WTS 2012 A European Perspective On The Telecommunications Industry

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

© 2012 IBM Corporation


Agenda

 Industry Dynamics – 4 key trends

 Global CMO Survey

 Global Telecom Consumer Survey

 Driving Customer Advocacy

2 © 2012 IBM Corporation


Telecommunications is IBM’s #1 research focus

Telecom
Research TSL Russia
Mobile Web
Labs (Moscow Satellite TSL) Services
TSL China &
Telecom Research Lab
TSL Israel & (Beijing)
TSL Europe Telecom Research Lab
(La Gaude &
(Haifa Satellite TSL) Japan
Montpellier, France) (Tokyo
Satellite TSL)
TSL North America Telecom Research Lab
(Austin, Texas)
(New Delhi)
TSL India ASEAN
(Bangalore Satellite TSL) (Kuala Lumpur
Satellite TSL)

TSL LATAM
(Sao Paulo,
Centers of Institute for
Brazil Satellite TSL) Worldclass
Excellence Business Africa
South Partner
Value
(Johannesburg, Satellite TSL) Ecosystem

Telecommunications Solutions Lab (TSL)
Telecommunications Research Lab


The IBM Institute for Business Value creates fact based
thought leadership that help clients realize business value

Future Value Realization CXO
Agendas Studies Surveys

3 to 10 year industry outlook In-depth assessment of today’s Chief Officiers studies – CEO,
with action oriented next steps critical issues, opportunities, etc CIO, CMO, CFO, CHRO, etc.



Within today’s transforming telecommunications landscape, four
major trends are apparent

Consolidation continues OTT providers thrive
The process of telecom OTT providers continue
operators expanding to build a dominant
outside their home position in the
markets continues, with telecommunications
new giants emerging landscape

Mobile data explodes Consumers are seizing control

People increasingly use People increasingly
the mobile internet. connect with each
Video is the fastest other to exchange
growing application. information and
influence CSPs



Consolidation continues – Many CSPs have become international
companies by expanding their business across multiple countries
As part of the sector’s
15 multi-country (10 or more countries) transformation, many
companies now control ± 3 billion subs telecom operators have
increased their footprints
Number
Subs 2010 outside their home markets
Company (HQ) of
(mio) Rev
Countries
France Telecom (France) 32 217 63,3
Telefonica (Spain) 25 231 88,5 Challenges:
Bharti (India) 21 243 21,2  How can the multi-country CSP
MTN (South Africa) 21 137 17,0
leverage their scale and identify
Vodafone (UK) 20 391 72,9
Singtel (Singapore) 20 382 13,6 the right synergy potential for
Telia Sonera (Sweden) 19 160 16,3 their company?
Vimpelcom (NL) 19 159 24,0  How can the single-country
America Movil (Mexico) 18 236 51,3 CSP compete against global
Etisalat (UAE) 18 135 8,5 CSPs in their own market?
Deutsche Telekom (Germany) 17 151 85,0
Tele2 (Sweden) 12 30 6,5
Telenor (Norway) 11 203 17,5 Emergence of multi-country Giants
STC (KSA) 10 139 14,0
Axiata (Malaysia) 10 160 5,0



OTT providers thrive – but Value concentrates

Combined Market Value Combined Market Value

Top 25 Top
drivers of
Internet = ~1/2 150
CSPs
traffic
Top 4 = 70% of total of top 25

Premium priced devices, customer OTT providers – in particular the top 4 – will
eco-system, pay for product (apps, continue to build and expand their dominant
iTunes, iCloud) position in both mature and emerging markets
Search and advertising value cap-
ture, customer data monetization
Extensive retail portfolio, retail Challenges:
portal infrastructure, recommen-
 How can CSPs compete against OTT
dation engine, advertising value
capture players?
Dominant market position,  Or better, if they cannot beat them, how can
advertising value capture, self- they partner with OTT providers in a way
content creation business design they both benefit?


Mobile data (really video) explodes
Global Mobile Data Traffic, 2011–2016
(TB x 1000/ month) 10 8 0 4
10804

Mobile VoIP Middle East & Africa

Mobile Gaming 20% Central & Eastern Europe

Mobile File Sharing
6896
Latin America 78% 6896
18%
CAGR
Mobile M2M North America
4215 23%
Mobile Web/Data
4 2 15
Western Europe

Mobile Video Asia Pacific
2379
2 3 79
70.5
12 52 % 1252
40%
59 7
597

2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016

2011 Mobile data – in particular OTT video – will
• Global mobile data grew 2.3-fold dramatically increase
• Mobile video traffic exceeded 50%
• Average smartphone usage trippled Challenges:
2016  How can CSPs cope with the ever-
• Mobile data traffic will increase 18-fold increasing amount of data, and how can
• 2/3 of mobile data traffic will be video they close the mobile data revenue gap?
Source: Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011–2016..


