GDS International - Next - Generation - Telecommunications - Summit - Africa - 5

Document Number : AU63312T ©2011 IDC

I D C C U S T O M E R S P O T L I G H T

Te ls t ra Embeds Bus iness Log ic S ys tems ' InTe les tage in P repa id Mob i l i t y Grow th Publication Date - August 2011

Sponsored by Business Logic Systems

Introduction

This case study details how Telstra created competitive advantage in the tightly contested Australian pre-paid mobile market.

Telstra is Australia's largest Telecommunications service provider with revenue of AUD24.98 billion and EBITDA of AUD10.15 billion (FY2011 company accounts). A profitable company with healthy margins, Telstra provides a comprehensive range of services to both consumer and business markets. These include local/national /international voice and data services, IT services, internet services, wholesale, media, online and mobile communications.

Early 2005 the company electrified the industry by announcing an aggressive new 3G mobile infrastructure deployment. Dubbed 'Next G' (for Next Generation Wireless) it is the cornerstone around which Telstra builds, shapes and executes its Mobile strategy in the Australian market – it provides a strong infrastructure, market and competitive differentiator and consistent marketing and messaging to consumer and business customers.

Between November 2005 and October 2006, the company completed a massive rapid deployment of its Next G(R) network service – one of the quickest and most successful mobile infrastructure roll-outs seen in the industry. To this date (July 2011) Next G (R) remains the largest Mobile network infrastructure in Australia and Telstra has been aggressively upgrading capacity and speeds through a combination of HSPA+ and Dual Carrier HSPA solutions since commercial launch in November 2006. July 2011 network speeds now stand at up to 42Mb/s and Telstra plans to double this to 84Mb/s by late 2011.

With a relatively small population of 22.5 million people, the Australian market is intensely competitive and handset penetration exceeds 100% of the population. Telstra faces strong competition from multiple mobile service providers including Optus (SingTel owned) and VHA (Vodafone Hutchinson Australia - after Vodafone Australia's acquisition of Three Australia in 2009) as well as a clutch of

Solution Snapshot

Organization: Telstra

Operational Challenge: Improve Pre-

paid mobile subscriber retention and

value

Solution:

Business Logic Systems' InTelestage

Project Duration: Deployment < 3

months

Project Cost: Costing on a 'per

campaign' basis; deployment cost

approx USD1.0 million

Benefit: Reduced churn by 3%;

improved campaign deployment time

from a minimum of eight (8) weeks to

between two (2) to three (3) days.

Reduced cost of campaigns by approx.

USD8 million, doubled campaign

response rates


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lower-price MVNO players. Any advantage, no matter how slight, is squeezed ruthlessly to extract any last drop of value.

Telstra also embarked in 2008 on a Business Transformation project designed to refocus the company around customer service and engagement. Still ongoing, this strategic initiative was identified as critical to the organisation's future success, particularly in a political environment where the Australian Federal Government is determined to create a National Broadband Network ("the NBN") and effectively impose a structural separation on Telstra.

Telstra faced a tumultuous mix of issues. Let's pause and wind the clock back a little from 2011 to the beginning of quarter 1- 2008. Then, Telstra's share of Australian mobile pre-paid revenues stood at just over 30%. Competitors struggled throughout most of 2008 to match the speeds and coverage of Next G(R). However Telstra's pre-paid share began to erode via churn to competitors and conversion to post-paid and by early 2009 its share had dropped to just above 20% of total pre-paid market revenues.

No wonder then that Telstra was seeking ways to drive greater loyalty amongst pre-paid subscribers and reverse the decline in its pre-paid mobile base. With the cost of customer acquisition continuing to climb and mobility integral to its future, Telstra had to adapt.

Telstra needed an edge in its go to market campaigns. It needed to strengthen its pre-paid loyalty base and lengthen retention performance. The organisation concluded that its previous approach was not going to support its key goal of driving improved pre-paid loyalty. In short Telstra needed a campaign tool that gave it the flexibility to selectively identify and target pre-paid users and build end-to-end campaigns, and most crucially, do it via automation.

The previous campaigns were manually driven, intensive, time-consuming and slow to execute. Very slow. It was common to only run one, or maybe two, loyalty campaigns per year. Not well suited to the fast-paced, highly competitive pre-paid market – a market that is fickle, price/value sensitive and open to churn. Telstra's marketing team would define target customers, attain a customer list, wash-out the customer list (Australia has specific regulations around marketing campaigns, for example companies are restricted to frequency of contact) and then work with the data warehousing and engineering teams to create and execute a script and then credit customers. Each campaign needed to be built from scratch, an expensive option that simply wasn't quick enough to drive more positive market engagement.

