WTS 2012 A European Perspective On The Telecommunications Industry

© 2012 IBM Corporation

IBM Institute for Business Value

How Recession and the Empowerment of Consumers

impact the Telecommunications Industry

- A European Perspective Rob van den Dam

Global Communications Sector Leader IBV



2

Agenda

Global CMO Survey

2

Driving Customer Advocacy

Global Telecom Consumer Survey

Industry Dynamics – 4 key trends



3

Telecommunications Solutions Lab (TSL)

Telecommunications Research Lab

TSL China &

Telecom Research Lab (Beijing)

TSL North America (Austin, Texas)

Japan (Tokyo

Satellite TSL)

TSL Israel &

Telecom Research Lab

(Haifa Satellite TSL)

Telecom Research Lab

(New Delhi)

TSL LATAM (Sao Paulo,

Brazil Satellite TSL)

TSL Europe (La Gaude &

Montpellier, France)

TSL Russia (Moscow Satellite TSL)

South Africa (Johannesburg, Satellite TSL)

ASEAN (Kuala Lumpur

Satellite TSL)

TSL India (Bangalore Satellite TSL)

Telecommunications is IBM’s #1 research focus

Worldclass Partner

Ecosystem

Mobile Web Services

Centers of Excellence

Institute for Business

Value

Telecom Research

Labs



4

The IBM Institute for Business Value creates fact based

thought leadership that help clients realize business value

Future

Agendas

Value Realization

Studies

3 to 10 year industry outlook

with action oriented next steps

In-depth assessment of today’s

critical issues, opportunities, etc

CXO

Surveys

Chief Officiers studies – CEO,

CIO, CMO, CFO, CHRO, etc.



Mobile data explodes

Consolidation continues

5

Consumers are seizing control

OTT providers thrive

The process of telecom

operators expanding

outside their home

markets continues, with

new giants emerging

People increasingly use

the mobile internet.

Video is the fastest

growing application.

OTT providers continue

to build a dominant

position in the

telecommunications

landscape

People increasingly

connect with each

other to exchange

information and

influence CSPs

Within today’s transforming telecommunications landscape, four

major trends are apparent



Consolidation continues – Many CSPs have become international

companies by expanding their business across multiple countries

6

Company (HQ)

Number

of

Countries

Subs

(mio)

2010

Rev

France Telecom (France) 32 217 63,3

Telefonica (Spain) 25 231 88,5

Bharti (India) 21 243 21,2

MTN (South Africa) 21 137 17,0

Vodafone (UK) 20 391 72,9

Singtel (Singapore) 20 382 13,6

Telia Sonera (Sweden) 19 160 16,3

Vimpelcom (NL) 19 159 24,0

America Movil (Mexico) 18 236 51,3

Etisalat (UAE) 18 135 8,5

Deutsche Telekom (Germany) 17 151 85,0

Tele2 (Sweden) 12 30 6,5

Telenor (Norway) 11 203 17,5

STC (KSA) 10 139 14,0

Axiata (Malaysia) 10 160 5,0

Emergence of multi-country Giants

15 multi-country (10 or more countries)

companies now control ± 3 billion subs

As part of the sector’s

transformation, many

telecom operators have

increased their footprints

outside their home markets

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?



OTT providers thrive – but Value concentrates

7

Top 4 = 70% of total of top 25

Top 25

drivers of

Internet

traffic

Top

150

CSPs = ~1/2

Combined Market Value Combined Market Value

OTT providers – in particular the top 4 – will

continue to build and expand their dominant

position in both mature and emerging markets

Challenges:

How can CSPs compete against OTT

players?

Or better, if they cannot beat them, how can

they partner with OTT providers in a way

they both benefit?

Premium priced devices, customer

eco-system, pay for product (apps,

iTunes, iCloud)

Search and advertising value cap-

ture, customer data monetization

Extensive retail portfolio, retail

portal infrastructure, recommen-

dation engine, advertising value

capture

Dominant market position,

advertising value capture, self-

content creation business design



Mobile data (really video) explodes

8

597

2379

4215

6896

10804

1252

2011 2012 2013 2014 2015 2016

Middle East & Africa

Central & Eastern Europe

Latin America

North America

Western Europe

Asia Pacific

59 7

12 52

2 3 79

4 2 15

6 8 9 6

10 8 0 4

2011 2012 2013 2014 2015 2016

Mobile VoIP

Mobile Gaming

Mobile File Sharing

Mobile M2M

Mobile Web/Data

Mobile Video

Global Mobile Data Traffic, 2011–2016 (TB x 1000/ month)

70.5

%

20%

40%

23%

18%

Mobile data – in particular OTT video – will

dramatically increase

Challenges:

How can CSPs cope with the ever-

increasing amount of data, and how can

they close the mobile data revenue gap?

