David Hillard, CEO of Mentor, specialists in telecoms execution challenges, says UK operators are being left behind by their global counterparts when it comes to providing the best customer experience
On the face of it, the mobile internet is an exceptional opportunity for UK operators to achieve renewed financial growth after years of stagnation. But there is a big gap between operators’ marketing rhetoric and customers’ experiences.
Customers are weary of hair-splitting debates between CTOs, where each declares their network the best. All customers care about is what happens when they use their handset – and if the experience is bad, the network is bad. Simple.
In the UK, capex has been managed down for years to support cashflows. As well, smartphone and tablet sales are growing each day and data traffic is doubling every four months. But should customers be concerned they are being sold a crazy pipedream?
Because at best, UK operators are following a middle-of-the road strategy. While spectrum availability for LTE is critical, it is only one snag in a bigger picture. Operators could be doing much more now to dramatically improve customer experiences.
Elsewhere, operators in Japan, Norway, Sweden and the US are racing ahead. Japan has a dynamic market leadership position. Operators like NTT DoCoMo and Softbank have redefined mobile by providing customers with unmatched services.
Japanese operators continue to invest like mad in the mobile internet. With capex/sales ratios of around 20 per cent, operators deliver healthy revenue growth, with EBITDA margins of around 45 per cent.
In terms of 3G, dongles and smartphones, demand patterns in Norway and Sweden are similar to the UK and the US. Both countries are hotbeds of innovation, not just on 3G/4G network sharing arrangements, but also with OTT players like Spotify, Voddler and Skype.
Without question, Norway and Sweden have taken a bold and gutsy approach to network modernisation – first in the world to LTE, with fibre backhaul, EPC and a single RAN.
TeliaSonera (Sweden) and Telenor (Norway) plan to deliver steady revenue growth, have capex/sales ratios of around 11 per cent and EBITDA margins in the low 40s.
The US was shocked by the arrival of the iPhone and forced to play catch-up on network performance. AT&T and Verizon are expected to leapfrog their European cousins in LTE.
Both are investing heavily in fibre backhaul and, significantly, already securing a satisfactory share of data revenues. With capex/sales ratios of around 15 per cent, both deliver steady revenue growth with EBITDA margins in the mid-40s.
Following a four-year dispute between Ofcom and UK operators, the auction for radio spectrum has been delayed. It should now take place in the first half of 2012. So, what should operators do in the near term?
Well, one thing is clear: if marketing oratory has simply created a soon-to-erupt volcano, piecemeal approaches to fixing clogged up networks is the wrong answer.
A muscular package of measures is required to ease customer frustration and improve backhaul performance, offload capability, radio efficiency and IT systems.
And while UK operators were previously amongst the first to be innovative with network outsourcing and infrastructure sharing ventures, most of these were motivated by serious margin pressure problems – not by any deep-rooted belief that managed services was a sensible, ground-breaking way of doing business.
Deep within most operator organisations, there are ‘horse and buggy’ brigades at work – CAVE people (Citizens Against Virtually Everything). These crews believe so-called ‘box’ suppliers like Ericsson, NSN, Huawei and Alcatel-Lucent have nothing to teach them about running networks. But nothing could be further from the truth.
With managed service deals covering hundreds of millions of subscribers across the globe, these suppliers now hold the balance of power in terms of ‘know-how’ in designing, building and operating networks.
UK networks are behind the curve – there is a serious catch-up job to be done. And while it may be realistic to return to 10 per cent capex/sales levels in a few years time, it is not on the cards today.
Anything less than 10 per cent smacks of just ‘killing the alligators near the boat’ – an approach that is costly and drawn-out.
Irrespective of the business sector, most companies would be absolutely euphoric if they were presented with the golden goose that UK mobile operators have been presented with – huge demand, new technologies and major growth opportunities.
Isn’t it is time to get down to business and stop following each others tail lights in the fog?