Amb 13 03-14 - Allan Greve - Tefficient

www.tefficient.com 13 March 2014

How to measure, compare and improve efficiency within telecoms

Benchmarking – and the tale of a wing clipped Dutch opportunityPresentation to Ambassadors of Telecom13 March 2014

tefficient ABAllan [email protected]+45 2546 0055

http://www.tefficient.com/


Content

Why do we benchmark and how?

• Efficiency and strategy – goes hand in hand• What to measure• How to interpret the measurements

Did greed wing clip Dutch mobile?

• Subscription development in the Netherlands• Mobile data traffic development around the world• Traffic unit pricing and usage around the world• The dilemma in the Netherlands – if there is one

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But first…

…what is tefficient?




An international efficiency specialist

Provides telecom operators and -suppliers with analysis, benchmarks, consulting and coaching

Inventor of




Why do we benchmark and how?



What is operational efficiency?

Less Same More Muchmore

Less

Same

More

Muchmore

You are here

Input

Output

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How to improve operational efficiency?

• There are different ways to improve operational efficiency

• Not all of them mean using less!

Less Same More Muchmore

Less

Same

More

Muchmore

You are here

Input

Output

More for less

More for

same

Much more for

more

Same for less

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Two questions

Where are you?Where do you want to get to?

”Where are you?” is answered by analysis & benchmarking”Where do you want to get to?” is answered by strategy

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To some people…

Efficiency=

Low unit cost

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If it was so…

Apple12m to 28.9.2013

NokiaDevices & Services

2013

Net sales 170910 MUSD 10735 MEUR

Gross profit 64304 MUSD 2209 MEUR

Operating incomeOperating profit (non-IFRS)

48999 MUSD -590 MEUR

Operating margin % 28,7% -5,5%

OPEX 121911 MUSD 11325 MEUR

Units sold 264,010 M(PCs, iPod, iPhone, iPad)

250,000 M(Estimate: Q1-Q3 annualised)

OPEX per device (=unit cost)

462 USD 45,3 EUR = 62,1 USDEfficient

?Inefficient?

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What is efficiency?If it isn’t low unit cost?

• Efficient operators = those with an effective strategic differentiation• Lowest price might well be an effective strategic

differentiation• Others might be:

• Widest sales channel• Widest range of products• Best brand• Best content partnerships• Best customer service• Best network quality• Widest network coverage• Most innovative products• Simplest-to-use products• …

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Remember

It isn’t Efficiency vs. strategic differentiationIt is Efficiency through strategic differentiation

When you compare efficiency, make sure to take the strategic differentiation into account!• Otherwise Nokia might look more efficient than Apple

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“…differentiation arises from both the choice of activities and how they are performed”

Michael E Porter: "What is Strategy?", Harvard Business Review, November 1996



Measure a variety of KPIs

Input KPIs• OPEX• CAPEX• Headcount

Output KPIs• Revenue• Customers• Performance• Quality• Innovation• Growth• …

Load/complexity KPIs• Customer behaviour• Country characteristics• …

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www.tefficient.com 13 March 2014 18

tefficient’s benchmark KPIs

Revenue 81

OPEX 155

CAPEX 16

Productivity 132

Subs & channels 77

Performance 47

Load 51

Quality 7

Innovation & growth

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Total 577

Input data points (maximum)

Headcount (2013) 81

Subs & channels (2012, 2013)

104

Revenue & costs (2012, 2013)

105

Size & performance (2013) 64

Total 354



Interpret the results in the light of the strategic differentiation

Quantitative analysis

Peer groupdata

Worse

Typical

Better

Qualitative analysis

Strategic

differen-tiation

Worse than peers

Better than peers

In line with strategy

Not in line with strategy:

Overdoing

Potential overspend

In line with strategy:

Deliberate choice

Not in line with strategy Issue!

Consequence of strategy, not of inefficiency

Your KPIs• Input• Output• Load/

complexity

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Did greed wing clip Dutch mobile?



Characteristics of the Dutch mobile market• Focus on handsets rather than services• SIM-only is offered, but not prominently• Preference for binding customers on 24

month contracts (EU may dictate 6 month contracts - see tefficient analysis)

• High level of subsidisation• Price differentiation in mobile data on both

speed and volume

Difference between SIM-only and with subsidised handset is 26 EUR per month.

Equates to 624 EUR over the contract length (price of the handset)


http://tefficient.com/.cm4all/iproc.php/tefficient%20public%20industry%20analysis%2012%202013%20Six%20months%20contracts.pdf?cdp=a




Mobile market stable, but

Subsidisation has driven contract share

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Source: tefficient public analysis 18 December 2013 (download)

High smartphone penetration in NL

But low mobile data usage

What was the point in driving smartphone

penetration with high subsidisation?

Vodafone reports 59,6% smartphone penetration

December 2013T-Mobile and KPN believed to be at similar

levels

France in a similar situation


http://tefficient.com/.cm4all/iproc.php/tefficient%20public%20industry%20analysis%2015%20mobile%20data%20usage%201H%202013.pdf?cdp=a


High traffic prices may be successful in a monopolistic market…

Logical relation – high traffic prices and low traffic

1 traffic unit = 1 voice minute, 1 SMS or 1 MB mobile dataSource: FY2012 reported data (not all countries have reported FY2013 yet, hence the slightly old data)

ARPU = 20 EUR



But mobile is not monopolistic…• Mobile became synonymous with expensive in

NL• Mobile users found alternatives…• Skype• WhatsApp• Wi-Fi (e.g. Homespots)

• …and they got used to it• Operators tried to earn on the alternatives (e.g.

charge for Skype access) but were slapped by the parliament

• Dutch operators now left in a dilemma - or are they?• Will traffic come if traffic prices are reduced?• Or are Dutch mobile operators happy as it is now?



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2nd opinion

“Know your customer”Latest from tefficient:• Shared plans and

data monetization• Quad-play• “Know your

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An international efficiency specialist

Provides telecom operators and -suppliers with analysis, benchmarks, consulting and coaching

Inventor of


Technology

Amb 13 03-14 - Allan Greve - Tefficient