2011

• Global mobile data grew 2.3-fold

• Mobile video traffic exceeded 50%

• Average smartphone usage trippled

2016

• Mobile data traffic will increase 18-fold

• 2/3 of mobile data traffic will be video

78% CAGR

Source: Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011–2016..



Consumers are seizing control

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”

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

it can do anything to your customers and

that we will allow it to happen…

Within 24 hours, more than 100,000

people had signed a online petition:

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…”

9

77% Tell friends/

family bout

their poor

experience

81% Avoid

Providers

with poor

experience

48%

9%

10%

44%

51%

56%

31%

7%

19%

23%

41%

45%

65%

25%

16%

5%

61%

56%

Attempt to redial/reconnect

Avoid providers with whom

friends had bad experiences

Tell friends about my poor

experience

Contact customer service

Switch providers, -

e.g. use a different SIM

My provider proactively

contact me

What happens when being disconnected?

Always Most/ sometimes Never

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

Consumers now have unprecedented power

to build and demolish brand strength as they

blog, text and comment via social media

Challenges:

How can CSPs get in tune with todays

digital consumers, and respond to negative

chatter?



To evaluate the impact of the recession and the empowerment of

consumers the IBV conducted both a Consumer ánd a CMO survey

10

IBM Global Consumer Survey

(25 countries;13,237 consumers)

IBM Global CMO Survey

(131 interviews with telecom CMOs)



CSP CMOs indicated they feel underprepared particularly in areas that

are key for connecting to customers, identified as most critical for them

Source: Q7 Which of the following market factors will have the most impact on your marketing organization over the next 3 to 5 years? n1=131 Q8 How prepared

are you to manage the impact of the top 5 market factors that will have the most impact on your marketing organization over the next 3 to 5 years?

Global outsourcing

Decreasing brand loyalty

Customer collaboration and influence

Growth of channel and device choices

Data explosion

Regulatory considerations

ROI accountability

Privacy considerations

Corporate transparency

Shifting consumer demographics

Social media

Financial constraints

Emerging market opportunities

Mean

5

6

7

8

9

10

11

12

13

1

2

3

4

11

50

60

70

40

20 40 60 0

Global Marketing Priority Matrix

Factors impacting

marketing Percent of CMOs selecting

as ‘Top five factors’

Underpreparedness Percent of CMOs reporting

underpreparedness

8 7

11 12

6

3

7

6

1

2 4

5

10 9

Telecom (CSPs)

11



12

The IBM Institute for Business Value conducted a survey of more than

13,000 consumers in 25 countries in both mature and emerging markets

Consumer Spending

priorities for 2011 –

2013

Consumers’ Adoption of

digital comms services

and products

Consumer Sources of

Information for

services/products

Consumer Profiles and

Attitudes towards their

providers

Customer Advocacy

and Antagonism

Revenue Opportunities

with ‘connected

consumers’

Surveys conducted in 25 countries mid 2011



13

-8%

-9%

-13%

-15%

-17%

-19%

-26%

-27%

-29%

-33%

-43%

15%Utilities

Food & drinks

Transportation

Mobile broadband usage

Pay television

Mobile phone usage

Landline/wireline usage

Sports

Holidays/vacations

Clothing

Electrical appliances

Going out

Mobile Telephony

Mobile Broadband

Transportation

Pay television

Utilities

Elect. Appliances

Fixed Telephony.

Net Increase/Decrease

Holidays

Food & drinks

Clothing

Going out

Sports

average

-19% 50%

25%

24%

23%

14%

14%

13%

12%

7%

4%

-10%

-19%

Utilities

Mobile Telephony

Food & drinks

Transportation

Clothing

Mobile Broadband

Electrical appliances

Holiday/vacation

Fixed Telephony

Pay television

Sports

Going out

Mobile Telephony

Mobile Broadband

Transportation

Pay Television

Utilities

Elect. Appliances

Fixed Telephony

Net Increase/Decrease

Holidays

Food & drinks

Clothing

Going out

Sports +13%

average

Consumer sentiment on future spending in western European

countries is far less than that in emerging European countries

Source: 2011 IBM Global Telecom Consumer Survey, UK N = 797: Russia N = 514

Question: 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?

UK Russia



44%40%38%31%

25%25%22%20%16%

-4%-5%-7%-8%-8%-9%-9%-12%-17%-18%-19%-22%

-29%-30%

-56%

1%

Sw

ed

en

UK

Gre

ece

Ita

ly

Po

rtu

ga

l

Fra

nce

Ne

the

rla

nd

s

Spain

Belg

ium

Ge

rma

ny

Au

str

alia

US

A

Ja

pa

n

Ca

na

da

.

