Digital Transformation & Maturity

CSPs’ digital strategies start to deliver measurable results

‘Digital’ and ‘digital transformation’ mean different things to different people. Nowhere is this more apparent than in telecoms, where a TM Forum analysis of the latest quarterly financial presentations from 25 leading communications service providers (CSPs) reveals a wide range of interpretations, drivers and metrics applied to digital initiatives within their organizations.

For all 25 operators, their digital strategies (including digitization and/or transformation) focus on at least one of these areas:

  1. Delivering improved customer experience, more digital experiences and re-orientating the business towards the interests of the customer
  2. Driving operational efficiencies or cost savings
  3. Developing new lines of business outside of communications and connectivity

Most CSPs likely will maintain that their strategies embrace all three of these objectives. However, our analysis considers only the most recent financial presentations delivered to shareholders, so if the CSP references only one of the three pillars of transformation, we record only that pillar in our analysis. Such an approach may not seem fully representative of a CSP’s overall transformation program, but it does allow us to make comparisons based on publicly available data. It also shows where a company’s focus is today rather than where it may have been one or two years ago.

Comparing operators’ reasons for going digital

The graphic below shows the relative digital focus of selected CSPs based on their most recently quarterly presentations of financial results. The companies were selected because they have made strong reference to “digital” in their results.

While many operators include operational efficiency as one of the benefits of digital transformation, Telenor is the only one of the operator groups we tracked that clearly identifies cost savings as the primary driver.

A cluster of European operator groups (KPN, Orange, Swisscom, Telefónica) and VEON in Russia appear to have a balanced approach to digital transformation, giving equal emphasis to operational efficiency, customer experience and new business. Their focus on transitioning to a digital experience helps them reduce costs (through a reduction in calls to call center agents) and improve customer experience.

Operators whose principal digital focus is developing new lines of business include CSPs in growth/emerging markets, such as MTN in South African, Turkcell in Turkey and Etisalat in the Middle East. Others in this group include North Asian operators SK Telecom and NTT DoCoMo, and North American CSP Verizon. However, it is not altogether clear how and where many of these new business initiatives connect into bigger, overarching transformation initiatives. Despite the fact that some of these companies (and other operators) include platform businesses in their future strategic visions, few of their current new lines of business can be genuinely referred to as platform businesses.

What are the KPIs?

In our analysis, we focused on measurable benefits or key performance indicators (KPIs) delivered through transformation – or future hard targets – rather than loose visions lacking specificity. We have identified the following categories of digital results where there are enough CSPs reporting numbers to draw out interesting comparisons and trends:

  1. Use of digital/mobile self-service apps and resulting cost savings through reductions in calls to customer care agents (customer experience and operational efficiency)
  2. Operational expenditure (OpEx) savings through initiatives including the automation of customer care functions (operational efficiency)
  3. Improvements in NPS (customer experience)
  4. Usage and revenue from new services (new business)

Use of mobile self-service apps

CSPs are deploying an array of digital capabilities to transition customers to online experiences. Many are reporting on their progress in different areas including:

  • The number of self-help transactions
  • Usage (users, downloads, visit) of mobile apps
  • Online sales transactions (including top-ups)

Many operators have started incentivizing customers to use mobile apps by offering (free) data add-ons or value-added services. There is clearly growth in the adoption of mobile apps but the selective approaches to reporting (for example, reporting numbers of downloads or visits rather than the number/proportion of their customers using these apps on a regular basis) indicates that CSPs still have a long way to go before they can claim that a meaningful proportion of their customers have a primarily digital experience.

The table below shows a comparison of selected CSPs’ mobile app usage, measured either by number of users/downloads, percentage of online sales transactions or volume of calls into customer care centers.

CSPMobile app data
 27% increase in mobile app ‘visits’ (from 8.8 million in Q4 2016 to 11.2 million in Q4 2017)
 15% reduction in customer care calls
 26.6 million mobile app downloads (18.1 million users), up from 14.3 million a year previously
 2,225,000 users, up from 2,018,000 in Q4 2017


17% of online sales through mobile app in Q4 2017, up from 12% in Q3 2017

 929,000 users in Q3 2018, up from 818,000 in Q4 2017


20% of online sales through mobile app in Q4 2017, up from 16% in Q3 2017

Aiming for a 4.8x increase in mobile app users between 2017 and 2020


1.6x growth in mobile app year-on-year

 24% increase in mobile app users in the last year and 13% reduction in calls to call centers
Mobile app has been downloaded by 8 million users (out of 240 million subscriber base)


OpEx savings

CSPs are becoming increasingly confident about their ability to reduce OpEx as a result of successful digital transformation programs. Orange, Telefónica and Telenor disclose annual reduction targets, while KPN has provided detailed breakdowns that drill down into specific cost savings resulting from changes to business support systems (BSS) and operational support systems (OSS). VEON has set an ambitious target of halving its BSS costs.

