How can telcos be loved?

Why should telcos care about being a ‘loved brand’?

If you are from an engineering or financial background, it can be tempting to look at branding and think it is a trivial or ‘soft’ aspect of business. This is valid in the sense that perceptions are inherently subjective, but this subjectivity does not mean that such perceptions are unimportant. People respond very strongly and instinctively to emotional stimuli. These responses are deep in our nature. We have evolved to quickly learn the characteristics of things that we want to repeat; the things we like. This extends to social behaviours too: Who do we want to be with, and be seen to be with? Which ‘tribe’ are we in, and who do we associate with?

Businesses have learnt a lot about this, because it has proved hugely valuable to the best practitioners, and the study and practices of marketing, advertising and branding have developed significantly in the past seventy years as a result. To be a ‘loved brand’ is a shorthand description of the ideal state.

What is a loved brand and what are the advantages?

Loved brands create strong emotional bonds with their customers, through a set of values and beliefs that customers can identify with and incorporate into their daily lives. In theory, businesses with loved brands have a range of advantages over others, which over time create significant financial benefits.

Business advantages for loved brands

Source: STL Partners

They enable businesses to charge a premium over other competitors as consumers pay less notice to the price of products sold by the loved brand.

  1. Loved brands can charge a premium over other competitors as consumers pay less notice to the price of products sold by the loved brand. Apple iPhones are generally more expensive than competitors’ phones with similar feature sets. However, many Apple customers remain loyal with the status of owning the latest iPhone outweighing the additional cost.
  2. The emotional bonds with loved brands can become so robust that their customers do not consider their competitors and forcefully defend the brand. Customers are even willing to forgive the brand for making some mistakes.In 2010, Ferrari recalled more than one thousand Italia 458 cars after reports that a design fault could cause them to catch fire.Despite the obvious negative publicity, which would have had a catastrophic consequence on many manufacturers, Ferrari’s strong emotional connection with its customers protected their position in the luxury car market.
  3. Customers become valuable promotors of loved brands on their social networks, pushing the benefits and encouraging others to join. Tesla provides a great illustration of this advantage, where many of the customers are not only delighted with their new electric vehicle, but they are also strong advocates in persuading their friends and family to purchase a Tesla for themselves.
  4. Loved brands attract the best talent, which helps the business to sustain its success.

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Table of Contents

  • Executive Summary
  • Loved brands
    • Why should telcos care about being a ‘loved brand’?
    • What is a loved brand and what are the advantages?
  • Challenges for telcos in being a loved brand
    • How are telcos viewed by their customers?
    • Why do telcos find it hard to be loved?
  • Common telco strategies that have had limited success to date
    • Focus on having the best network
    • Offering the lowest prices in the market
    • Differentiating on customer relationship
    • Offering content bundles
    • Launching new service innovation and diversification strategies
  • What strategies could telcos adopt to succeed going forward?
  • Case study 1: TELUS brand positioning
  • Case study 2: o2 Priority Moments
  • Case study 3: MTN – sustainable economic value
  • Case study 4: Telstra Health
  • Deep dive: What learnings can be drawn from successful strategies adopted by Orange
    • What has Orange done?
    • What has been the impact on Orange’s results?
    • How has strategy contributed to Orange being a loved brand?
    • What lessons are there for other operators?
  • How do others develop and sustain “the love”?
  • Recommendations for being a loved brand in the new era for telecoms
  • Index

Related research

 

Are telcos smart enough to make money work?

Telco consumer financial services propositions

Telcos face a perplexing challenge in consumer markets. On the one hand, telcos’ standing with consumers has improved through the COVID-19 pandemic, and demand for connectivity is strong and continues to grow. On the other hand, most consumers are not spending more money with telcos because operators have yet to create compelling new propositions that they can charge more for. In the broadest sense, telcos need to (and can in our view) create more value for consumers and society more generally.

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As discussed in our previous research, we believe the world is now entering a “Coordination Age” in which multiple stakeholders will work together to maximize the potential of the planet’s natural and human resources. New technologies – 5G, analytics, AI, automation, cloud – are making it feasible to coordinate and optimise the allocation of resources in real-time. As providers of connectivity that generates vast amounts of relevant data, telcos can play an important role in enabling this coordination. Although some operators have found it difficult to expand beyond connectivity, the opportunity still exists and may actually be expanding.

