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7 IV OPERATOR STRATEGY
7 4.1 Increasing network and business coverage
7 4.2 Business innovation is key to acquiring low-income markets
8 4.3 Striking gold with high-return markets
18 VI CONCLUSION
19 VII GLOSSARY
20 VIII REFERENCES
I
EXECUTIVE SUMMARY
1
( 1 ) Low-ARPU Solutions: Using customized low-ARPU solutions help
operators to provide basic communications services for more users by
effectively managing network construction costs and operating costs
2
II
DEFINING HIGH GROWTH MARKETS
HGMs are defined as countries with very large and growing populations, less
developed economies, low penetration rates of telecoms services, and immense
growth potential. HGMs focused on in this report include China, India and
Bangladesh in Asia, Brazil in Latin America, and South Africa in Africa.
Due to low income levels, ROI (Return on Investment) and rural-urban divide,
HGMs represent tremendous growth opportunities for operators. There is
unprecedented opportunity in HGMs for the adoption of cutting-edge services,
according to the penetration rates of ICT services. In addition, it has been 10
years since the tenets of the WTO's Basic Telecommunication Agreement - aimed
at reducing tariffs on information technology products - took effect, thus aiding
the expansion of telecommunication companies worldwide, and in HGMs in
particular.
The opening up of the telecommunications regulatory system started a trend
towards favorable telecommunications policies, while the tremendous growth
potential provided opportunity for strong partnerships resulting in state-of-
the-art, next generation networks and services. HGMs offer significant global
subscriber growth potential. Overall, according to research by Informa Telecoms
& Media, there will be more than one billion[1] broadband subscribers worldwide
in 2011, with the majority using a mobile, rather than fixed, system.
The HGMs have two distinct market segments. One is the vast, untapped rural
and low-income population that is starved of connection with the outside world;
3
the other is the well-off consumer segment that has disposable income available
for high-tech purchases. Income levels of HGMs generally resemble a pyramid,
with the middle class showing the greatest potential for immediate growth. For
example, in India, the development of a booming IT service outsourcing industry
helped to establish mounts of middle class consumers. When the market
segments are further examined, evidence suggests that the true gap comes from
age disparity, rather than income, indicating that the highest growth potential
will come from the youth market.
100+
95-99
90-94
85-89
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
70 60 50 40 30 20 10 0 0 10 20 30 40 50 60 70
4
III
OPPORTUNITIES FOR OPERATORS
Average revenue per user (ARPU) is typically low in HGMs (Mostly between five
to 20 dollars and sometimes even less than three). What is the rationale behind
continuous investment by new operators in such a competitive and low ARPU
environment? The promise of huge subscriber numbers, a scalable business model,
and the value brought by various market segments.
potential subscribers
Two major trends are occurring in HGMs that affect the telecommunications
industry – the institution of favorable laws and regulations that encourage foreign
and private investment and an extremely congested and competitive marketplace.
In 2008, mobile operators saw a rapid decline in RPM (revenue per minute) in
nearly all high growth countries.
The large amount of potential subscribers could partially offset the negative
effects caused by low ARPU. By 2013, telecoms industry analyst Ovum forecasts
5.63 billion connections, up 43 percent from 2008. High growth markets are key
to this continued growth. The China-India region (containing China and India, as
well as Pakistan and Bangladesh) will continue to be the main connections growth
engine, with a cumulative annual growth rate (CAGR ) of 12 percent up to 2013.
Penetration is forecasted to rise from 40 percent in 2008 to 67 percent in 2013.
Asia-Pacific and Africa are also expected to add to the number of connections.[3] It
is predicted that subscriber rates will continue to rise steadily in HGMs as current
telecom penetration remains low in these areas.
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3.2 Larger scale, better operating effect
6
IV
OPERATOR STRATEGY
Pursuing large numbers of subscribers, without first having a wide and stable
coverage network, would be like a river without water or a tree without roots.
