Digital Transformation & Maturity

Tracking the digital dollars – How was it, and how much did you get?

This is the second installment of a three-part series, where Mark Newman, Chief Analyst, TM Forum examines 25 of the largest telco groups’ returns on digital investment.

In this article, Newman looks at how companies have been doing on the customer experience front, and how much revenue they’ve been getting from new digital services. In the first, Newman looked at global trends, OpEx and CapEx.

Major focus on customer and digital experience

It has almost become mandatory for a quarterly results presentation to include a reference to initiatives to deliver improved customer experience as customer centricity is one of the defining characteristics of digital services.

The most regularly-cited benefits of delivering a stronger customer experience include lower churn and upselling new products and services – loyal customers buy more. Vodafone is an interesting example of an operator seeking to monetize enhanced customer experience with its “more for more” offers allowing customers to benefit from new data allowances for a modest €1 to €2 monthly additional fee.

A better digital experience can result in lower costs as a results of fewer calls to call centers. There are a numer of examples of digital experience initiatives and derived benefits over the last two quarters:

  • In April Russian operator group VEON launched a new app called Personal Internet Platform. It is designed to improved customer engagement through offering free social and infotainment services.
  • Orange has reported a 20 percent decline in customer service calls in the first six months of 2017, largely as a result of greater use of its mobile app and other digital channels. In the month of June 49.8 percent of all ‘care’ interactions and 27.5 percent of all commercial transactions were digital. Its Orange et moiapp had 4.7 million unique visitors in June, a 31 percent increase on the same month in 2016.
  • Telenor is forecasting a 27 percent reduction in customer service calls for 2017 and for Norwegian customer care a 15 percent reduction in calls to call centers year on year.
  • Deutsche Telekom recorded an 18 percent increase in transactions on its service app in the period from April to June.

Revenues from new digital services

Despite their best efforts to launch new services and new lines of business, few operators report regularly on revenues from such initiatives. However, it is possible to piece together a picture of global trends by collecting disparate sets and snippets of data. The overall picture that we see is one of relatively strong (10 to 20 percent) revenue growth in new services, but a realization that these new lines of business have a long way to go before they merit regular inclusion in quarterly financial results.

  • Telefónica produced one of the most detailed service-by-service revenue breakdowns of any telecoms operator group for the three months to September 30. It reported ‘digital revenues’ of €2.558 billion for the period, equivalent to 9.9 percent of total revenues. The main contributors to this total were:
    i. video and TV (5.8 percent of total revenues);
    ii. end-to-end IoT solutions (0.49 percent of total revenues);
    iii. cloud (0.79 percent of total revenues); and
    iv. security (0.58 percent of total revenues).
  • Deutsche Telekom reported an 11 percent increase in cloud revenues in the three months to June 30. They now represent 0.42 percent of total revenues.
  • Vodafone recorded 15 percent revenue growth in IoT services in the period April to June. It now has 59 million IoT SIMs, up 43 percent on the corresponding period in 2016.
  • Orange reported data about growth for a number of digital services in the three months to the end of June without disclosing the absolute numbers. It included 65 percent revenue growth in mobile money and 32 million users (10 million active users in the last month); 27 percent growth in security service revenue, 15 percent growth in cloud and 3.3 percent growth in IT and integration service revenues. Orange had 6.83 million machine-to-machine communications customers at the end of the period, up 4.61 million from June 2016.
  • Verizon recorded 13 percent growth in IoT and telematics revenues in the period from April to June.
  • Deutsche Telekom registered 97,000 new customers to its SmartHome platform in Germany.

Not all operators gave a positive outlook for new services. Taiwan Mobile commented that “management does not see any substantial revenue opportunities from IoT initiatives over the next two years…private enterprises are yet to meaningfully deploy IoT services”.

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    About The Author

    Chief Analyst

    Mark Newman is an analyst with 25 years of experience delivering insights on the future of the telecoms sector to senior level executives and audiences. Mark’s recent research has focussed on telecoms operator business models, digital transformation, service provider diversification, and the intersection between Internet and telecoms. He delivers analysis, presentations, strategy sessions and workshops to global audiences, helping them to plan for the changes that technology and disruptive new business models that will fundamentally transform their businesses. Mark was Chief Research Officer at Informa Telecoms & Media and Ovum before leaving to set up his own research firm, ConnectivityX, in 2016. He joined the TM Forum as Chief Analyst in February 2017.

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