Connecting the data
This quarter we talk to Telecoms industry stalwart, Tobin Ireland about game changing trends in telecoms, admiring Theresa May and his approach to the local versus global conundrum for business.
The Telecoms industry is going through a sustained period of change as Mobile Network Operators (MNO) come to grips with a changing dynamic in terms of customer needs, the convergence of the over-the-top services and the new demands on networks to keep up with FinTech products and customer usage. Opportunities are aplenty with new markets such as the world’s unbanked populations coming online and creating real opportunities for growth.
Ding talks to telecoms strategist Tobin Ireland about this and more.
Ding: Thanks for taking the time to talk to us – you have spent much of your career working in or around the telecoms/mobile sector – how has it evolved and if there has been a game changer what was it?
Tobin: The industry has been transformed in the last ten years – the truth is iPhone was a game changer and in no small measure made people sit up and forced them to look at what the customer wanted and needed.
The industry was on the backfoot and needed to bring its strategy up to date. Basically, the iPhone hit the 15 year old mobile phone industry and knocked it for six. If you said the words ‘Google’ or ‘Apple’ at the time, people ran for cover. So when I joined Vodafone in 2008 (otherwise known as the year of the iPhone!) the CEO said I had three priorities to focus on – a voice strategy, a services strategy and a data strategy.
Before iPhone – it was a simpler industry, which built networks and sold voice and minutes to customers – it was hugely profitable so the level of investment in things like brand media and retail footprints was very high – but little time was spent on customer retention, increasing LTV and decreasing churn. iPhone changed that overnight.
Ten years on and the industry is largely ex-growth and has 25% EBITDA margins, but as the demand for data networks grows capex has exploded. Unsurprisingly, there is now a much greater focus on cost efficiency, customer retention and adding new revenue streams. The industry has gotten smarter and sees the value of using data to better understand customers and therefore deliver more tailored service offerings.
In the future, we will see even more systems and organisational agility and data will be used to deliver more value and extract more profit from individual customer segments.
“iPhone was a game changer and in no small measure made people sit up and forced them to look at what the customer wanted.”
Ding: Changes are afoot in the prepaid mobile market as the percentage of prepaid phones continues to grow (12% last year) – how do you think it has evolved in recent years?
Tobin: The prepaid side of the industry has dominated in markets where there is no market for device subsidisation or financing, or where the MNO has been restricted from controlling downstream retail distribution by regulatory or market forces.
Generally, MNO executives have been rewarded for revenue market share growth, and the truth is a post-paid/bill pay subscription with a subsidised handset has delivered more Average Revenue per User (ARPU) growth. Where there has been a choice, the major push of a MNO has been to upsell the pre-paid SIM only base to higher revenue post-paid options.
This has naturally been less relevant to markets and customer segments that have large sets of customers without access to credit or bank accounts. In developed economies this has been mainly the youth and migrant segments – and in developing economies often the whole market relies on SIM only prepaid products for cost reasons. For example the Philippines 94% of the population is on a prepaid phone. This has created a market focused on these segments.
The top of the pyramid
Ding: We’ve seen innovation across sectors in recent times not least of which has been in the mobile financial services space – what are you most excited about?
Tobin: The industry is appropriately focused on the top of the pyramid – i.e. data enabled smartphone subscriptions which are driving industry profitability. It is fast becoming recognised that the next billion people to be connected will be through mobile in emerging economies. Many of these people are currently not part of the traditional financial services sector – and therefore this represents an exciting and significant growth opportunity.
There have been isolated pockets of success which have demonstrated the potential power of mobile financial services (such as M-PESA in Kenya and Tanzania) but I believe the next five to 10 years will see much greater interoperability and prevalence of mobile financial services – either with mobile network operator (MNO) support or through over-the-top services such as Alipay and Wechat.
Mobile is undoubtedly the route to greater financial inclusion and economic growth in many developing markets – such as Africa, South America, Asia and Eastern Europe.
Ding: There are close to two billion people in the world with no access to bank accounts/bank cards etc – the digital revolution is moving at an amazing pace some wonder is it leaving these customers behind.