The GSM network run by Indian operator, Reliance, is a benchmark of the Indian
communications market, resulting from its excellent quality, high speed and rate
of business delivery. Reliance began initial deployment of this network in 2001,
and by 2008, it covered the entire country. The fast and high-quality delivery of
Reliance's GSM network allows the company to manage CDMA and GSM dual
network operations, while successfully preventing them from competing against
each other. Solid GSM network coverage helped Reliance become the number
two mobile communications company in India.
For operators seeking to deploy new networks and solutions, finding the right
partner, who can help them realize their strategic goals, is an essential element
of delivering high quality services to end users.
7
An example of a breakthrough technology is the CellBazaar platform provided by
GrameenPhone Company, co-founded by Grameen Telecom and Telenor, which
won the "Best Use of Mobile for Social and Economic Development” award
in 2009 given by global mobile awards of 3GSMA, for its applications to the
agriculture industry.
Previously, most rural dwellers in HGMs had limited access to telecommunications,
and thus little access to information critical to the agriculture marketplace, such
as pricing. Without this information, these dwellers were not able to determine
fair market value for their products, leaving most of the profits to the middlemen.
CellBazaar technology helps this population to access information about
agricultural products by establishing a direct channel between rural dwellers and
final buyers, which improves price transparency, reduces the need for a middle
man, and increases their income.
How can operators offer the diverse telecom services required in HGMs, while
gaining a significant increase in ARPU? By developing a strategy that serves
multiple needs and offers innovative solutions, tailored for each individual market
segment.
8
As discussed earlier, the youth market represents an enormous opportunity for
operators in HGMs, as the 25 and under set make up a large percentage of these
populations. In view of this, and based on a full study on the youth market's
purchasing power and consumption behavior, it is important for operators to use
customized marketing strategies and solutions that enable them to get optimal
benefits. For example, to reach this market, Globe, a telecom operator in the
Philippines, has built partnerships with content service providers such as Yahoo
and Friendster. In addition, the company developed its own multi-play, integrated
application platform, combining Twitter, Facebook, Friendster, and other popular
social media platforms, together to simplify the customer experience. This
platform allows people to be able to keep in touch with friends on line when
they are, for example, out at a party.
However, finding a way to maximize value from an often highly transient
market has been a key concern for operators. In many HGM countries, the
underdeveloped rural economies urge many to move from home to the more
developed cities, resulting in tremendous population mobility. The economies
in the more developed regions and cities have resulted in higher numbers of
business people in these areas. Understanding each of these market segments
and carrying out a specific and targeted marketing program helps operators
increase profits.
9
V
DEFINING SUCCESS FOR OPERATORS
Green and energy efficient solution Reduce network operation cost and
for emission reduction realize carbon neutral and green GDP.
Quantity + revenue Solutions such as "Two-Cloud" and Provide intelligent network architecture,
increase mobile Single RAN improve wireless air interface
broadband solutions NGN mobile communication utilization, effectively identify P2P
technologies such as HSPA+ and LTE/ traffic and management such traffic,
SAE effectively ensure user experience, and
IPN protect existing resources.
Smart business "Platform + service + operation" Meet the greatest differentiated and
innovation platform "Platform–converged billing solution" individualized requirements in the market.
Offer one-stop billing solutions.
Customization strategy Terminal planning conducted based on Meet various requirements in the terminal
matched with operator's customer requirements market, build an industry ecosystem,
terminal roadmap Chip selection and production according and provide customized terminals and
to product planning operating systems to end users.
Bundled sale of products and services
A low-ARPU solution can ensure business success for operators, while helping end users gain
equal access rights to information networks. With the help of the operator's network, a rural
mountain village can step into the digital world helping poor villagers to change their destinies
through modern communications.
10
5.1.1 Affordable Network Construction Costs
In the past several years, the maturation of IP technology has brought about
all kinds of miracles including the efficient utilization of network resources and
simplification of network structure, all of which have greatly reduced costs, to
the surprise and delight of operators. Operators in China, India, Indonesia, Brazil
and other countries have realized that the All-IP-based network, ranging from
core network to wireless/wired network, builds strong data telecom technology
that boosts capability and competitiveness.
