Successful mergers and integrations of telecom operators

© Omnitele Ltd. 2005 1

Successful mergers and integrations of telecom

operators

2005St Kitts & Nevis

Markku Kivinen+1 202 361 8039

[email protected]


Presentation contents

• Omnitele in brief

• Drivers for consolidation

• Planning of merger/integration process

• Integration challenges

• Summary of learnings


Omnitele in brief

• Telecom consulting since 1988• We provide leading edge mobile operator know-how• Projects in more than 70 countries worldwide• Owned by Finnish telecom operator group• Offices in Finland, the Netherlands and the U.S.• Net sales in 2004 EUR 5,2 million


Omnitele global presence

© Omnitele Ltd. 2004 5© Omnitele Ltd. 2005 5

Drivers for consolidation


Market share impact

• <15% market share not sufficient in a saturated market– Densely populated (Hong Kong) have lower cost per subscriber – better chances– Sparsely populated countries (Finland) have high cost per subscriber

• Caribbean markets still growing, but reaching saturation soon• Cost savings

– Network and organization economies of scale– Purchasing power impact on CAPEX– In-net calls (termination charges)

Western European Operator Market Shares (5/2004)

0%

10%

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30%

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50%

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100%

Denm

arkIta

ly

Austri

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Danger zoneAlready merged

Exception(3 ?)


Planning of merger/integration process


Example case: Finland

Land of Santa Claus, thousand lakes,midnight sun, ice hockey and the bestrace car drivers in the world

Four operators: Sonera, Elisa, Finnet andTelia Mobile until Finnet acquiredTelia Mobile in 2003.

Finnet– 450.000 subscribers, all post-paid– 3600 GSM BTS (80% Ericsson, 20% Nokia) – ~100 pre-commercial WCDMA BTS

Telia Mobile Finland– 250.000 subscribers, also prepaid– 1160 BTS (all Nokia)– ~100 pre-commercial WCDMA BTS


Before the process is public

Due diligence & other advance planning

• Due diligence– Financial– Sales & marketing– Network & facilities– Organization and employees– Legal

• Customer management plan– Customer communication– Brand management– Customer care

• Operator’s plan for vendor participation– Renewed contracts– Risk sharing– Swap opportunities– ” Free-of-charge advice”– Redundant equipment

Plans needs to be done in detail: To realistically estimate the integration cost in the merger decision To speed up the integration process to save money

Integration plan

• Network integration plan– Whose network to use as a basis for a future

integrated network?– What are the costs of integrating two networks?– Which equipment is redundant?– How and when can the swap to one radio

network be made?– How and when can the swap to one core

network be made?

• Integration plan of other assets, functions & organization


Show time:Operator integration managementTypical issues to consider• Detailed integration plan – “no more surprises”

– Division of responsibilities– Timetable

• Integration of two service portfolios into one– Which/whose services to keep– How to bill for services– Customer communication

• Integration of two networks into one network– How to integrate as fast as possible and with no service downtime

• Organizational aspects• Vendors’ role confirmed in the process:

– Logistics– Professional services

Failures lead to Confused & disappointed customers; high churn More money spent than expected, expected savings do not materialize


Integration challenges


Example of a real integration process timeframe

6/03

Deal closing 6.6.

Radio integration “MVNO” phase• Traffic moved regionally to the Finnet network• Existing core network and service platforms in

use in TMF network, Finnet core upgraded to cover the traffic from the TMF subscribers moved to the Finnet network

• TMF customers billed with billing systems of TMF

• Finnet and TMF subscribers have own separate service portfolios

Core integration (HLR migration) phase• Detailed planning of core swap and service

platforms• Core swap

Integration planning• Project plan on:1. Service operator strategy and

its implications to network integration

2. Basis for integration3. BSS integration4. NSS integration5. Service platform integration6. IN integration7. GPRS integration8. CS data integration9. IP networks integration10.Transmission networks

integration11.OSS integration12.Mediation and Billing13.UMTS14.WLAN• First version made before

closing, second together with TMF

• Updated and specified regularly during the integration project!

8/03 10/03 12/035/03

Finnet (450.000 subscribers) acquiring competing operatorTelia Mobile Finland (TMF, 250.000 subscribers) withpartly overlapping network

Last radio nw swap 21.11.

First radio nw swap 8.9.

Core swap 20.11.