Cyp

rus

Czech R

.

Pola

nd

Ru

ssia

Ind

ia

Ch

ina

Bra

zil

UA

E

Me

xic

o

So

uth

Afr

ica

Kore

a

45%

35%31%

15%15%12%8%6%5%

-3%-6%-6%-7%-7%-9%-10%-12%-13%-15%-16%-20%

-25%-32%

-43%

-2%S

we

de

n

UK

Gre

ece

Ita

ly

Po

rtu

ga

l

Fra

nce

Neth

erlands

Spain

Cze

ch

R.

Belg

ium

Ge

rma

ny

Au

str

alia

US

A

Ja

pa

n

Ca

na

da

.

Cyp

rus

Pola

nd

Ru

ssia

Ind

ia

Ch

ina

Bra

zil

UA

E

Me

xic

o

So

uth

Afr

ica

Kore

a

Emerging

Markets

Spending on MOBILE Telephony (Voice, SMS, etc) (2012 – 2014)

Spending on MOBILE Broadband (2012 – 2014)

More than less consumers in western European countries expect to reduce spending on mobile telephony and broadband

Net

Incre

ase

/Decre

ase

N

et

Incre

ase

/Decre

ase

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237; Mature Countries N=8865; Emerging Countries N=4372 14



15

Mobile Telephony

Email/IM/Chat

Social Networking

VoIP

Video Streaming

Fixed Voice

84%

85%

60%

49%

34%

56%

Daily

Usage

Mobile Telephony

Email/IM/Chat

Social Networking

VoIP

Video Streaming

Fixed Voice

70%

66%

45%

46%

13%

28%

2

1

4

3

5

6

2

1

5

5

3

6

Em

erg

ing

Countr

ies

Ma

ture

Co

un

trie

s

6 7%

6 4 %6 3 %

6 0 %

51%4 9 %

4 6 %4 6 %4 5%

4 1%4 0 %

3 6 %3 4 %

30%

40%

50%

60%

70%

Gre

ece

Sw

eden

Russia

Port

ugal

Pola

nd

Italy

UK

Spain

Czech R

.

Germ

any

Fra

nce

Neth

erlands

Belg

ium

Daily access of SOCIAL

NETWORKING sites in

European countries

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237; Mature Countries N=8865; Emerging Countries N=4372

Many consumers have switched to – or increased use of – OTT communication services



Consumers’ Perception of network quality is relatively poor, yet most

consumers do not engage with CSPs on these issues

16

6% 6% 8% 8% 9%11% 12% 13% 14%

17%21%

23% 25%

0%

10%

20%

30%

Cze

ch

Be

lgiu

m

Ne

the

rla

nd

s

Po

rtu

ga

l

Sw

ed

en

Gre

ece

Fra

nce

UK

Sp

ain

Ge

rma

ny

Po

lan

d

Ita

ly

Ru

ssia

9%12% 12%

15% 16% 17% 18% 19% 20% 21% 23%25% 25%

0%

10%

20%

30%

Cze

ch

Be

lgiu

m

Po

rtu

ga

l

Sw

ed

en

Ne

the

rla

nd

s

UK

Gre

ece

Fra

nce

Sp

ain

Ge

rma

ny

Po

lan

d

Ru

ssia

Ita

ly

31%33%37%40%41%43% 46%

50%52%53% 56%62%65%

69%67%63%60%59%57% 54%

50%48%47% 44%38%35%

0%

20%

40%

60%

80%

100%

UK

Ne

the

rla

nd

s

Sw

ed

en

Po

lan

d

Ge

rma

ny

Po

rtu

ga

l

Sp

ain

Cze

ch

Be

lgiu

m

Fra

nce

Ru

ssia

Ita

ly

Gre

ece

No

Yes

Frequently DROPPED MOBILE

CALLS as perceived by consumers

Frequently DISCONNECTED MOBILE INTERNET

SESSIONS as perceived by consumers

Question: Do you ever complain to

your service provider when you are

disconnected from the network?



Spain

Russia

Fra

nce

UK

Italy

Neth

erlan

ds

Sw

eden

Gre

ece

Germ

any

Cze

ch

R.

Port

ugal

Belg

ium

Pola

nd

Telco networks unreliable, variable service expected

Don't believe it make any difference

Too much hassle to get through to the Call Centre

Have to wait too long in queue to speak to Call Centre

My Provider charge for calls to Call Centre

My Provider is unable to resolve my problems

Don’t know how to contact my Provider to complain

Ranking of reasons for not complaining vary by country

Reasons for NOT complaining

Question: Why do you not complain to your service provider when you are disconnected from the network during a conversation, a voice

call or internet session?

