Telco Deep Dive: Q&A with the Big 3 (Part 1)

On May 26, Digital News Asia (DNA) released its first Deep Dive report, which looked at the telecommunications space in Malaysia. Over these next two weeks, we will be publishing the articles from the PDF report on our portal, plus other stories. To download the Telco Deep Dive, click here. In this final article, DNA founder Karamjit Singh puts the senior executives of the Big 3 telcos in the hot seat. This reprint includes responses from Celcom Axiata CEO Shazalli Ramly, which came too late to be included in the initial report.

• Celcom, DiGi and Maxis focus on improving network performance
• Believe telco networks offer better quality app experience

NOTICING that a neighbour’s house alarm had triggered and spotting some bikes outside the house, another neighbour tried desperately to reach to reach him. But Anthony Umann, the neighbour in question, was calm.
 
He had already received an alert when his house alarm went off, and, remotely accessing two wireless cameras he had installed, he saw that a back-door that was not shut properly was the cause of the alarm.
 
Umann’s mobile has in effect become his home security monitoring centre. He did not need his telco, in this case, Celcom, to provide him the home security service, He just needed a data line that was reliable.
 
With many previously physical services becoming digitised and being delivered wirelessly, it therefore comes as no surprise when Maxis Bhd chief executive officer Morten Lundal shares that 98% of the traffic over his company’s network is now data, with voice and SMS making up the remaining measly 2%.
 
This is despite the fact that around half of Maxis’ customers still use feature phones.
 
DiGi.com Bhd is experiencing the same surge in data, which of course is a global phenomenon. As its chief operating officer Albern Murty points out, in the first quarter of 2014, data traffic increased 55% year-on-year.
 
This data surge has put the pressure on telcos in two key areas. The first is to upgrade their networks and sharply improve network performance.
 
Recent research by telco vendors shows that improved network performance leads to improved customer experience, which happens to be the second area telcos are under pressure to improve rapidly.
 
Albern talks about DiGi being “loved by customers” as a central pillar of its long-term strategy, while Lundal talks about the lofty ‘Unmatched Customer Experience’ goal that Maxis has set and how it is working hard to come as close as possible to achieving this ambition.
 
But really, it was Celcom Axiata Bhd chief executive officer Shazalli Ramly who described what it was all really about, when earlier this year he described 2014 at the ‘Year of Battles’ for the Malaysian telecommunications space.
 
You can read more about their response in the following Q&A, where we also asked the three senior executives about how they were faring in areas like location-based services (LBS), over-the-top (OTT) services, and an update on the trend of consumers using dongles to access the Internet.
 
DNA: The volume of mobile data traffic we are going to see over the next five years, is expected to multiply by 11 with respect to 2013, Telefonica president Cesar Alierta said in February. Based on what you have seen in your own experience, can you share your growth projections for volume of mobile data traffic over the coming five years? Aside from the big three trends of Devices, Mobility and Social, are there any other factors driving this?
 
Albern (pic): We believe the Malaysian market will likely see similar growth trends, albeit at a different scale and magnitude. For instance, DiGi’s Q1/2014 data traffic increased 55% year-on-year (13% quarter on quarter, vs Q4/2013).
 
This was fuelled by our stronger data network with the expansion of HSPA+/3G coverage to 86% of the population, and a clear plan to build 1,500 4G-LTE (Fourth Generation/ Long-Term Evolution) sites by end-2014.
 
Aside from this wider coverage and higher capacity, other factors that will strongly drive data traffic will be more affordable and relevant Internet services; growth of high-speed digital service applications; and, the increase in smart device adoption, particularly at the entry level.
 
Lundal: It's hard to see five years ahead and whether it’s seven, 11 or 15 times today, nobody really can predict with any confidence. But based on the exceptional data growth the last few years and the fact that half of our customers still use feature phones, we must assume that the growth will be very, very large.
 
And, it’s all about data, which constitutes 98% of our traffic, whilst voice and SMS comprise 2%.
 
The key to future data growth is the increase adoption of video streaming, particularly applications like YouTube, whilst emerging cloud solutions (particularly for enterprises) will also drive the demand for bandwidth.
 
Shazalli: At Celcom, we have seen how data traffic today is driven by the services category or function – for example video streaming, live audio or file transfer – and not by services purposes or segments such as education, entertainment or social media per se.
 
The Ericsson Mobility Report in November 2013 also forecast that video streaming will continue to be the main driver for data traffic growth, and again this is thanks to the emergence of smartphones as reliable devices to watch high quality content.
 
Recognising the potential and opportunities that this trend has to offer, Celcom is continuously enhancing our network quality and data capacity for better data services.
 
During the latest financial quarter of Q1 2014, Celcom achieved strong growth in data revenue with a 16% Year-on-Year (YoY) increase, driven by a rise of smartphone adoption and data usage. The period also saw Celcom’s YoY smartphone penetration grow from 24% to 35% within our network.
 
DNA: Have you been able to monetise LBS (location-based services)? With so much promise touted over it, we don’t hear you talking about it much.
 
Albern: Location is just one among a variety of information points that make up a customer profile and dictates customer need.
 
If you serve something based on location alone, you run the risk of disregarding the customer’s other demographic and psychographic characteristics – an example of this would be offering a customer a concert ticket for a venue he lives close to, but if the customer dislikes the genre, you might end up dissatisfying him.
 