Service integration phase• Integration of service pl.• Integration of customer

management & billing


Radio network integration challenges

• Eliminate unnecessary coverage overlap and cost – select best sites

• To provide seamless coverage, more sites are needed to serve customers of both networks

– Extensive testing/benchmarking needed – Frequency changes (850/900/1800/1900) impact coverage

• Capacity planning of the future network is critical– Traffic distributions vary a lot between competitors

• Multivendor environment is always tough to handle, especially in small geographical scale – vendor swaps & logistics ?

• Documentation, documentation, documentation...

• Realistic planning/deployment workload expectations are critical

• Market for redundant equipment is limited


Core & service platform integration challenges

• How to provide seamless user experience during the integration ?

• How compatible are the services, service platforms and billing environments ?

• How to integrate two service portfolios into one ?

– Kill or maintain– Legal aspects– Billing and provisioning– External communication to customers– All the services controlled by the

subscriber may be lost in migration e.g. call diversions, barring, barring password and call waiting, operator logo

• Harmonizing interconnection and termination fees ?

• Intelligent Network and service platforms ?

– Telia Mobile Finland was regarded as market leader for prepaid customers while Finnet did not have any prepaid subscriptions

– To keep the prepaid solution required not only the IN but also saving TMF’s MSC (INAP) and NCC (SMS, content, GPRS and MMS charging)

• Transferring subscribers– SIM swaps are risky business– HLR migration for postpaid is a

challenging task


Customer Care challenges

• Educate the Customer Care– Build processes and different compensation levels– Handle the changes in subscription management

• Prepare yourself for call volumes from both new subscribers and existing subscribers, as existing subscribers are also experiencing changes in network performance

• Prepare different offers with retailers

• Letters to customers, particularly corporate

• To prepare for competitors’ attacks, various counter offers must be ready (newspapers, web, direct SMS offers)


Customer Care integration

Case Finnet/Telia:

In CC integration, target was to deploy the best practices– Politically challenging– Lots of personnel involved– Most visible part of the operator towards the customers

Starting point:– TMF had a CC with very high reputation– Finnet had a partly outsourced CC function (shareholders’ fixed line operations)– Finnet had a ”VIP CC” for corporate customers– Failure of the billing system of Finnet and replacement decision just before integration

made matters worse– Mobile number portability introduced with lots of interest in Finnet

Final outcome:– Completely new CC process introduced with participation of both parties– More than 10% savings in CC cost per customer, mean waiting time <30 seconds

achieved– Eventually best CC reputation in the market and winner in number portability


Summary of learnings


Operator integration – key learnings

1. Subscriber management is crucial– SIM card swaps for non-OTA capable SIM’s– Discontinuity is a driver for churn: Provide seamless service for end-users during

and after integration– Inform customers of “no change” or “change towards better”

2. Prepare the ”best guess plan” well before closing the deal– High level planning to identify showstoppers & major hidden cost items– Focus on contracts & other third party related issues– New IN and other platforms may be needed to accommodate subscribers with

varying services– Breaking BTS site leases may take longer than expected– Running parallel networks is extremely expensive

3. Identify key people from the acquired party– Absorb the best people, take best practices in use asap– Keep both organisations motivated– Review of the ”best guess” plan– “Interim consolidation organisation” needs to be immediately nominated



4. Identify hidden clauses in contracts with suppliers– Example: Contract may be valid only if major part of NSS from vendor xxx– Re-sales of redundant infrastructure may be contractually restricted

(network management system from vendor yyy)

5. Re-negotiate operational & expansion contracts– New technology pilot networks and commercial contracts back on the table– Subcontractor agreements (planning, implementation, maintenance, tower

leases)

6. All parts of the consolidated network need to be capable of handling significantly more traffic after the swap

– Temporary half-rate to be able to quickly move traffic to one radio network– Seamless swap BSC area / MSC area ; start with smaller regions– GPRS throughput may be significantly impacted



Third party’s role as the temporary project office:

Risk sharing - things get done in time

Neutral third party – best practices identified, disputes solved Telecom specific knowledge – pitfalls identified in advance Experienced temporary project staff available

Omnitele services• Technical and organizational/economical due diligence• Integration project planning and support• Integration project management• Service integration support• Technical experts in e.g:

– BSS integration– Core nw integration– Service platforms integration


For more information about Omnitele,please visit our web site

www.omnitele.fi

Documents

Successful mergers and integrations of telecom operators