Tobin: Maybe five years ago you could have argued that consumers in developing economies were being left behind. But I think what we are seeing now is a shift and a broad realisation that there is enormous growth potential here by bringing global standard products and services to the disconnected and unbanked globally.
There is increasing focus to address the ‘next billion’ from large players such as Google, Facebook, Samsung, Amazon, ANT Financial, Wechat, Paypal and Mastercard as well as huge investment into start-ups from Europe, Silicon Valley and Singapore, as well as locally in Africa and India.
It has perhaps surprised the industry a bit that post-paid smartphone migration has slowed (in regions such as Africa) and how resilient the prepaid base has remained. There is a renewed focus on designing services specifically for these segments to drive more share and profit and I think this is where the opportunities are in the next few years.
“Company’s looking to target specific communities have to win the hearts and minds of their customers on the streets.”
Ding: At Ding, we are trying to solve a global problem, while trying to maintain a local approach to better understand and serve our users – what’s your view on the globalisation versus localisation conundrum for companies such as Ding?
Tobin: It is clear that in today’s market a platform needs to be global. On the whole the needs and uses of customers all around the world are the same – with only economic barriers being a real differentiator in driving adoption of different devices, services, and behaviours. Migrant labour is a global trend that is only going to grow, and Ding is well positioned to capture the growth of this macro trend. Speed, security, performance, ease of use – are key criteria for consumers regardless of where they are or what kind of a consumer they are.
That said, most of the go to market activities need to be regional, local and hyperlocal. The products, features, and partner integrations that Ding builds on top of its core ITU platform may need to be different in each market. So companies still need to do an element of localisation of their product to be tailored for each market.
Marketing needs to be very localised. Although digital performance marketing can be coordinated centrally to achieve capability and buying synergies – as a rule much of the engagement with customers is better if it is run from regional teams, as close to the customer as possible.
With new data feeds and analysis, this grass roots marketing can be extremely effective when localised. Company’s looking to target specific communities have to win the hearts and minds of their customers on the streets as well as through targeted mobile advertising.
Ding: You worked for many years for Vodafone, among others – what do you think the future holds for the mobile operators. It is widely recognised that there are challenges they are currently facing.
Tobin: Tales of the demise of the network operator business model are very premature. Imagine a world without reliable high-speed data networks. Exactly. The MNO is certainly not going away, and consumers will continue to spend a large proportion of their digital wallet on connectivity in some form. The network experience underpins the entire digital economy on a global basis.
The primary issue is how network operators continue to grow their revenues and the return on capital invested in the network. New models of customer monetisation are key, otherwise the MNO will end up as a ‘dumb pipe’ while over the top services cream off the economic value.
Ultimately, I believe that things go in cycles and will eventually equalise – and that the value of the networks will be recognised. They are still 25% EBITDA margin businesses at a very large scale, so let’s not write them off just yet!
iPhone or Android?
Android globally, my family are Apple. I pack both.
What’s the last book you read?
Life 3.0 by Max Tegmark. It’s about what happens to the Human Race when the robots take over.
What would you say is the best part of your day?
Walking my dog Lily.
What’s your favourite saying?
‘Have more fun, make more money, work with people I like, make someone laugh every day…’
What political – contemporary or historic – figure do you most admire?
Teresa May – she’ll go down in history as having been sold a pup and having an impossible job to do. But she’s done it with grace and with a sense of perspective and humour. Sometimes we all have to do something we really don’t believe in.
What do you wish you had invented?
To Bitcoin, or not to Bitcoin?
There are better things to spend your money on. If it’s too good to be true, it probably is.
What is the biggest lesson you have learnt during your career so far?
Never give up and play the long game.
Give us one example of success in your career so far, and one failure!
I’ve been lucky enough to work with some incredible teams on some incredibly insane projects. I don’t really regret much. The failures are usually about working with the wrong people for too long.
What’s the most interesting thing about you that we wouldn’t learn from your resume alone?
I used to be able to swim 50 meters in 23 seconds (more than 35 years ago!)
What’s the funniest thing that has happened to you recently?
Great question. I’m not sure. Wow – it must have been a long year. I went to my kids music concert the other day and one of the groups was so bad that all the parents were struggling trying to hold it in… then the fire alarm went off and they had to play it all again!