South Africa’s telecommunications industry has “made too much money for too long” and, as competition intensifies and as government and regulatory scrutiny grows, operators are having to become more cost effective and understand customers’ needs far better.
They’re also going to have to figure out how to make money from enterprise services and value-added services like content if they want to continue to do well in the long term.
These are the views of Craig Holmes, vice-president of communications industries at IBM, who says local telecoms companies haven’t traditionally used data analytics well to segment their customers and to understand customer behaviour to drive loyalty.
Holmes says analytics is an area of information technology where early adopters in the telecoms industry could benefit to a large extent. He cites an example of an operator using analytics to look at calling patterns and determine that an apparently disparate set of individual accounts actually all belong to the same small company. The operator can then provide additional products — broadband services and group calling discounts — to that group.
“A lot of this doesn’t have to be real time,” says Holmes. “If you look at historical data, you can get it pretty accurate. You can find populations with specific interests that can then be targeted more appropriately.”
Indeed, as pressures on margins intensify in coming years, telecoms companies are going to have to become much smarter about the way they approach the market and ensure their multibillion-rand investments in network infrastructure continue to pay dividends.
Holmes believes operators could face a big crunch in a few years’ time when the networks they’re building now become overloaded, but when margins have fallen to such an extent that the infrastructure reinvestment case is less clear cut.
“How much will they have monetised out of those networks when they start experiencing significant load and have to do another round of big investment? Do they provision for the next generation of networks?” he says. “Many are busy with exercises to ensure they push that curve out as long as possible.”
Pushing out the curve means cost cutting, entering new industries like content distribution, and expanding into business services.
Content will be key, Holmes believes. He estimates that between 40% and 50% of telecoms operators’ total revenues within five years will come from content-related services. User-generated content will come to play a big part of the mix in South Africa, emulating markets such as India and Nigeria.
Operators are not “dumb pipes” and they can monetise the fact that consumers tend to trust them with their data. They should focus on selling value-added services, Holmes says, but shouldn’t try to do it all themselves.
“They should be partnering, but they’re not. However, they are starting to realise that they can’t build everything themselves. There is competition out there, and the competition will do it quicker than they can.”
In enterprise services, mobile operators in particular are finding it daunting to find the right formula, not least because they’re geared for one-to-many relationships with retail consumers rather than the one-on-one relationships they must have with enterprise customers, says Holmes.
“It’s not part of their DNA,” he says. “Mobile enterprises have to understand how much a server costs, or how much storage costs per unit. Asset management and these sorts of things haven’t been top of mind. Selling an enterprise solution is very different to selling a mobile phone.”
Operators in South Africa have no choice but to buy these skills, Holmes says. “The market is moving too quickly for them to do it themselves, and they don’t have the skills to do it,” he says. “You can’t ignore the people and process side, and the change management that has to go with it. Companies like Google are moving way, way quicker.” — © 2014 NewsCentral Media