In this report, we consider how telcos can support more efficient allocation of capital by playing in the financial services sector.  Financial services (banking) sits in a “sweet spot” for operators: economies of scale are available at a national level, connected technology can change the industry.

Financial Services in the Telecoms sweet spot

financial services

Source STL Partners

The financial services industry is undergoing major disruption brought about by a combination of digitisation and liberalisation – new legislation, such as the EU’s Payment Services Directive, is making it easier for new players to enter the banking market. And there is more disruption to come with the advent of digital currencies – China and the EU have both indicated that they will launch digital currencies, while the U.S. is mulling going down the same route.

A digital currency is intended to be a digital version of cash that is underpinned directly by the country’s central bank. Rather than owning notes or coins, you would own a deposit directly with the central bank. The idea is that a digital currency, in an increasingly cash-free society, would help ensure financial stability by enabling people to store at least some of their money with a trusted official platform, rather than a company or bank that might go bust. A digital currency could also make it easier to bring unbanked citizens (the majority of the world’s population) into the financial system, as central banks could issue digital currencies directly to individuals without them needing to have a commercial bank account. Telcos (and other online service providers) could help consumers to hold digital currency directly with a central bank.

Although the financial services industry has already experienced major upheaval, there is much more to come. “There’s no question that digital currencies and the underlying technology have the potential to drive the next wave in financial services,” Dan Schulman, the CEO of PayPal told investors in February 2021. “I think those technologies can help solve some of the fundamental problems of the system. The fact that there’s this huge prevalence and cost of cash, that there’s lack of access for so many parts of the population into the system, that there’s limited liquidity, there’s high friction in commerce and payments.”

In light of this ongoing disruption, this report reviews the efforts of various operators, such as Orange, Telefónica and Turkcell, to expand into consumer financial services, notably the provision of loans and insurance. A close analysis of their various initiatives offers pointers to the success criteria in this market, while also highlighting some of the potential pitfalls to avoid.

Table of contents

  • Executive Summary
  • Introduction
  • Potential business models
    • Who are you serving?
    • What are you doing for the people you serve?
    • M-Pesa – a springboard into an array of services
    • Docomo demonstrates what can be done
    • But the competition is fierce
  • Applying AI to lending and insurance
    • Analysing hundreds of data points
    • Upstart – one of the frontrunners in automated lending
    • Takeaways
  • From payments to financial portal
    • Takeaways
  • Turkcell goes broad and deep
    • Paycell has a foothold
    • Consumer finance takes a hit
    • Regulation moving in the right direction
    • Turkcell’s broader expansion plans
    • Takeaways
  • Telefónica targets quick loans
    • Growing competition
    • Elsewhere in Latin America
    • Takeaways
  • Momentum builds for Orange
    • The cost of Orange Bank
    • Takeaways
  • Conclusions and recommendations
  • Index

This report builds on earlier STL Partners research, including:

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Fixed wireless access growth: To 20% homes by 2025

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Fixed wireless access growth forecast

Fixed Wireless Access (FWA) networks use a wireless “last mile” link for the final connection of a broadband service to homes and businesses, rather than a copper, fibre or coaxial cable into the building. Provided mostly by WISPs (Wireless Internet Service Providers) or mobile network operators (MNOs), these services come in a wide range of speeds, prices and technology architectures.

Some FWA services are just a short “drop” from a nearby pole or fibre-fed hub, while others can work over distances of several kilometres or more in rural and remote areas, sometimes with base station sites backhauled by additional wireless links. WISPs can either be independent specialists, or traditional fixed/cable operators extending reach into areas they cannot economically cover with wired broadband.

There is a fair amount of definitional vagueness about FWA. The most expansive definitions include cheap mobile hotspots (“Mi-Fi” devices) used in homes, or various types of enterprise IoT gateway, both of which could easily be classified in other market segments. Most service providers don’t give separate breakouts of deployments, while regulators and other industry bodies report patchy and largely inconsistent data.

