At the end of last year, we sat down with Ovum analysts to discuss the challenges and big questions telcos will face in 2018.

1. GET TELECOMS
SMART
The quest for revenue growth
continues in 2018

2. G E T T E L E C O M S S M A R T
The quest for revenue growth continues in 2018
Traditionally, at the end of the year, we sit down with Ovum analysts to look at the year
ahead and get an expert view of what’s in store for telcos. At the end of 2017 Michael
Philpott (Senior Practice Leader, Consumer Services) and Dario Talmesio (Practice
Leader, Fixed and Mobile Telecoms Europe) offered us their view of the challenges and
big questions in 2018.
R E V E N U E G R O W T H
Some challenges never move from the list of operators’ top priorities year in, year out.
Revenue growth is one of them. Dario Talmesio mentioned a few operator strategies that
have proven successful in incrementally growing revenues, which is the most realistic
growth option in category where revenue growth is virtually non-existent.
“Revenue growth is about capitalizing on small pockets of
opportunity.” – Dario Talmesio, Ovum
In many markets, including the UK, operators have added an annual tariff adjustment for
inflation into their customers’ contracts. According to the analyst, this has been an
effective tactic for improving financial performance. In other markets, like Italy,
connectivity providers have adjusted their billing periods, moving them from a calendar
month to a four-week basis, thus gaining a few extra days to charge customers for. Both
approaches have undoubtedly brought positive financial results for the operators.
However, there is concern on our part with these strategies’ potential impact on the
already distrustful and often negative relationship telcos have with their customers.
Operators have also been exploring the opportunity of growing prepaid customers’
revenues by making topping-up easier. Offering a payment card registration option
removes a significant step from the top-up process, thus encouraging spend. Additionally,
this move turns operators into the owners of the payment touchpoint and sets them up
for carrier billing opportunities. As opposed to the two strategies described above, this
tactic both improves the customer experience by minimising effort required from a
customer and has a positive impact on operators’ revenues. It also likely incrementally
improves brand perception and strengthens customer relationships, as making customers
lives easier is one of the main areas of positive engagement available to connectivity
providers.

3. G E T T E L E C O M S S M A R T
The quest for revenue growth continues in 2018
B U N D L I N G
Bundles have been very successful for operators all over the world – they have helped
maintain overall revenues whilst individual product ARPU has declined for legacy voice
services. TV in particular has become an important source of revenue for telcos –
according to analysts, big players draw 25-30% of their revenues from TV subscriptions.
However, as the market becomes further saturated and increasingly competitive, growing
bundle revenues becomes challenging.
Bundle differentiation is starting to weaken according to Michael Philpott, as content
experiences becomes ever more fragmented and OTTs grow in importance. As the next
step to producing proprietary big budget content, Amazon in the UK is allegedly
considering participation in the auction of this year’s football TV rights – the traditional
battleground of major pay TV players and telco with deep pockets.
“Most bundles are similar unless the operator invests in
super-premium content.” – Michael Philpott, Ovum
Luckily, the evolution of technology and the increasing number of connected devices
present many bundling opportunities for connectivity providers. Smart home services can
be a natural extension of the operators’ connected home presence and many operators
have ventured into this territory. However, selling new products to customers will require
a great deal of persuasion – for example, why should a customer purchase smart energy
services from their broadband provider versus their energy supplier? Smart homes will be
a battleground and will benefit those with strongest customer relationships developing
solutions in a customer-centric manner and truly seeking to improve customers’ lives.
On the one hand operators need to increase the size and value of bundles in order to
grow revenues. On the other hand, Ovum analysts raise a concern over the increasing size
of bundles, as the accompanying augmentation of the monthly bill is likely to be subjected
to higher levels of scrutiny from the customer – a behaviour that might not be in the
operators’ interest as they tend to rely on customer inertia and disengagement to
maintain ARPU and customer base.
R E N E W E D F O C U S O N T H E H O M E
Home broadband has always been the anchor product of most bundles, but now it is
further growing in importance. As people stream more video on more screens and tend to

4. G E T T E L E C O M S S M A R T
The quest for revenue growth continues in 2018
use an increasing number of connected devices via the home Wi-Fi, the quality of home
broadband experience becomes an important differentiator between operators.
“Consumers see broadband providers as responsible for the
quality of OTT (Netflix, Spotify etc.) experience.” – Michael
Philpott, Ovum
Poor quality broadband experience doubles the customers’ likelihood to churn and hence
is becoming a key area of operators’ focus with an urgent need to invest in advanced Wi-
Fi technology, in particular offering more sophisticated set top boxes. While operators
have continuously been investing in their overall network improvement, the set top box
has somewhat been neglected by many providers opting for the cheapest solution. With
an increasing demand for in-home coverage and lowering tolerance for connectivity
disruptions, some broadband providers are developing business models that allow them
to sell a better home connectivity experience at a premium to the customer – Orange in
France is charging a premium for a more advanced set top box. Premium in-home
hardware not only improves the coverage, it also allows for more efficient remote
diagnostics and problem resolution, often eliminating the need to send out a technician or
a replacement set top box. This lowers customer support costs, thus strengthening the
business case for investment in the quality of home broadband experiences.
S H I F T I N A T T I T U D E S T O L O Y A L T Y
Finally, we were pleased to hear from the analysts that operators’ awareness of the need
to focus on customer loyalty is on the rise. As many markets are beyond saturated and
revenues are maxed out, connectivity providers need to prevent customers from
shopping around. Retention focused approaches are in direct opposition to operators’
long-standing quest to attract switchers – a strategy which drives down perceived service
value, and as a result the operators own revenues, while simultaneously damaging
relationships with existing customers. As the understanding of the customer improves
thanks to the sophisticated tools for customer data analysis, operators are well placed to
reward longevity and encourage loyalty.
“Operators realise they need an emotional lock-in – a softer
approach as opposed to contractual lock-in.” – Dario
Talmesio, Ovum

5. G E T T E L E C O M S S M A R T
The quest for revenue growth continues in 2018
However, this is still a learning curve for telcos, as loyalty* is not something they have
been traditionally preoccupied with.
In 2018 the fight for revenue will continue, operators will seek to reinvent their bundles
and improve the home connectivity experience as well as keep their existing customers
for longer. We believe that the determinant factor in their ability to succeed next year and
in the long term will be the relationships they manage to build and sustain with their
customers by engaging emotionally throughout the customer experience. For more on
this, stay tuned for the new BBDO Knows telecommunications category overview.
* If you are interested in the extended BBDO Knows argument in favour of refocusing on
customer retention in telecoms, please contact the team.

6. G E T T E L E C O M S S M A R T
The quest for revenue growth continues in 2018
If you are interested in learning more about the subject of this article, please contact
Melanie Norris, Global Planning Director, norrism@bbdoknows.com
A B O U T B B D O K N O W S
BBDO KNOWS is a planning resource for the BBDO network.
BBDO KNOWS offers thinking, strategy, insights and inspiration on key categories, key
themes and consumer segments.
If you are interested in learning more about the way BBDO thinks please contact Melanie
Norris, Global Planning Director, norrism@bbdoknows.com.
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