Telenor’s roots are in Europe, but its strategic ambitions are universal – efficient operations, loved by customers, and Internet for all. It’s head of European operations, Kjell Morten Johnsen, recently sat down with WinWin to discuss these three priorities, the operator’s challenges in Europe, and its transformation plan to overcome them.
Telenor Group took in some USD13 billion in revenue in 2014 (6% growth y/y), spanning 186 million mobile subscriptions in six Asian and seven European markets (not counting its stake in VimpelCom), with the European certainly the more competitive – four mobile operators per market, 14 million people per country (less than some cities in Asia), 125% penetration, two-thirds of the world’s MVNO’s present; with all of this adding up to the only mobile market where revenues are in decline. But Telenor EVP of Europe Kjell Morten Johnsen is surprisingly upbeat on the state of things in his region. “We have had very good development in Norway, especially over the last 12 months. We see Europe stabilizing. We see some growth coming in there, also. So the overall picture has been fairly benign. We have benefitted from that.”
However, Johnsen would temper this somewhat when the topic turned to regulation in Europe, “The development that we see now is, of course, very challenging in terms of the regulatory environment in Europe. I think that this, to some extent, goes back to the fact that Europe has been in a difficult economic situation. Governments have been very ‘short-term.’ They’re focused on raising cash rather than developing their economy. And obviously, what we need in Europe is more development of LTE, of getting more technology out there. And more investment in infrastructure, because now we are seriously at a risk of lagging behind. Operators have to be able to build scale to do that, but also we need to see governments not only focusing on getting the maximum for their spectrum, but also on how they can encourage people to invest into the economy, which again creates jobs and more activity in the economy.”
Building scale has been on a lot of minds lately in Europe – a fragmented market where the top three carriers combined would only qualify as number three in a market like the U.S. When asked as to what Telenor is doing to build scale, Johnsen stated, “We are now trying to work to build more scale through our joint venture (with TeliaSonera) in Denmark and through our different partnerships – network sharing in Sweden, Denmark, and Hungary. The initiatives that we do to build scale with our shared services in Common Operation. So, all these things are positive for our development, but tricky sometimes from a regulatory point of view.”
Optimus Prime?
Building scale will certainly help, but it isn’t enough. User consumption habits are transforming, and Telenor is transforming to adapt. This is taking the shape of a project Telenor has dubbed Optimus Prime (the leader of the good side in the Transformers franchise). When asked for the details, Johnsen stated, “Optimus Prime is our name for a business transformation process that’s going on. We have been good at creating agnostic networks, efficient networks. Now the time has come to clean up the IT stack. The legacy that was set up in the 90’s and early 2000’s are not set up for delivering data and services for 2016. We just have to fix it now. It is a big task where we want to reduce the number of price plans by maybe 70-80%. We want to take away 70-80% of the products. And we also want to completely overhaul our business rules so that we take away as much complexity as possible, and become much more nimble so that we can integrate services quickly, together with partners, in the future, rather than update our IT stack once or twice a year.”
Digital retail
Optimus Prime is intended to automate a lot of complex process, and future-proof Telenor’s technology against shifting customer trends. But according to Telenor, these are only two out of the five simultaneous goals that need to be achieved in a market in order to stay competitive. The others are simplified governance, convergence/modularity, and omni-channel service. The endgame for all this transformation is what Telenor calls “digital retail” of e-services where “offerings are only limited by Telenor’s ability to know what customers want” and “telecom services are just the initial offering.” How does Telenor intend to “know what customers want?” Big Data analytics.
An example of such digital retail is Telenor’s mobile banking arm in Serbia, called Telenor Banka. Launched in 2014, Telenor Banka is Telenor’s first wholly-owned financial institution, and a “fully online bank” that offers multi-currency accounting & exchange, foreign exchange, contactless debit card, and more, through any connected screen. But this is just the present.