Our view is that FWA is firstly about providing permanent broadband access to a specific location or premises. Primarily, this is for residential wireless access to the Internet and sometimes typical telco-provided services such as IPTV and voice telephony. In a business context, there may be a mix of wireless Internet access and connectivity to corporate networks such as VPNs, again provided to a specific location or building.

A subset of FWA relates to M2M usage, for instance private networks run by utility companies for controlling grid assets in the field. These are typically not Internet-connected at all, and so don’t fit most observers’ general definition of “broadband access”.

Usually, FWA will be marketed as a specific service and package by some sort of network provider, usually including the terminal equipment (“CPE” – customer premise equipment), rather than allowing the user to “bring their own” device. That said, lower-end (especially 4G) offers may be SIM-only deals intended to be used with generic (and unmanaged) portable hotspots.
There are some examples of private network FWA, such as a large caravan or trailer park with wireless access provided from a central point, and perhaps in future municipal or enterprise cellular networks giving fixed access to particular tenant structures on-site – for instance to hangars at an airport.

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FWA today

Today, fixed-wireless access (FWA) is used for perhaps 8-9% of broadband connections globally, although this varies significantly by definition, country and region. There are various use cases (see below), but generally FWA is deployed in areas without good fixed broadband options, or by mobile-only operators trying to add an additional fixed revenue stream, where they have spare capacity.

Fixed wireless internet access fits specific sectors and uses, rather than the overall market

FWA Use Cases

Source: STL Partners

FWA has traditionally been used in sparsely populated rural areas, where the economics of fixed broadband are untenable, especially in developing markets without existing fibre transport to towns and villages, or even copper in residential areas. Such networks have typically used unlicensed frequency bands, as there is limited interference – and little financial justification for expensive spectrum purchases. In most cases, such deployments use proprietary variants of Wi-Fi, or its ill-fated 2010-era sibling WiMAX.

Increasingly however, FWA is being used in more urban settings, and in more developed market scenarios – for example during the phase-out of older xDSL broadband, or in places with limited or no competition between fixed-network providers. Some cellular networks primarily intended for mobile broadband (MBB) have been used for fixed usage as well, especially if spare capacity has been available. 4G has already catalysed rapid growth of FWA in numerous markets, such as South Africa, Japan, Sri Lanka, Italy and the Philippines – and 5G is likely to make a further big difference in coming years. These mostly rely on licensed spectrum, typically the national bands owned by major MNOs. In some cases, specific bands are used for FWA use, rather than sharing with normal mobile broadband. This allows appropriate “dimensioning” of network elements, and clearer cost-accounting for management.

Historically, most FWA has required an external antenna and professional installation on each individual house, although it also gets deployed for multi-dwelling units (MDUs, i.e. apartment blocks) as well as some non-residential premises like shops and schools. More recently, self-installed indoor CPE with varying levels of price and sophistication has helped broaden the market, enabling customers to get terminals at retail stores or delivered direct to their home for immediate use.

Looking forward, the arrival of 5G mass-market equipment and larger swathes of mmWave and new mid-band spectrum – both licensed and unlicensed – is changing the landscape again, with the potential for fibre-rivalling speeds, sometimes at gigabit-grade.

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Table of contents

  • Executive Summary
  • Introduction
    • FWA today
    • Universal broadband as a goal
    • What’s changed in recent years?
    • What’s changed because of the pandemic?
  • The FWA market and use cases
    • Niche or mainstream? National or local?
    • Targeting key applications / user groups
  • FWA technology evolution
    • A broad array of options
    • Wi-Fi, WiMAX and close relatives
    • Using a mobile-primary network for FWA
    • 4G and 5G for WISPs
    • Other FWA options
    • Customer premise equipment: indoor or outdoor?
    • Spectrum implications and options
  • The new FWA value chain
    • Can MNOs use FWA to enter the fixed broadband market?
    • Reinventing the WISPs
    • Other value chain participants
    • Is satellite a rival waiting in the wings?
  • Commercial models and packages
    • Typical pricing and packages
    • Example FWA operators and plans
  • STL’s FWA market forecasts
    • Quantitative market sizing and forecast
    • High level market forecast
  • Conclusions
    • What will 5G deliver – and when and where?
  • Index

Telcos in healthcare: Winning in a long game, Babylon, and the impact of 5G

Introduction: telcos in healthcare

This is a summary of some of the learnings from another fascinating session at the TELUS Carrier Health Summit in Toronto, May 22nd 2019. This is an annual gathering that was hosted by TELUS Global Solutions for telcos and their partners in healthcare.