Consumers are seizing control

What happens when being disconnected?
Most/
Always sometimes Never
12/29/11 Press Release:
Attempt to redial/reconnect 48% 44% 7%
81% “Starting January 15, a new $2 payment
Avoid providers with whom Avoid convenience fee will be instituted for
25% 56% 19%
Providers
friends had bad experiences customers who make single bill
with poor payments online or by telephone”
Tell friends about my poor 16% 61% 23% experience
experience
Contact customer service 9% 51% 41% 77% Within 24 hours, more than 100,000
Switch providers, - Tell friends/
e.g. use a different SIM 10% 56% 45% family bout people had signed a online petition:
their poor Greetings,
My provider proactively
5% 31% 65% experience I am disappointed to learn that Verizon Wireless
contact me
plans to institute a new $2 fee for paying bills
Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237
online…. Your company should not assume that
it can do anything to your customers and
Consumers now have unprecedented power that we will allow it to happen…
to build and demolish brand strength as they
blog, text and comment via social media
12/30/11 Press Release:
Challenges: “Verizon Wireless has decided it will not institute the
fee for online or telephone single payments that was
 How can CSPs get in tune with todays announced earlier this week.
digital consumers, and respond to negative The company made the decision in response to
customer feedback about the plan…”
chatter? © 2012 IBM Corporation
9


To evaluate the impact of the recession and the empowerment of
consumers the IBV conducted both a Consumer ánd a CMO survey
IBM Global Consumer Survey IBM Global CMO Survey
(25 countries;13,237 consumers) (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
Global Marketing Priority Matrix
1 Customer collaboration and influence
Underpreparedness 6
2 Growth of channel and device choices
Percent of CMOs reporting
underpreparedness 3
70
3 Social media
10 4 Data explosion
9
5 Decreasing brand loyalty
11 5
6 1
7 6 Shifting consumer demographics
60
7 ROI accountability
2 8 Regulatory considerations
4
8 9 Emerging market opportunities
7
50
11 10 Financial constraints
12
11 Privacy considerations
Factors impacting
marketing 12 Corporate transparency
40 Percent of CMOs selecting
Telecom (CSPs) as ‘Top five factors’ 13 Global outsourcing

0 20 40 60 Mean

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? © 2012 IBM Corporation
11


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 Consumers’ Adoption of Consumer Sources of
priorities for 2011 – digital comms services Information for
2013 and products services/products

Consumer Profiles and Customer Advocacy Revenue Opportunities
Attitudes towards their and Antagonism with ‘connected
providers consumers’

Surveys conducted in 25 countries mid 2011


Consumer sentiment on future spending in western European
countries is far less than that in emerging European countries
UK Net Increase/Decrease Russia Net Increase/Decrease

15%
Utilities
Utilities Utilities Utilities 50%

Food & drinks
Food & drinks
-19% average -8% Mobile Telephony
Mobile Telephony 25%

Transportation
Transportation -9% Food & drinks
Food & drinks 24%

Mobilebroadband usage
Mobile Broadband -13% Transportation
Transportation 23%

Pay Pay television
television -15% Clothing Clothing 14%

Mobile Telephony
Mobile phone usage -17% Mobile Broadband
Mobile Broadband 14%

Fixed Telephony.
Landline/wireline usage -19%
Elect. Appliances
Electrical appliances 13%

Sports
Sports -26%
Holiday/vacation Holidays 12%

Holidays
Holidays/vacations -27%
Fixed Telephony
Fixed Telephony 7%

Clothing
Clothing -29%
Pay Television
Pay television 4%

Elect. Appliances
Electrical appliances -33%
Sports
Sports -10%
+13%
average

Going out
Going out -43%
Going out
Going out -19%

13 Source: 2011 IBM Global Telecom Consumer Survey, UK N = 797: Russia N = 514 © 2012 IBM Corporation
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?


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

Netherlands
Germany
Net Increase/Decrease

Australia

Canada.
Portugal

Belgium

Sweden
Greece

Cyprus

France

Japan
Spain
38% 40% 44%

USA
Italy

UK 31%
20% 22% 25% 25%
16%
1%

Czech R.

Russia
UAE

China
Poland
India

Korea
Brazil
Mexico
South Africa
-9% -9% -8% -8% -7% -5% -4%
-17% -12%
-22% -19% -18%
-30% -29%

-56%
Spending on MOBILE Telephony
(Voice, SMS, etc) (2012 – 2014)
Emerging
Markets

Netherlands
Germany
Czech R.