In short, Telstra's pre-paid campaigns were slow, out of sync with competitive activity in the market, expensive and hampering the company's ability to create greater value in the market.

Solution

Telstra is regarded through the telecommunications industry as a robust and thorough assessor of vendor solutions. As part of its programme to deploy an efficient campaign solution the company considered a number of external and internal aspects that were critical to the successful bidder:

• Time to launch a campaign to market

• Ability to tailor and segment campaigns by pre-paid mobile users

• Ability to undertake automated campaigns

• Ability to customise the solution interface and deliverables

• Ability to undertake data analysis


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• Impact upon internal resources, marketing and engineering teams.

• Positive impact upon customer revenues

The Business Logic Systems (BLS) campaign solution replaced an unwieldy internal process that was in place at Telstra. To launch a campaign with the previous approach involved a substantial degree of manual engagement across multiple groups including Products, marketing, data warehousing and engineering teams. This was both cumbersome and inefficient. BLS deployed its InTelestage (sic) product to provide an end-to-end campaign and loyalty management solution comprised of:

• Knowledge Base – a data storage and data warehousing module.

• Segmentation – customer segmentation based on network usage and behaviour.

• Campaign Management – real-time, periodic, customised marketing campaign management.

• Reward Fulfillment – automated reward/loyalty fulfillment.

• Relationship Manager – multiple customer touch points.

• Campaign Reporting – Automated, near real-time campaign analysis.

Source : Business Logic Systems


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Challenges

The principal issue centred on initial concerns that BLS' operations were located in Europe. Should any issue require on-site attention, Telstra was concerned that travel time to Australia would slow resolution. To help allay this concern BLS established an Asia-Pacific support centre in Kuala Lumpur, Malaysia to provide more localised support. The centre has brought an additional benefit in that between Kuala Lumpur and Europe, service support can take a "follow the sun" route to help speed any resolution.

With a higher number of campaigns in play, it became apparent that Telstra needed to adjust its internal approach to determining campaign success rates. The company is working on moving its metrics assessment from a 'strike-rate' approach to one more focused on pure retention rates.

From an ongoing operational perspective, Telstra found that the automation and the GUI worked well yet for any new profile that is not pre-set there is a back-end configuration required. This can necessitate a high level of involvement from the BLS' team. As Telstra's campaign profiles can be dynamic and driven by market activity it is difficult for the service provider to always know in advance what profiles will be required. If not managed carefully there is potential back-end configuration that can be costly and time-consuming.

Benefits

Telstra has experience a dual stream of benefits through deployment of the BLS' solution in terms of process improvements and retention, including:

• Increase in Number of Campaigns Executed – Perhaps a highlight of the deployment has been the move from 1 to 2 campaigns per year to 7 to 8 campaigns per month throughout 2010. Telstra upped the ante again in April 2011, planning 16 campaigns in one month, something that the organisation states it simply could not physically deliver without the InTelestage solution.

• Dramatic Improvement in Execution Speed of Campaigns – A typical campaign now takes between 3 to 5 days to build and deploy. Prior to the InTelestage deployment a typical campaign took a minimum of eight weeks to execute from start to finish.

• Automation – Telstra can now gain higher levels of efficiency around campaign targeting and management. This has removed the need for continuous reworking with internal data warehousing and engineering terms. This in turn frees these groups to work on more strategic projects.

Improvement in process without an improvement in loyalty value would be meaningless and this is where the commercial strength of the BLS' InTelestage solution comes to the fore:

• Reduction in Churn Rates: Telstra cited that its mobile pre-paid churn rate had dropped over a two year period by 3%. Over a similar period, estimates suggest key competitors' acquisition costs rose in the region of 20-30%. Not only is Telstra reducing its own churn, competitors are finding it more expensive to buy share.

• Increased Pre-Paid Revenues – Telstra's financial accounts for 31st December 2010 suggest that the provider's pre-paid mobile (excluding mobile broadband) revenues have increased by over 9% compared to the previous half year


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• Increased Average Revenue per User (ARPU). Although Telstra does not disclose exact pre-paid ARPUs, the company's accounts suggest that mobile service ARPUs (again, not including mobile broadband, which have also increased), have risen between by between AUD6-8 per month between FY2007 and 1H2010.

• Improved Market Share of Pre-paid Revenues: Since the low point of share of pre-paid revenues in Q1 2009, IDC's data shows Telstra's share of revenue has consistently improved to reach above 25% by Q4 2010.

However, perhaps the ultimate validation came in late 2010 when Telstra paused its pre-paid campaign activity. Churn started to increase. The campaigns recommenced in 2011.

Methodology

The project and company information contained in this document was obtained from multiple sources, including information supplied by BLS, questions posed by IDC directly to Telstra employees and Telstra corporate documents.

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