17



92% Attempt Redial/

Reconnect

77% Tell friends/family

about their poor

experience

81% Avoid Providers

with poor

experience

What happens when being disconnected?

48%

25%

9%

10%

44%

56%

61%

51%

56%

31%

7%

19%

23%

41%

45%

65%

16%

5%

Attempt to redial/reconnect

Avoid providers associated with poor

experiences

Tell friends/family about my poor

experience

Contact customer service

Switch providers – e.g., use different SIM

My provider contacts me when I have a poor

network experience


Always Most/sometimes Never

18

While consumers might not be connecting with their providers, they

are definitely connected with other consumers



70%

64%

51%

45%

31%

22%

19%

17%

66%

51%

28%

35%

19%

13%

23%

8%

Internet search

Recommendations from friends/family

Social media

Web sites of communication providers

Traditional advertising

Emails/ promotional offers

Retail stores

Shopping portals/ auctions

Emerging markets

Mature markets

What are you preferred sources of information when you are looking

for communication products and services?

Question: What are you preferred sources of information when you are looking for communication products and services?

19

Family/Friends – and Internet Search and Social Media - have

become the preferred sources of information




Spain

Russia

Fra

nce

US

A

UK

Ch

ina

India

Austr

alia

Italy

Mexic

o

UA

E

Ko

rea

Japan

Canada

Neth

erlan

ds

Sw

eden

Bra

zil

Gre

ece

Germ

any

Czech R

.

Port

ugal

Belg

ium

Pola

nd

Internet search or comparison sites

Recommendations / advice from friends, family, peers

Social media, blogs, discussion groups, knowledge sharing web sites

Websites of communication providers

Traditional advertising

Retail stores

Emails from comms providers, incl. promotional offers of new products

Shopping portals/ auctions

In a number of countries, Social Media is ranked as the number two source of information in the below 25 age group (South Africa #1)

South

Afr

ica


Under

25s

20



21

CSPs should focus on this new trend and mine digital channels, such

as blogs, tweets, social networks and peer reviews

Blogs

Tweets

Peer

Reviews

Social

Networks

• Get in tune with today’s digital consumers

by listening to the digital dialogue

• Become part of the dialogue and to be

prepared to proactively respond to

negative chatter

• Encourage a two-way dialogue and

embrace customer input by building online

and offline communities

• Find the influencers, and target them with

appropriate messaging

By capturing viewer insights from social media sources, RTL

Nederland was able to gather timely feedback from viewers

on the television programmes 'X Factor' and 'So You Think

You Can Dance'. This helped the entertainment company to

better understand audience needs and preferences and

increase viewer satisfaction and involvement.



Bharti Airtel understands how important it is to participate in the

digital dialogue and how it can help solving problems

Source:http://www.buzzom.com/2011/07/airtel-adopts-social-media-strongly-customers-can-live-chat-in-facebook-and-orkut/

http://telecomtalk.info/airtel-impact-on-social-media/51645/

Having the official verified Twitter profile @Airtel_Presence,

they are scanning for every tweet which contains the word

“airtel” in it and giving appropriate replies to the customers and

solving the issues.

Airtel uses social network analysis to determine customers

facing problems. Any mention on social media is captured and

they get in touch with the customer to get the issue resolved.

“We take the business of customer satisfaction very

seriously.

Abhilasha

Hans,

CSO

22



A consumers’attitude is shaped by cumulative experience and

directs future behavior and suggestions for improvement

Likelihood to Recommend A willingness to recommend one’s

primary provider to friends and family

Purchase Intent

AND A willingness to increase one’s

purchases if one’s primary provider

expanded its assortment and offered

products currently found only at other

providers

Staying Rate

AND

A willingness to stay with one’s primary

provider, even if other providers begin

offering competitive products or services

CFiq: An Advocate is defined by three criteria

Antagonists Apathetics Advocates

Consumer Attitude

CFiq: IBM’s approach for Customer Advocacy: Customer Focused Insight Quotient 23

“CFiq versus NPS,” The Customer Institute,, 2007, http://thecustomerinstitute.blogspot.com/2007/09/cfiq-versus-nps.html



Applying CFiq on the global consumer sample, it is found that only

18% are advocates, and 60% are antagonistic towards their CSP

“I have recommended my provider to several people” “They have amazing customer service” “They are more expensive but I hardly get disconnected or have calls dropped”