For the future, Telenor envisions a lot of the ordinary household products that we buy in a one-time fashion becoming services that we pay for over time, to the tune of some 30 billion connected objects by 2020. This might include your bathroom scale becoming your home health analysis station, or a connected basketball that sends tutorials & analysis via the cloud to your smartphone. The possibilities are endless with the IoT.
The big picture
In 2014, Telenor laid out three group-wide strategic goals – efficient operations, loved by customers, and Internet for all.
Efficient operations
Telenor is working to achieve efficiency through both scale and resource sharing (common operations). One such project has involved combining operations in three Central and Eastern European (CEE) markets – Hungary, Serbia, and Montenegro. According to Telenor, these networks featured best-in-class quality before their combination. Now that they are together, Telenor expects a 35-to-55% increase in cash flow by the end of next year, a 20% decrease in cost base starting from the same time, and information security to be a key competitive advantage.
But when asked to comment, Johnsen didn’t seem terribly concerned with the numbers. For him, “I think that when we take the outside-in view, focusing on what we are going to deliver and how, and then designing the platform in an efficient way, efficient operations for me is about having clarity of thought in terms of where you are going and then designing your business around that. It is not about saving pennies here & there. It’s about fundamentally reshaping the way you run your business around the customer needs.”
Loved by customers
In line with the aforementioned Telenor notion that products are in fact becoming services, their focus here is on boosting after-sales sentiment. When asked to elaborate, Johnsen said, “When it comes to ‘loved by customers,’ this is much more about the relevance of our business. How we compete inside the industry and how we contribute to making our industry compete with other players outside our industry – OTTs and others. This is very much a brick-by-brick challenge. We are building IT systems that are meant for 2015 and 2016, rather than delivering voice services in the year 2000. We have been doing well on the networks. Now is the time for the IT systems, so that we are easier to relate to for customers. And again, the measurement of that is whether we are able to deliver on our NPS ambition to be #1.”
Telenor sees that aforementioned relevance that Johnsen mentioned as the result of delivering something that customers truly value, with this achieved through insight instead of guesswork, via any channel, and with “empathy” (a word one rarely finds in a telco slideshow).
Internet for all
Only seven million out of Telenor’s 186 million subscribers are in developed markets, and the digital divide is massive in some of the developing markets in which it operates. Bangladesh and Pakistan rank 49 and 50 (respectively) out of 50 on the Huawei Global Connectivity Index (GCI), with India also ranking in the bottom 10. Much needs to be done.
Telenor’s strategy for “Internet for all” is to drive down the cost of terminals, offer the services that the newly connected would want (usually third party) and monetize later through upsales, roaming, and the like. But this is just the minutiae. When asked about the big picture, Johnsen would state, “The ‘Internet for all’ ambition comes naturally to Telenor. We have invested, at an early stage, in several emerging markets. And that was primarily to drive voice penetration, and messaging. Now we get 3G and 4G that we are counting increasingly on. And then it’s not about having coverage for voice & messaging anymore. It’s about delivering Internet, and delivering Internet out in all the countries in which we operate is a way to significantly contribute to economic growth. It is about making people participants in the new digital economy, rather than being spectators. And of course, it has some democratic elements about being able to use the information that is out there. So ‘Internet for all’ also goes very well with our having the stated ambition of having a positive local impact where we operate.”
A strong commitment
As to Telenor’s partnership with Huawei, Johnsen stated, “When I visited Shenzhen the first time, in 2010, and had a nice time meeting Ren Zhengfei and Ken Hu and others, I got a very strong commitment. We were planning to do a swap in Serbia, and I was the CEO there at the time. I got that commitment. We went ahead with it. And it became a success. We have now had a very good cooperation also on swapping our infrastructure in Bulgaria. I’m glad to see that it has worked out very, very well. So, of course, going forward there will be areas where we will do more with Huawei. I think that we have moved much more towards a partnership, which I think was the intention.”
