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Today, Telcos are operating in a fast changing world, of technology leaps, regulatory shifts and customer preference swings. The mobile penetration rate is over 130% in Australia. For both fixed and mobile, data traffic usage has been increasing, data speeds have been increasing, while data unit prices have been decreasing each year as a result of competition and multi-play bundling.
On top of this, we are seeing 4 mega-trends that are affecting our business and creating a profound impact on ours and adjacent industries.
Firstly, technological improvements have led to widespread rich digital media being made available on multiple affordable devices (on average an internet user around the globe has 3.6 devices):
- the small interactive screen (the smartphone – on average users check their smartphones 150 times a day)
- the bigger interactive screen (the tablet – the global sales of tables are now larger than those of laptops and desktops); and
- the very large screen (the traditional TV or monitor).
The majority of networks in developed markets are now either 4G if they are mobile or fibre to the node / premises if they are fixed, delivering not just broadband but have multiplied into “MEGAbands” (with speeds up to 100 Mbps). And research shows that there is significant demand for Web 2.0 services (online digital services and content above and beyond games, research, communities and social networks).
Secondly, consumer behaviour is changing with consumers around the world continuing to shift their media, communication, social and shopping activities online, especially onto the mobile device. Here are a few examples:
- 48% of all the videos viewed are now either “time shifted”, using DVRs or video on demand, or “device shifted” from TV sets to laptops, tablets or mobile phones. Music is even more digital with just over two thirds of usage from streaming services.
- Time spent on social networks has doubled over the last few years to take over a quarter of all communications time. And when consumers do use their phones only about 20% of their time is for talking. The majority is used for more data-centric activities such as streaming music, browsing websites, doing retail research and playing games. Smart device penetration has reached mainstream, an average smartphone user has 33 apps installed and the hours of app use have increased significantly – by 66% in the last 2 years in the US to reach an average of 30h/month.
- Consumers are buying more and more online, with about 60% of smartphone users making at least one mobile purchase a month. The volumes of online transactions are also growing, and for example Alibaba processed more than $9bn of sales just in 24 hours in 2014 on “Singles Day”. Increasing online shopping contributes to the significant growth of the mobile payments market expected to reach $500bn in 2015.
Thirdly, the needs of our business customers are changing as well. In particular the two highest areas of demand are the cloud and hosting, growing at 23% a year, and the cyber-security, growing at 8% a year. Now over 70% of telcos globally have a cloud offering and cyber-security is also developing quickly. In addition, driven by consumer trends, enterprise mobility is growing rapidly supported by BYOD, transforming corporate cultures and making the cyber-security offerings even more important.
And finally, the emergence of mega-digital companies and small start-ups who have created new types of competition through fundamentally new models of value creation that have taken flight, and which disrupt the traditional telecom and media businesses. These companies go over the top of our networks and engage our customers directly with their services by destroying traditional telecom value creation with their lower cost or free substitution. The 8 largest technology companies today are Apple, Google, Microsoft, Alibaba, Facebook, Samsung, Amazon and Intel. Most of these would not have been on top of the list 5 years ago. And these top 8 are today collectively valued at $2.4 trillion. The marketplace is changing and customer behaviour and preferences are driving this change.
So what lies ahead for us… in the new digital era, where things around us are changing at warp speed. At Singtel and Optus, our goal is to meet this opportunity head on by a strategy that we call the SHIELD, EXPAND and CAPTURE imperatives, in order to grow our business.
Firstly, in the area of SHIELD, we will focus on the basics. In a world where demand for data per subscriber (especially on the move) is exploding with an additional 3-4 times growth in the coming years, we will be investing to ensure we have an integrated next generation platform across fixed and mobile networks that has the speed, quality, reliability and security to transfer “data” for the vast majority of Australians; everything from the latest episode of Game of Thrones to a chat with a friend at home, in the office or on the move.
We will also increase our pace of investment in Customer Care platforms and in our people. In the “flat” world of increasing commoditisation for our industry, we need to ensure we are making a fundamental change in our customer experience to be distinctive in providing our Consumer, SMB and large enterprises the value and service that they need through a multitude of channels to fill their ever growing data expectations in an integrated manner.
