Serbian telecom market: Overview of current status and future trends
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In telecommunications, offering a state-of-the-art network will continue to be crucial and therefore stay in focus for Telenor. However, what will be increasingly important for a successful differentiation over the next years is the way how you serve your customers across the different touch points. In other words, providing a consistent, highly convenient and even seamless experience will be the key for attracting customers.
Telecommunications are one of the most important and exciting industries nowadays. Important, because the magnitude of investments in this area is significant and spreads over decades. Telenor is still the biggest foreign investor in Serbia, having invested 1.53bn Euros in 2006. In 2014 only, Telenor has invested around 20 mn Euros in expanding its network and is investing 40 mn Euros in building the first mobile bank in the region.
As stated in RATEL’s report for 2013, total revenues from telecom services in 2013 in Serbia amounted to 1.55 bn Euros, out of which mobile has the biggest share of the pie (57%). This means that the overall share of the Telco industry in GDP is around 5%, a figure that is rather stable over time. So far, we were witnesses of steady growth in the Telco sector, especially when it comes to mobile, Internet and pay TV markets. However, starting from this year, we see the first ever decline in total mobile market value in Serbia (approx. -3%), while in some countries in Europe even more severe declines have been visible for several years already. Besides the challenging macro-economic conditions, the main reason for such a development lies in the reduction of interconnection rates, which are regulated.
Despite all challenges, the Telco industry appears to be rather resilient in tough times. Because communication and information is one of the core human needs regardless of the circumstances people are more willing to give up other types of consumption than mobile, Internet or TV. The Telco industry is also very attractive from an employee perspective. It attracts many young talents who look for great possibilities to learn and grow in a modern, international working environment.
When talking about the Serbian mobile market, it is important to say that in terms of penetration and access to most advanced services we are pretty much on par with the more developed markets. With SIM penetration of close to 130% and availability of the full assortment of latest handsets, products and services, Serbian customers are in the same position as their peers from Western Europe and the US, for example. Even the iPhone has finally arrived to Serbia!
Talking about smart phones, their uptake is rising steadily, contributing to an overall growth of mobile Internet usage and accelerating the so called “voice to data transition”. Today, the Smartphone penetration amongst Serbian mobile users is around 35%, and constantly rising. Besides the natural demand from customers, this growth is mainly fuelled by the mobile operators who are subsidizing smart phones and thus making them more affordable in combination with postpaid contracts that offer attractive bundles of voice, data and messaging. This has shifted customers from prepaid to postpaid, which means that the prepaid base is increasingly left to customers who spend less, many of them having to further optimize their mobile spending due to economic constraints. Besides this, mobile operators always explore additional models to enable people having a Smartphone.
One other important trend we face is the significant rise of Internet based communication services such as Skype, Viber and WhatsApp. According to our market surveys conducted during 2014, approx. 80% of mobile Internet users are using at least one of these services, which is around 30% of all mobile customers. The main reasons are significant cost saving potentials as well as enhanced features and ease of use. Mobile operators around the world are still struggling to find the best approach for how to deal with that trend, ranging from one extreme like blocking Voice over IP usage to another such as offering access to these services for free. In my view, it is clear that partnership models have to be found between the Internet services players and the operators, which allow a sustainable business on both sides. Internet players need high quality access to hundreds of millions of customers, and operators need investment security to build this high quality access.
The future of telecommunications will be all about data, where also all voice and messaging services will be IP (Internet protocol) based. In addition to that, literally all people will have the desire to have access to the Internet, similar to having access to TV some 50, 60 years ago. That’s why we in Telenor follow the ambitious goal to provide Internet to all our customers, no matter where they live. On that road, operators in Serbia are facing some regulatory challenges, such as the so called technology neutrality. Technology neutrality means that the operators can chose freely which of their spectrum should be used for which technology, a prerequisite to expanding high speed Internet coverage to broader rural areas in a cost efficient way. This will not only provide benefits primarily end customers living in these areas, but also to operators themselves. On top of that, the spectrum auction for LTE (also called 4G, the latest network technology that can carry enormous quantities of data at very high speeds) is still pending, even though Serbian mobile operators are technically and financially ready for that deployment. With the growing number of mobile Internet users and smart phones, as well as volume and speed hungry services such as YouTube or online games, LTE gains even more in importance.
I’d like to finish with something less technical, at least at first sight. As in most other industries, the players strive for a unique position that meets their target customers’ needs and differentiates them from their competitors. This creates more satisfied customers, more customer loyalty and ultimately better financial results. In telecommunications, offering a state-of-the-art network will continue to be crucial and therefore stay in focus for Telenor. However, what will be increasingly important for a successful differentiation over the next years is the way how you serve your customers across the different touch points. In other words, providing a consistent, highly convenient and even seamless experience will be key when a customer is visiting our web site, using a self-service app like MojMeni, entering one of our shops or calling the customer service. To give one example: When a customer in the future visits his operator’s web site to make a reservation for an upcoming Smartphone model, she can chose to pick it up in the closest shop. Over the next days, she can check the delivery status on her personalized self-care app in real time, and gets a message when the phone has arrived. In the shop, our customer will be welcomed by her name, receive the phone, gets all her contacts installed and also receives a special offer for the latest headphone since she uses the music service Deezer on a regular basis.
I think it becomes clear that this actually requires a lot from technology and IT, providing the same information to and about the customer across all channels, and linking all these channels in real time. In addition, all employees in the whole organization need to have customer centricity in their DNA. The Telco operator who masters this customer experience the best will have the happiest customers and take the leadership position on the market. If you think about yourself as a customer I’m sure you can agree that this will apply to many other industries as well.
Author: Oliver von Gagern
The author is Chief Strategy Officer at Telenor. He spent most of his career in the telecommunications industry, with senior roles in management consulting, strategy, pricing and marketing, in different countries.