Australia
Canada.
Portugal

Belgium

Sweden
45%
Greece
Net Increase/Decrease

France
Cyprus

Japan
Spain

35%
USA

31%
Italy

UK

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

-7% -7% -6% -6% -3% -2%

South Africa
-10% -9%

Russia
UAE

China
India

Korea
Poland

Brazil
Mexico
-15% -13% -12%
-20% -16%
-25%
-32%
-43%

Spending on MOBILE Broadband
(2012 – 2014)
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
Daily
Usage 70%

1 Email/IM/Chat 85%
Daily access of SOCIAL
2 Mobile Telephony 84%
Countries
Emerging

NETWORKING sites in
60% European countries
3 Social Networking 60%

4 Fixed Voice 56%
5 Video Streaming 49%
50%
6 7%
6 VoIP 34% 63% 64%
60%

1 Email/IM/Chat 70% 40% 49%
51%
Countries

4 5% 4 6 % 4 6 %
2 Mobile Telephony
Mature

66% 4 1%
40%

3 Fixed Voice 46% 34%
36%

5 Social Networking 45% 30%

Italy

Sweden
Greece
France

Spain

Poland

Russia
Portugal
Belgium

UK
Czech R.
Netherlands

Germany
5 Video Streaming 28%

6 VoIP 13%


Consumers’ Perception of network quality is relatively poor, yet most
consumers do not engage with CSPs on these issues
30%
Frequently DROPPED MOBILE Question: Do you ever complain to
20% CALLS as perceived by consumers your service provider when you are
disconnected from the network?
25% 100%
10% 21% 23%
17%
13% 14%
8% 8% 9%
11% 12% No
6% 6%
80% 38% 35%
0% 47% 44%
50% 48%
Netherlands

Italy
Belgium

Germany
Czech

Sweden

Poland

Russia
Portugal

France

Spain
UK
Greece

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

30% Frequently DISCONNECTED MOBILE INTERNET
40%
SESSIONS as perceived by consumers
62% 65%
20% 53% 56%
46% 50% 52%
20% 37% 40% 41% 43%
25% 25%
23% 31% 33%
10% 19% 20% 21%
12% 12%
15% 16% 17% 18% Yes
9%

0% 0% Netherlands

Italy
Belgium
Germany

Czech

Russia
Sweden
Poland

Portugal

France
Spain
UK

Greece
Netherlands

Italy
Belgium

Germany
Czech

Russia
Sweden

Poland
Portugal

France
Spain
UK
Greece



Ranking of reasons for not complaining vary by country

Netherlands
Czech R.
Germany

Portugal
Belgium
Sweden

Poland
Greece
France
Russia
Spain

Italy
UK

Telco networks unreliable, variable service expected Reasons for NOT complaining
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
17 Question: Why do you not complain to your service provider when you are disconnected from the network during a conversation, a voice © 2012 IBM Corporation
call or internet session?


While consumers might not be connecting with their providers, they
are definitely connected with other consumers

What happens when being disconnected?
Always Most/sometimes Never
Attempt to redial/reconnect 48% 44% 7% 92%
Attempt Redial/
Reconnect
Avoid providers associated with poor
25% 56% 19%
experiences

Tell friends/family about my poor
16% 61% 23% 77%
experience Tell friends/family
about their poor
experience
Contact customer service 9% 51% 41%

Switch providers – e.g., use different SIM 10% 56% 45% 81%
Avoid Providers
with poor
My provider contacts me when I have a poor
5% 31% 65% experience
network experience



Family/Friends – and Internet Search and Social Media - have
become the preferred sources of information
What are you preferred sources of information when you are looking
for communication products and services?

70%
Internet search 66%

64%
Recommendations from friends/family 51%

51%
Social media 28%

45%
Web sites of communication providers 35%

31%
Traditional advertising 19%

22%
Emails/ promotional offers 13%

19%
Retail stores 23% Emerging markets
Mature markets
17%
Shopping portals/ auctions 8%

19 Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237; Mature Countries N=8865; Emerging Countries N=4372 © 2012 IBM Corporation
Question: What are you preferred sources of information when you are looking for communication products and services?


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 Africa
Netherlands
Czech R.
Germany

Portugal
Australia

Belgium
Sweden
Canada

Poland
Greece
Mexico
France
Russia

Japan
Korea
China
Spain

Brazil
India
USA

UAE
Italy
UK

Internet search or comparison sites
Recommendations / advice from friends, family, peers
Social media, blogs, discussion groups, knowledge sharing web sites
Websites of communication providers Under
Traditional advertising 25s
Retail stores
Emails from comms providers, incl. promotional offers of new products
Shopping portals/ auctions


CSPs should focus on this new trend and mine digital channels, such
as blogs, tweets, social networks and peer reviews

