Digital Transformation: Can South African telcos capitalise on it?

Digital Transformation: Can South African telcos capitalise on it?

Digital Transformation: Can South African telcos capitalise on it?

South African telcos must start focusing on four key ingredients if they are to successfully own their part of the future telco market. The telco, that successfully prioritises these four elements first, will also set themselves up for huge successes. This is the view of George Kalebaila, Research Director for telecommunications, media & Internet of Things at International Data Corporation.

“The telco is no longer the same business it used to be. Telcos must start focusing on adjacent opportunities that come along with digital transformation if they are to survive the commoditisation of their existing products, yet the telcos still seem to be experiencing an issue in getting customers to take them up on those opportunities. I believe the core issue here is trust.”

New opportunities are emerging
Kalebaila believes that digital transformation has several adjacent opportunities that any business, that has the existing capability, can easily monetise. “We have seen this in other sectors where companies have used their existing high brand equity in one particular line of business to diversify into another,” he says. One of the key brands, that has done this successfully, is Woolworths. “Woolworths has diversified from clothing retail into food and their customers moved with them because they trusted that they would still get the premium service they originally received. Discovery is another example of a company that has diversified from mainstream medical insurance to offer a whole range of other financial services products through leveraging their brand equity and trust,” says Kalebaila. Pick ‘n Pay, for example, has moved from groceries into clothing and pharmaceuticals, showing that there are a number of companies moving into adjacent opportunities and making a success of it.

“When we flip the coin to the telco side, especially in our region, they have, however, not been that successful,” he says. “We haven’t seen that monumental shift in them successfully monetising adjacent opportunities. Even in digital services, such as music streaming, they are acting more as an intermediary and not really taking the lead. In the UK, for example, we have seen BT competing successfully with Sky in digital content, but we haven’t seen that happening here, even though the telcos have the same infrastructure that the BTs of this world have. So, I keep asking myself why this is the case?”

The impact of trust
The South African Top 50 most valuable brands for 2017, coordinated by Brand Finance and Brand Africa, in partnership with Brand South Africa, saw the top 10 lists dominated by financial and telecommunications brands. On the top 50 list, telecommunications brands combined were second only to banking. “So, the telcos’ brands are very visible, but somehow, they seem to fail to use that brand visibility and equity to do other things,” says Kalebaila.

He believes there could be a few factors at play here. “The first thing that comes to mind is that perhaps we underestimate the impact of trust, particularly trust that is transferable. So, the telcos have very high visibility, but most of their customers, and here the context is really consumer, consumers do not trust that the telcos act in their best interest and so they’re not willing to transfer that trust to the other services which are not directly in the same line of business.” There is no telco in South Africa, possibly even Africa, that has not faced billing issues at some point. “Billing transparency has been a key issue for many telcos over the years. Most consumers don’t believe that they are getting value from, and have a clear understanding of, what they are paying for. So, transparency and flexibility are key issues,” says Kalebaila.

Disappearing data, not being able to carry over services to the next month, being forced to pay for services as part of a package, while you do not need them, and roaming are also big issues for the customer. “We’ve seen the activism around #datamustfall because inherently consumers don’t believe that they are getting value, or that the telcos are fair. We cannot do without the telco services, so we buy them, but we don’t trust that they will give us the best option to suit our requirements,” he says. These factors, as well as customer service, are preventing customers from transferring trust.

How do telcos recapture that trust?
The four key ingredients to recapture that trust are transparency, flexibility, customer service and providing for customer needs. “It’s about being transparent, particularly in billing and the tariff structure of the services. Telcos also need to give the consumer the flexibility to choose what they want to pay for. If you purchase one item of clothing, you are not forced to buy another, because the clothing store believes you should,” says Kalebaila. “In the telco industry, however, there is no choice and as consumers, we buy things even when we don’t need them. Today, most packages, for example, include an allocation of SMS bundle and if you don’t use it during a certain period it vanishes, despite you having paid for it. If you go to a restaurant and you order a pizza, but you don’t finish it, do they tell you, you’re not allowed to take it home?”

He says the challenge for the telcos is that their business model hinges on recurring business, so they cannot run the risk of the consumer not purchasing that SMS bundle the following month. That is why post-paid is the holy grail for telcos because it is annuity income. If you sign a contract they know that for 24 months that revenue is assured.

“The traditional model of the telcos is that they sell the consumer what telcos think users want. We have seen this where even though most users have shifted to data, most consumers are still saddled with voice minutes that they barely use.. That already leads to the consumer thinking that the telco doesn’t have their best interest at heart,” says Kalebaila. “The only way to turn this around is for the telcos to turn their business models on their head, put the customer first and start providing those customers with what they want. The telco that does this first, will likely emerge as the strongest player in the market.” When the consumer trusts that the telco is acting in the consumer’s best interest and providing them with services that are aligned to their behaviour and need, they will easily transfer this trust to other services that the telco might offer them.

Edited By: Darryl Linington
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