Secondly, the area of EXPAND concentrates on expanding current business opportunities in our core telecom markets by enhancing our core with key capabilities and digital services. In terms of capabilities, the priority is employing analytics in order to optimise our brand and our potential in the communication market.
Compared to other value chain providers, telecom operators hold the most valuable data – consumer identity, behaviour location and relationship (the monthly bill). Our initial focus is to use this info to improve our in-house operations and create a competitive advantage by transforming our organisation into a “quant savvy” one by cultivating and disseminating the skills and talent required to foster a big data mindset across the company.
The second priority is smarter ways of enhancing our core connectivity services within globally renown digital brands in areas that resonate with Australian consumers, for example digital media, retailing apps. This is a win-win relationship that generates value for both players since telcos provide these brands with a go-to-market channel, billing capabilities and the ability to bundle with a high QOS data so as to provide a superior customer experience.
Finally is the CAPTURE imperative. This is about growing business in our sector and capturing new opportunities by reinventing ourselves and becoming the disruptor as opposed to the disrupted so we are capable of innovation at scale.
This will allow us to help our customers go beyond just linking to the internet, but allowing them to push the boundaries of what the internet can do for them regardless of whether it’s a digital e-concierge or recommendation engine for consumers or next generation integrated enterprise ICT services. Our focus here is around co-opting, investing or bringing in new technologies or ideas.
A. Making major investments. Singtel has invested close to $2 billion in 4 areas that have global scale, have high growth potential, can generate synergies with the core business over the long run and have the ability to make a difference to the future growth trajectory of our business.
- Amobee has a digital marketing capability that would be able to monitor the online and social sentiments of Australia on a real time basis and run highly effective targeted media campaigns.
- DataSpark is a smart geographical analytics platform that applies innovative analytics and the services of highly skilled and specialised data scientists to provide a wide range of bespoke and off-the-shelf analyses that help businesses make better decisions.
- Hooq is offering a premium mobile video service to developing markets; and
- Trustwave focuses on cyber security in the enterprise space.
B. Using a venture capital approach to make small early stage strategic investments in multiple emerging opportunities that will either bring next generation technologies to enhance our core operations or enable us to engage our consumer or business customers better.
In this category, we have EverythingMe for consumer and Jasper Wireless for business customers. EverythingMe is a mobile search engine for customers that will offer personalised suggestions to customers, whoever they are and wherever they are, that match their interests and lifestyle. And Jasper Wireless offers M2M services for enterprises.
C. Creating an open innovation ecosystem in our key hubs of Sydney, Singapore, Tel Aviv and Silicon Valley whose goal is to search for fledgling ideas which we can incubate to be the seeds for the next growth areas of our business. We can scale up through our operating machinery. These hubs also leverage the creative minds of our staff and external parties, like our global technology and infrastructure partners, universities and start-ups in order to jointly collaborate and jointly shape the business.
And on such an important topic for our industry as innovation, this is something where everyone can learn a lot from countries like Israel. If we take the example of one simple metric –VC spend per capita – Israel spends 28 times more than Australia. This is where leveraging the Israeli partnerships will benefit Australia and the telecommunication sector.
The telecommunication industry has had the tailwinds of new technology adoption to propel its growth. The market is fast shifting to an all-digital world where digital platforms are growing rapidly in importance in the areas of communication, entertainment and retail. Therefore, the only valid response to the revolution is an advanced understanding of customer preference and a business model aligned with these insights so that we can grow and prosper.
Increasing market share by acquiring new customers simply isn’t the revenue engine it once was. For us, in Singtel and Optus, with an eye on the horizon and on growth we have adopted the SHIELD, EXPAND and CAPTURE imperative to capitalise on growth in a new era of the multi-gigabit mobile internet and nearly exhausted market penetration. Our strategy is timely because after all the tide of technological change is unstoppable and – as the rise and rise of the SMS has shown – is full of surprises.