• Get in tune with today’s digital consumers
by listening to the digital dialogue
• Become part of the dialogue and to be
Blogs
prepared to proactively respond to
negative chatter
Social Tweets
Networks • Encourage a two-way dialogue and
Peer embrace customer input by building online
Reviews 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

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.
Abhilasha
Hans,
CSO “We take the business of customer satisfaction very
seriously.
22 Source:http://www.buzzom.com/2011/07/airtel-adopts-social-media-strongly-customers-can-live-chat-in-facebook-and-orkut/ © 2012 IBM Corporation
http://telecomtalk.info/airtel-impact-on-social-media/51645/


A consumers’attitude is shaped by cumulative experience and
directs future behavior and suggestions for improvement
Consumer Attitude

Advocates Apathetics Antagonists

CFiq: An Advocate is defined by three criteria

A willingness to recommend one’s
Likelihood to Recommend
primary provider to friends and family

AND
A willingness to increase one’s
purchases if one’s primary provider
Purchase Intent expanded its assortment and offered
products currently found only at other
providers
AND
A willingness to stay with one’s primary
Staying Rate provider, even if other providers begin
offering competitive products or services

23 CFiq: IBM’s approach for Customer Advocacy: Customer Focused Insight Quotient © 2012 IBM Corporation
“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

Advocates have a higher
“I have recommended my Higher
wallet share and are highly
provider to several people” Shareholder
“They have amazing customer Value complimentary of the
service” provider capability
“They are more expensive but
I hardly get disconnected or
have calls dropped”
18%
22% Apathetics are generally
Advocates
Apathetics passive participants
susceptible to competitor
offerings
60%
“I think my telco over-charges me Antagonists
but how can I prove it; my credit
runs out too quickly after I top-up”
“The promotions lack any Antagonists have low
relevance to me”
Lower wallet share and high
“ I am looking to switch to the new
provider offering cheaper rates”
Shareholder support costs and are
Value prone to bad-mouth the
provider


The low advocacy level contrasts with, for instance, the retail industry,
where it is close to twice that of the telecommunications industry
80%
Global average 18%
70%
Belgium
Global average 60%
Portugal
% Antagonists

Spain
60% Poland
Italy United Kingdom

Germany France
50% Russia
Netherlands Greece
Czech
40% Republic Sweden

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



Competitive advantage takes a distinctive customer experience that
goes beyond satisfaction and creates real value for the customer

Customer Satisfaction Customer Experience
(CSATs) 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.



CSPs do not account for the extreme gap in emotive attributes of
their customer base
Advocates Gap Antagonists
% strongly agree % strongly agree

74% Offers me relevant products and services 29%

71% Values me as a customer 26%

73% Prompt correction of errors when they occur 29%

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

68% Listens and collects information necessary to meet 25%
communication needs Find
Give the CSP
credit for 66% Resolves problems fairly 24% fault
doing with
“everything” 70% Allows me to customize products and services 29% “everything
right ” CSP
70% Displays consistent level of knowledge 29% does

63% Provide advice to improve my user experience 24%

81% Allows multiple ways to interact with them 44%

72% Does not request for existing information repeatedly 42%
Seeks input to develop new communication
48% 19%
27 Products/services © 2012 IBM Corporation


Advocacy is built on Trust

Invoice
My Telecom providers’ bill is accurate Trust in CSPs to manage identity and
private/personal information

Advocates Advocates
66% 26% 8% 34% 53% 13%

Most Most
Always of the Sometimes/ Least
Never trusted Somewhat trusted trusted
time

25% 39% 36% 10% 64% 26%

Antagonists Antagonists

Q09c Please provide an indication of your Q26 Who do you trust to manage your identity
experience of the frequency with and private/personal information, including
bills/charges are accurate medical data, transactions and social
relationships and retain your privacy?


CSPs should focus on building new non-traditional capabilities, as
well as deeper understanding of customer preferences and attitudes
We suggest four key recommendations to
Emotive help CSPs become more customer focused:
Performance
Touchpoints

Products and
Channels &

A. Improve customer experience insight by focusing
Services

Wants
and

on attributes that drive customer
needs

Rational
Performance
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.



Are you prepared to augment advocacy?

10 Questions to consider

• 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
30
such as churn, ARPU and customer profitability?
• Does your current analytical capability support this challenge to improve advocacy?
30


Thank you

Europe Global IBV
Mario Cavestany Bob Fox Rob van den Dam
IBM Vice President Europe Global Telecom Industry Leader Global Telecom Industry Lead
Telecommunications & Media Industries IBM Global Business Services IBM Institute for Business Value
m_cavestany@es.ibm.com robertfox@usnl.ibm.com rob_vandendam@nl.ibm.com

www.ibm.com/iibv

WTS 2012 A European Perspective On The Telecommunications Industry

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