“I think my telco over-charges me but how can I prove it; my credit runs out too quickly after I top-up” “The promotions lack any relevance to me” “ I am looking to switch to the new provider offering cheaper rates”

60% Antagonists

18% Advocates

22% Apathetics

Higher Shareholder

Value

Lower Shareholder

Value

Advocates have a higher

wallet share and are highly

complimentary of the

provider capability

Apathetics are generally

passive participants

susceptible to competitor

offerings

Antagonists have low

wallet share and high

support costs and are

prone to bad-mouth the

provider

24



The low advocacy level contrasts with, for instance, the retail industry,

where it is close to twice that of the telecommunications industry

30%

40%

50%

60%

70%

80%

0% 5% 10% 15% 20% 25% 30% 35% 40%

% Advocates

% A

nta

go

nis

ts

Sweden

Russia

Spain

Greece

France

United Kingdom

Czech Republic

Portugal

Poland Italy

Germany

Belgium

Netherlands

Global average 18%

Global average 60%

25



Competitive advantage takes a distinctive customer experience that

goes beyond satisfaction and creates real value for the customer

Customer Satisfaction

(CSATs)

Customer Experience

beyond Satisfaction

Apple customers have become passionate champions for

the brand because of the unique experience Apple

provides.

Research has revealed that Apple advocates generate

revenues about 45 percent higher than their competitors’

best customers.

26



Listens and proactively follows-up on issues 25% 68%

Prompt correction of errors when they occur 29% 73%

Displays consistent level of knowledge 29% 70%

Resolves problems fairly 24% 66%

Values me as a customer 26% 71%

Listens and collects information necessary to meet

communication needs 25% 68%

Allows me to customize products and services 29% 70%

Offers me relevant products and services 29% 74%

Provide advice to improve my user experience 24% 63%

Allows multiple ways to interact with them 44% 81%

Does not request for existing information repeatedly 42% 72%

Seeks input to develop new communication

Products/services 19% 48%

Advocates % strongly agree % strongly agree Antagonists

Give the CSP

credit for

doing

“everything”

right

Find

fault

with

“everything

” CSP

does


Gap

CSPs do not account for the extreme gap in emotive attributes of their customer base

27



Advocacy is built on Trust

My Telecom providers’ bill is accurate

66%

25%

26%

39%

8%

36%

Advocates

Antagonists

Always Most of the time

Sometimes/ Never

Q09c Please provide an indication of your

experience of the frequency with

bills/charges are accurate

34%

10%

53%

64%

13%

26%

Advocates

Antagonists

Most trusted Somewhat trusted

Least trusted

Q26 Who do you trust to manage your identity

and private/personal information, including

medical data, transactions and social

relationships and retain your privacy?

Trust in CSPs to manage identity and

private/personal information

Invoice

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237 28



CSPs should focus on building new non-traditional capabilities, as

well as deeper understanding of customer preferences and attitudes

A. Improve customer experience insight by focusing

on attributes that drive customer

advocacy

B. Apply a social behavior-driven “outside-in”

perspective and become part of a two-way

dialogue with the consumer

C. Profile and target customer advocacy

segments to improve advocacy levels

D. Build multilevel capabilities to

support the new approach to customer advocacy.

We suggest four key recommendations to

help CSPs become more customer focused:

Ch

an

nels

&

To

uc

hp

oin

ts P

rod

uc

ts a

nd

Serv

ices

Emotive

Performance

Rational

Performance

Wants

and

needs

29



Are you prepared to augment advocacy?

30

• Does your organization know who your advocates are and what attributes define

them?

• Does your organization know who your antagonists are and what they might be

saying about you?

• How valuable are your advocates? What might drive more business from them?

• Which elements of the customer experience are most important to your customers?

How do you measure those?

• Does your organization address both the rational and emotive drivers of behavior?

• How are you leveraging customer and network analytics to improve the customer

experience?

• Do you have the right information on your core customers? Do you have a single

view of the customer across all channels?

• Do you exploit social network analysis to understand how your customers perceive

your products and services?

• How well do customer experience measures correlate to hard outcome measures

such as churn, ARPU and customer profitability?

• Does your current analytical capability support this challenge to improve advocacy?

10 Questions to consider

30



Thank you

IBV

Rob van den Dam

Global Telecom Industry Lead


[email protected]

www.ibm.com/iibv

Europe

Mario Cavestany

IBM Vice President Europe

Telecommunications & Media Industries

[email protected]

Global

Bob Fox

Global Telecom Industry Leader

IBM Global Business Services

[email protected]

Documents

WTS 2012 A European Perspective On The Telecommunications Industry