Strong partnerships are again key to success in this area. Operators should
seek partners that advocate All-IP-based networks in ICT, are dedicated to
introducing IP technologies to telecommunications networks, and are committed
to enhancing the commercial interests of all telecom operators in HGMs. These
elements will help operators to protect their existing investment and realize
smooth and cost-effective evolution to All-IP networks resulting in commercial
success.
11
Larger Capacity and Wider Coverage Boost Network Efficiency
Operators seeking networks that offer large capacity, high density, and low
energy consumption, should incorporate large-capacity networking solutions
in the areas of optical transmission, data communications, and core network.
These types of solutions have been successfully deployed for high-capacity events
such as during the Pilgrimage to Mecca, Diwali Festival in India, and Ramadan in
Muslim countries. To meet high growth market demand for reducing network
deployment costs, wireless access technology solutions help operators to realize
maximum coverage with the minimum number of sites. Some solutions provide
coverage solutions that increase the radius by more than 20 percent above the
average and increase the area of coverage by 40 percent. Such a coverage level
is sufficient to reduce 30 percent of base stations.
In a high growth market, the latest technologies often coexist with the most
traditional services (such as the coexistence of 2G/3G and the evolution to
LTE). It is therefore imperative for telecom operators to protect their investment
without losing their leadership position. Operators do this by using solutions that
provide end-to-end support for smooth evolution from 2G to 3G, while helping
them realize carrier-level reliability and ensure effective protection for investment.
12
5.1.2 Affordable Network Operating Costs
Network operating costs directly affect each operator's profitability and present a
common issue to operators in emerging countries. A complete and mature low
OPEX solution can help operators reduce network operating costs.
By analyzing the OPEX of telecom operators, Huawei has found that energy
consumption accounts for 50 percent. Therefore, the operators can realize OPEX
reduction targets by deploying a green and energy saving solution for emission
reduction. If one combines this solution with a TCO evaluation, the result is an
emission reduction solution with higher economical feasibility. Based on an in-
depth analysis of many customers' incumbent network data with respect to energy
consumption, Huawei has found that operators' energy consumption can be mainly
attributed to electrical energy and power consumption concentrated in the access
network, including wireless sites and broad access sites. Wireless site energy
consumption accounts for over 70 percent of the total energy consumption of
many mobile operators, whereas fixed line operators consume a smaller proportion,
just over 40 percent, of energy consumption in the access part of the network.
Consequently, the focus of network energy efficiency shall be on access network
sites, followed by core central offices and transmission networks. In addition,
new logistics technology can be used to achieve energy efficiency and emission
reduction targets for packaging and transportation in the manufacturing industry.
For many years, the people of the remote southern Pakistan village of
Theri Mirwah suffered from poor telecommunications network quality
for the low coverage density which was a result of its remote location.
The cost of maintaining traditional base stations in the region was
prohibitively high.
13
Under an alternative energy solution, solar/wind power and diesel generators are
used to reduce network damage due to power supply interruption and greatly
save power supply consumption. In the area of fixed line access, the power
consumption of a DSL line accounts for approximately 40 percent of the entire
port's power. The DSM technology can automatically adjust the PSD template
of each DSL line, eliminate crosstalk, boost the line rate by 15 percent, and
effectively reduce port power consumption by about 40 percent. The first key
energy efficiency measures for the core central office, is to replace traditional
servers with blade servers and thus realize drastic reduction in emissions from
hardware. For DSL equipment, effective DSM technology can be used to reduce
meaningless power consumption by eliminating crosstalk. By deploying an
end-to-end green solution, the operators can realize drastic OPEX reduction.
Meanwhile, the green solution plays a pivotal role in making operators carbon-
neutral and turning a green GDP.
In the vast and sparsely populated rural areas of most high growth market
countries, telecom operators face enormous network construction difficulty due
to complex topography. The traditional fixed line telephony and broadband
access mode require hefty investment, whereas mobile broadband is more cost-
competitive. Compared with fixed line broadband, mobile broadband can offer
greater convenience. In urban areas, the key subscribers of mobile broadband
are most likely young people and business people. These two customer groups
are the focus for high growth market operators.
The traditional mobile broadband solution faces a conundrum that the operator's
service revenue cannot grow in proportion to the surging data service traffic.