Of the hosts, Fawad Shaikh, VP TELUS Global Solutions, said it ran this years’ session because it wants “to develop an alliance of like-minded telcos in health”. David Thomas, VP TELUS Health Solutions, added that “healthcare has to be delivered locally, which is a real plus for telcos. Yet we all need to gain global scale to compete, so it is a great opportunity for non-competitive collaboration.”

About sixty people from telcos and health tech companies were there this year, and the audience was global, with representatives from Latin America, N America, Europe, the Middle East, Asia and Australasia.

STL Partners presented its research on nine telco healthcare studies, and caught up with participants, including Dr Ali Parsa, CEO and founder of Babylon Health, and Mairi Johnson, its Global Partnerships Director.

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Healthcare: the problem to be solved

Healthcare is one of our favourite examples of the drive behind the Coordination Age. The explanation is simple:

The problem with healthcare in most economies is not that there isn’t great medicine and healthcare professionals. It’s getting it all delivered to the patients at the right time and at a cost that’s affordable.

This is fundamentally a coordination problem: bringing the right assets (whether physical or digital – a nurse, a treatment, or the patients’ records) together for the patient. Then maintaining the order throughout the patients’ treatment, and indeed, their lives.

All healthcare systems face multiple mounting pressures: growing and ageing populations, greater costs, skills challenges, and more pressure on funding from other sources to name a few.

There’s money in health

It’s also an area of HUGE expenditure. PWC’s Tara McCarville shared figures showing that:

  • Global healthcare spend is forecast to grow from $9.7 Trillion in 2014, to $18 Trillion in 2040, growing at 21% CAGR over the next 5 years.
  • Even so, it’s perhaps surprising that 84% of Fortune 50 companies are engaged in healthcare in some way.

Given this, it’s less surprising to note that the big tech players are seriously engaged in digital health too, with Amazon’s recent tie up with JP Morgan and Berkshire Hathaway to create the Haven Group being the most eye-catching. Others between CVS and Aetna, and Sanofi and Click Therapies involve less broadly familiar names, but are weighty nonetheless.

From a government perspective the numbers are big too. In the UK for example, which is one of the EU’s lower healthcare spenders per capita, the NHS’s annual bill is currently £154 billion, and it’s forecast to rise to £188 billion in 15 years (to 2033).

A 5% tax rise?

Without borrowing, this would lead to something like a 5% increase in overall taxation. Over 98% of UK tax funding is from ‘general taxation and national insurance’ – so mainly income tax, VAT and ongoing employment contributions.  In other words, people would have to pay.

Despite the UK’s love of the NHS, a permanent 5% tax rise would draw many concerned breaths from both politicians and the public. The need to find better solutions is genuinely pressing.

(NB Try out this calculator made by the Institute of Fiscal Studies if you fancy yourself as a policy guru. To fund healthcare, would you raise taxes, cut pensions, defence, or education?)

Figure 2: The Institute of Fiscal Studies’ (IFS) Health Budget Calculator

IFS NHS Budget Calculator
Meeting the NHS’s future funding needs would mean a 5% UK tax rise

Source: https://explore.ifs.org.uk/tools/nhs_funding/tool NB At £154bn, the Health spending category is already bigger than all those above.

The rest of the report contains:

  • The road to Babylon – one of the ways ahead?
  • Some telcos are scared by health, others are serious about it
  • 5G, Healthcare – or both?
  • Conclusions: telcos in healthcare – making a long game a good one

And includes the following figures:

  • Figure 1: How to succeed in telco health – key learnings from the Summit
  • Figure 2: The Institute of Fiscal Studies’ (IFS) Health Budget Calculator
  • Figure 3: Babyl has particular strength in Rwanda’s rural areas
  • Figure 4: A flavour of Babylon’s UK online offering
  • Figure 5: Pros and cons of telcos in healthcare
  • Figure 6: Telstra’s National Cervical Cancer Screening programme benefits
  • Figure 7: Telcos face a serious choice in Capex / Opex investments

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