Mobile operators fear Skype and WhatsApp but 4G is a knight in shining armour

Tecnotree provides telecom IT solutions for the management of products, consumers and revenue across the globe. We got up close and personal with the company's chief technology officer, Timo Ahomäki, to get a closer insight into the state of today's telecommunications industry.

What are the key challenges faced by operators at the moment?

One of the challenges facing operators is increasing competition from OTT services such as Skype and WhatsApp. This has become an increased concern over previous challenges of regulation, with time to market, customer churn and loyalty, however each of these are still posing a big challenge for operators.

Another challenge is switching to real-time charging of data. Whilst some operators have already started incorporating real-time charging, many more are expected to follow in the next couple of years. It is expected that real-time charging will allow for more dynamic pricing models and innovative device plans but the challenge will be in ensuring that charges are available directly to the customer. The more real-time options of payment operators can offer, further opportunities for transaction-based revenue will start to appear.

What are the biggest opportunities CSPs need to embrace over the coming years?

The ultimate weapon in an operator's arsenal will be the provision of 4G. Our research has shown that over half of consumer respondents would churn to access 4G connectivity sooner than it is made available by their existing provider. To access the benefit of LTE, it has also been revealed that consumers are prepared to increase their mobile spend upon becoming a 4G user. Thus, it is clear that LTE will have a very positive impact on the mobile operators and something that needs to be embraced.

What are the key factors that make a mobile customer loyal?

Consumers believe that they are loyal to their operator, yet their behaviour suggests otherwise. For example, at any one time there is a settled subscriber base of 50 per cent per subscriber. However, there is a clear incentive for CSPs to drive customer loyalty. Our research has found that a combination of multiple elements will make a customer more loyal, including better devices and better tariffs. Also the provision of bundled services as part of the service they offer, such as video on demand, mobile payment services and cloud storage, and the introduction of LTE/4G services will also cement customer loyalty. It has also been found that the longer a mobile customer remains with their operator, the more loyal they become.

What are the key contrasts/comparisons with regards to customer loyalty in terms of regions such as Europe and Africa for instance?

Despite many countries in Europe being far more competitive, loyalty varied significantly amongst different countries within the regions. Within Europe, Germany, Spain and the UK are three highly competitive markets, yet each has extremely different loyalty levels. For example, the UK has the least loyal mobile subscribers whereas the Spanish are the most loyal. This is also evident globally, as Kenya and Argentina were found to have the most loyal customers globally, and yet Brazil, Nigeria and the UK had the least loyal customers. It is also important to consider that loyalty can be skewed in African countries as it is far more common to own multiple SIM cards and therefore be with multiple providers at the same time.

Is churn the most appropriate metric/KPI for the mobile industry today?

It has been suggested to drop churn as a KPI for today's mobile industry because it creates a negative impression when reporting. A better replacement would be measuring customer loyalty, which is a much more positive KPI.

What strategies do operators need to adopt in order to combat churn?

Communications service providers (CSPs) often drive loyalty via device upgrades and better tariffs, supplemented by a bundled service offering and a broader 'all of the above' tactic. Conversely, churn is primarily driven by the incentive of a better device, with better tariffs playing a secondary role. However, 4G will provide a major incentive to churn, as a service provider offering 4G would be a major incentive for consumers to switch.

Can we expect to see more collaboration between managed service providers and operators in the future? If so, what types of collaboration will these be?

Yes. Our research shows that over four-fifths of operators have said that they would be interested in managed services to boost their operational excellence. Managed services could be used by CSPs to simplify and reduce costs of IT infrastructure and personnel. Alternatively, they could be used to manage services to improve customer satisfaction and experience. Similarly, CSPs could use managed services to help them consolidate operations by reducing operational expenditure versus capital expenditure.

What will be the impact of LTE on CSP service demand?

The rise of LTE is expected to have a positive impact on business for CSPs. Mobile customers are likely to change how they use their phones, therefore increasing consumer data spend and they will be able to consume much richer content. This in turn will have a positive impact on CSPs' revenues. The impact of LTE will also have an impact on how customers view digital services such as on-demand video, TV and cloud storage and demand for these services is likely to increase.

Timo Ahomäki is the chief technology officer at Tecnotree.

Image credit: Flickr (DeclanTM)