According to our research, when mobile data service traffic grows 50 to100
fold, the corresponding data service revenue grows only by 10 to 20 percent.
As a result, the operators have to take into account cost and revenue factors
when they make mobile broadband network investments, which adversely affect
network construction and operation.
14
Solutions are available to operators that can help solve these programs.
Intelligent architecture-based broadband network solutions that provide an
intelligent network architecture for operators, help them to guarantee user
experience in the most cost-effective way. While also enhancing user experience,
these solutions can significantly boost wireless air interface utilization efficiency
and reduce cost per bit. Combined they can reverse the trend of increasing
traffic, without matching revenue gains.
Value-added services and high-quality network operation are the most important
driving forces to improve customer experience. Innovative applications can
provide excellent user experience that help operators to maintain and obtain
more valued customers, while also pushing network transformation and bringing
in create profits.
In the Philippines, which has 70 million cell phone users, over 1 billion messages
are sent every day, with an average of 14 messages per person[6]. This high
messaging volume has brought about even greater industrial value through
advertising messages. Offering the right services can supply customers with a
greater experience and greater value. Huawei has partnered with an intelligent
service provider, specializing in music, to build the “Digital Music Alliance,”
which aims to provide a customized integrated solution - “Platform +Services+
Operation,” that meets the needs of differentiation and personalization in
developing digital music market.
15
Under the trend of industrial integration and transformation, customers have put
more emphasis on services and operations. Integrated service solutions including
3G, Full-service and IMS, can operate in a variety of heterogeneous networks,
helping operators rapidly deploy new businesses. Huawei's unified and powerful
platform “Convergent Billing Solution,” combines the strengths of CAPEX
and OPEX and aims to provide one-stop billing service for all users and to help
operators reduce CAPEX and OPEX. It can also supply a flexible tariff strategy
and specific operation model, helping to enhance subscribers' loyalty.
Roadmap
Mobile terminals have entered a development stage full of change and vitality. On
one hand, the increasingly powerful hardware platform enables mobile terminals
to carry an increasing number of functions. New terminals are launched one
after another and terminal devices have been changed substantively over recent
years. On the other hand, fast-growing mobile communications services in
the global high growth market present tremendous growth potential for entry-
level terminals. Telecom operators, software providers and service providers are
actively exploring a suitable terminal development path based on their respective
strength according to the characteristics of high growth markets.
Operators looking to enhance their terminal program can work with partners
from the earliest stages of technology development to ensure high returns.
Operators can work with partners on the product planning stage, where together
they develop market segmentation strategies based on detailed customer
behavior characteristic data in the operator's operation and maintenance system,
and then formulate a terminal product plan based on customer segmentation
and customer behavior trends. The product manufacturing stage would
16
involve selecting the appropriate terminal chip platform and entrusting the
manufacturing of the terminal device to this partner. The right partner can
help operators at the sales stage as well, to leverage their combined channel
advantages and realize the bundled sales of terminal products and services.
During post-sale, partners work together with the operators to customize the
system of operation and undertake refinement and improvement under an open-
source operating system in accordance with the operator's characteristics and
needs.
How can operators improve their business, gain customers, and overcome
fierce competition? By paying more attention to the core business in HGMs.
For operators looking to save on network management and maintenance,
gain benefits in rapid deployment, lower costs, have predictable network
performance and simplify network management, they should adopt diverse and
customized all network E2E solutions including EOT, outsourcing services, multi-
operators management and co-dimension. For operators needing to deploy a
new network or adopting new technology, entering into the market quickly and
reducing network deployment and maintenance has been their focus. Solutions
that provide services including maintenance organization/process establishment
and daily network maintenance can to help operators to reduce risk in new
technology/network deployment.
Solutions are also available for operators wishing to delegate the duties
of daily operation of their core business to strategic partners, including
outsourcing services such as NOC maintenance, on-site maintenance, spare
parts maintenance and network performance management. For operators with
equipment from different providers, there are multi-operators management
solutions available to simplify the management complexity.
17
VI
CONCLUSION
18
VII
GLOSSARY
19
VII
REFERENCES
20
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