CSPOpEx reduction data
 3.8% OpEx reduction (€138 million/$170 million) in 2017 including 8.2% reduction in IT
Run-rate target savings of €350 million ($431 million) (CapEx and OpEx) through simplification program by end of 2019, up from €240 million ($295 million) in 2018/19
Consumer (fixed and mobile) BSS run-rate savings of €80 million ($98 million) by end of 2019
OSS run-rate savings of €30 million ($37 million) by end of 2019 through consolidation of network interaction layer
 €1 billion ($1.23 billion) in OpEx savings targeted over two years, 2019 and 2020
 Gross savings run rate of €1 billion ($1.23 billion) between 2017 and 2020
€300 million ($369 million) savings in 2018
 Net OpEx reduction of 1% to 3% per year
 Target to cut BSS costs from 2% to 1% of total revenues

(Veon Georgia)

Has cut BSS IT costs from 1.9% to 1%


Improvements in NPS

For a long time, telecoms has compared poorly with others when it comes to Net Promoter Score (NPS). However, this is starting to change, and CSPs now commonly report NPS as they work toward improving customer experience. The chart below shows a comparison of select CSPs’ NPS scores.

CSPNPS results
 Group NPS, which was at 0 at the end of Q1 2016/17, had risen to 10 by the end of Q3 2017/18
 TRIM Index (measures the strength of the relationship between service providers and their customers) improved by 8% between 2017 and 2018, after improving by 19% in the previous year
 Consumer 13
Upgraded customer 43
Fixed-mobile bundle 25
 NPS for specific operating companies:

South Africa 75

Nigeria 13

Iran 33

Uganda 22

Ghana 29

Cameroon 4

Ivory Coast 27

 NPS leader in 16 countries
 Non-bundled services 19
Vivo (triple play) 27
inOne (flexible bundle) 32
 6 percentage point depreciation in last 6 months due to NBN (national broadband network) migration
 Consumer 41
Corporate 22
 Leader or co-leader in 18 out of 21 markets


New business revenue

Most of the operator groups we track are targeting revenue from new services outside their core connectivity and communications business. For many the focus is principally pay-TV (and it is debatable whether TV is emerging as a core CSP line of business rather than an adjacent market opportunity). For many others the focus is internet of things (IoT) and IT services more broadly.

Revenue from these new lines of business are not reported consistently. However, a picture is beginning to emerge of their relative potential.

CSPNew line of businessResults
 e-educationRMB4 billion ($640 million) in annualized revenues
Applications and information servicesRevenue in the first half of 2017 were RMB30.4 billion ($4.8 billion), up 12.1% over the same period in 2016
 Digital servicesRevenue from smart family services, new ICT services, IoT and “Internet Finance” accounted for 15.1% of service revenue in the first half of 2017, 23% higher than in the corresponding period in 2016
 Cloud12% increase in cloud revenues from €1.6 billion ($2 billion) in 2016 to €1.7 billion ($2.1 billion) in 2017
Smart home87% increase in smart home subscriptions (each generating incremental ARPU of €10 ($12) per month) from 137,000 to 256,000 between Q3 2016 and Q3 2017
 Digital servicesEtisalat Digital (B2B) revenue grew by 62% between 2016 and 2017; it is aiming for a 6 percentage point increase in digital contribution to total business revenue between 2018 and 2020

Digital servicesMTN Group saw a 24.7% increase in first half 2017 revenue to ZAR460 million ($38 million)
MTN Nigeria’s digital services represented 12.2% of total revenue in first half of 2017, up from 11.8% in first half of 2016
MTN South Africa’s digital service revenue rose from ZAR915 million ($76 million – 5.7% of service revenue) in first half of 2016 to ZAR1.26 billion ($104 million – 7.5% of service revenue) in first half of 2017
 Cybersecurity17% increase in revenues in Q3 2017 compared with Q3 2016; annualized revenue in the region of €200 million ($246 million)
Cloud15% increase in revenues in Q3 2017 compared with Q3 2016
Retail (online) banking55,000 customers by end 2017
 Cybersecurity6% increase in Q3 revenue from S$118 million ($90 million) in 2017 to S$126 million ($96 million) in 2018
Mobile advertising106% increase in Digital Life revenue from S$167 million ($127 million) in Q3 2017 to S$344 million ($261 million) in Q3 2018
 Security (B2B)Revenue rose by 24.3% in Q4 2017 compared with the same period in 2016
Digital services€5 billion ($6 billion) revenue in 2017 of which video represented 57%
 IoTA$200 million ($153 million) revenue in first half 2018
CloudA$180m ($138 million) in cloud revenues in 1H2018, up 14.6% on the same period in 2017
 Telematics & IoT8% year-on-year increase in revenue to 4Q 2017
 IoT€730 million ($897 million) per year in annualized revenue


Some operators are now reporting revenue and/or growth from the entirety of their ‘digital services’ portfolio. For example, African telecoms group MTN says that digital services represent 10% of total group revenue, while China Telecom’s revenue from IoT, ‘new’ ICT, smart family and mobile financial services topped 15% of revenue.

Other operators are limiting their reporting to snapshots of revenue (and/or) growth from individual lines of business. Vodafone, for example, reported annualized IoT revenue of €730 million, equivalent to 1.5% of total revenue, in 2017. Cloud, and ICT services more broadly, are other segments where CSPs are starting to provide snapshots of revenue, or revenue growth. Cybersecurity is an interesting new opportunity where Telefónica, Orange and SingTel are all starting to disclose actual numbers and overall market potential.


    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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