All of the demographics (like location, age, occupation) and psychographics (values, beliefs, personality) make up the comprehensive profile of the customer. Once you have built these profiles, you can be fairly confident of their contextual needs and wants, and start to promote tailor-made, highly relevant offers.
 
Lundal (pic): Our location-based advertising (LBA) services are currently being utilised at more than 90% of our available inventory at most of our commercial locations. The feature adds relevance to the messages and offers our customers elect to receive. But this is not a big revenue stream for us.
 
Shazalli: Yes, we have been able to monetise LBS but it is still in its early days. We see the bulk of the value from LBS coming from its integration with other capabilities such as loyalty management, campaign management, big data and more.
 
Still, we recognise that the biggest undertaking of any new deployment is the development of an ecosystem around the service itself. We are taking the steps to understand the challenges and working diligently to bring all elements of the ecosystem to the forefront.
 
DNA: Related to Q2, how have you ‎been able to use the data you have on customers to enrich their experience?
 
Albern: Customers have already been adopting and using LBS applications actively for navigation, taxi requisition, social applications, check-ins, etc., which drive overall demand for Internet and data traffic.
 
DiGi has also started its M2M (machine-to-machine) service based on LBS technology to support logistics [players’] fleet-tracking system, and will explore more opportunities in the future.
 
In our view, experience mainly takes two forms. First is the physical experience of voice quality, data speed, etc., and the second is the intrinsic experience of knowing that my mobile operator understands me.
 
On the first aspect, we believe that we now have in place the right network to be able to deliver a strong customer experience. On the second aspect, we are offering micro campaigns tailored to the customer’s preference, and while we (as in the industry) are still in the early days of doing this, we strongly believe we will become better at offering more relevant products and services once our understanding of the customer evolves.
 
Shazalli: Firstly, the data can be used to gain insights on aggregated customer behaviours and, in turn, improve our products by evolving the data in tandem with customer trends. For example, we had looked into the aggregated voice usage of users in the network and from that have significantly simplified our (prepaid) Xpax voice tariff to enable customers to pay one low rate without having to worry whether they are calling subscribers on the same or other networks.
 
From usage patterns too, we aim to improve our customer experience by providing the right offers, to the right customers, at the right time. This is called ‘contextual marketing,’ which aims to maximise the relevance of our marketing communications to customers and minimise any unwanted intrusion.
 
DNA: According to Ericsson’s Annual Mobility ‎survey, for the first time ever, consumers have ranked User Experience / Performance as being more important than price. It is not a coincidence then that Telefonica has declared delivering user experience as the key pillar for their strategy moving forward. We know you have your own permutation on this, so what is your approach in delivering this User Experience?
 
Albern: Being ‘loved by customers’ is a central pillar of DiGi and Telenor’s long-term strategy. We also believe that it is experience as opposed to price which will drive customer loyalty and turn them into fans of a brand. What we have started doing is looking at customer experience as a precursor to taking any decision.
 
So, we don’t only ask whether a certain product or campaign will make financial sense and is feasible to be implemented from a technological point of view, we also ask how it will enhance customer experience. Thus we are building a ‘Customer First’ mindset into our day-to-day work.
 
As part of this, we have put in place a ‘Customer First’ focus across our operations. We have also put in place a customer satisfaction index or Net Promoter Score (NPS), which is viewed as an important measurement and is now embedded as part of a company-wide performance marker.
 
Another example is to again have enough insight on the customer to know how to do the little things right. For example, when is the right time of day to send him an offer, whether he prefers to receive a phone call or SMS when we want to notify him of something (rewards, promotions etc.), what kind of offers he prefers, and so forth.
 
Lundal: As data grows in importance, there will be bigger differences between the operators and this will matter more and more to customers.
 
We also know that there is a large segment in Malaysia who want the best and are willing to pay a (fair) price for it. Here, Maxis has always been the preferred choice for these most demanding customers and we intend to keep it that way.
 
We have set the bar as high as ‘Unmatched Customer Experience’ and we are working hard to come as close as possible to this ambition.
 
Shazalli (pic): Celcom has always been committed to customer experience and it is the core of our business proposition. Our strategies and investments over the past few years and will continue in the years ahead to deliver on this promise. Some examples of these include:

1. Large scale IT platforms transformation:  In the past three years, Celcom has completely revamped our Business Support System (BSS), Business Intelligence (BI) and all other related service platforms in partnerships with Oracle, Accenture, IBM and Huawei. Simplifying the architecture and upgrading our capabilities is quintessential to building the right foundation for a customer centric network.
2. Single RAN: Delivering single Radio Access Network (RAN) capabilities to reduce congestion, dropped calls and other common customer dissatisfactions. From early this year 2014, our network has been fully Single RAN, and we are already seeing improvements in reliability and quality.
3. Building a state of the art data network: Working with Huawei, Celcom has significantly enhanced its data services capabilities via our new packet core, with integrated intelligence from policy management to context aware charging.
4. Service and product innovation: In January this year, we launched Celcom First Elite, the priority services plan that demonstrates a 360-degree approach to customer experience, offering our customers an access to exclusive lifestyle experiences and top class customer service which make them feel special and valued.

Tomorrow: The OTT challenge, and the dangling dongle
 
Related Stories:
 
Celcom CEO: 2014 will be the ‘Year of Battles’
 
Leading Maxis’ mind-set change, and the ‘Magic 30’
 
DiGi to spend more on capex in 2014
 
 
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