time dynamic promotions: In a crowded OTT market, operators must promote the right services to the right customers, at the right time and place, or they risk damaging customer experience with irrelevant messages;

Open platform: Integrating partners into the mobile operators’ business model means providing them with a simple, open platform both for market analysis as well as service and promotion development. The alternative is a slow TTM leading to many missed opportunities;

Vertical integration across IT and network: New service concepts need to be supported by a network and PCC environment that can deliver network insight to the business, and realise content-based charging models as well as QoS policies for a differentiated service offering.

HUAWEI’S DATA MONETIZATION SOLUTION

Huawei VGS (Value Growth Solution) is our vertically integrated data monetization solution, enabling a closed loop marketing lifecycle, with end-to-end capabilities. VGS incorporates Big Data technology at the IT layer for powerful visualisation, segmentation and campaigns. At the core network layer, VGS provides an advanced Policy & Charging control (PCC) engine for innovative charging and QoS.

With the addition of an integrated User Contact Management (UCM) capability, VGS allows our customers to identify opportunities, design and deploy offers with rapid TTM, and effectively promote these to their customers

A trusted innovation partner

Huawei VGS is a modular solution that includes services as well as technology. As the spotlight moves to marketing innovation in diverse global markets, we leverage our depth and variety of business experience to deploy innovative services with our partner operators. We provide a comprehensive suite of consulting services for marketing analytics, campaign design, service and offering design and operations, and we work in joint teams with operators towards a common set of shared strategic goals.

Tangible results

Huawei VGS is live at 30+ tier-1 operators globally, delivering significantly improved KPI performance across revenue, penetration, upsell, campaign effectiveness, TTM and customer QoE.

For more information please visit www.huawei.com.