With the bold ambition to transform itself into a well-rounded ICT solutions provider, UAE telco, du, is increasing its investment by 18% in 2017 relative to 2016. Chief commercial officer, Fahad Al Hassawi on how differential experience is giving du the competitive edge.
In 2017 du is all set to invest in order to broaden its horizons and continue transitioning from a connectivity provider to a ICT solutions provider. This year the operator is embarking on an 18% increase in its investment compared to 2016. This investment will be directed towards enhancing network and infrastructure. Beyond financial investments, du is investing in its human capital and equipping them with skill-sets since the telco believes this is critical to steer the company towards new business avenues and growth areas.
CommsMEA had the chance to speak to Fahad Al Hassawi, the CCO at du, a few days after his return from the Mobile World Congress 2017 in Barcelona. Upon being asked about the most interesting aspects of the MWC 2017, Al Hassawi highlights the new digital and networking capabilities with 5G round the corner, and the various new use cases and unconventional revenue streams these will unleash for operators worldwide. “Everyone needs to change their thinking from just selling data and minutes to selling other types of services,” he says.
du completed the year 2016 with a 3.2% increase in its annual revenues and a 12% increase in mobile subscribers. However, mobile ARPU decreased 12.5% YoY relative to 2015. While net profit before royalty remained flat, the net profits after royalty decreased 9.7%. Explaining the declining ARPUs, Al Hassawi says this is an industry wide phenomenon, adding: “At times it’s a healthy sign of penetration; the more you penetrate into the market, the deeper you go into different sizes of wallets, the ARPU figures tend to change.”
In terms of profits, while several key indicators showed improvement in 2016, a near 10% rise in the amount of royalty paid to the government meant net profit for the telco was lower compared with the previous year. Al Hassawi highlights that in spite of the challenges, du delivered a healthy bottom line for the shareholders.
Al Hassawi adds that in spite of being a market with just two telcos, competition has always persisted. In the attempt to win a larger share of customers’ wallets, operators have resorted to price reduction several times and that has eaten into the ARPU numbers as well.
So, how have the economic uncertainties affected du? “Unfortunately we aren’t completely immune to the situation of the market, but I think we did a fairly good job as an industry in 2016,” says Al Hassawi. “But we still see growth on top line which means the market is still healthy.”
Going forward, as the role of telcos in the ecosystem changes, they have the potential of becoming bigger players in the ecosystem. With a lot at stake, what will be the main revenue generators for du? Al Hassawi says that the core business is still strong and growing, however the growth rate isn’t enough as a consequence of which innovation is all the more necessary to devise newer revenue streams.
Every operator worldwide is finding new sources of revenue, at times from entirely new digital streams, and at times from something nearer to the core business. Bringing in an interesting proposition, Al Hassawi says once service providers understand in more detail the exact needs and preferences of the customers, it might be possible to provide a specially tailor made experience to them for an extra premium in price they pay for the services. Hotels have been traditionally resorting to this model; being yet another service industry, it might not be long before the telecom industry adopts a similar model. But how feasible will that be? Rafael Domane, senior partner at Peppers & Rogers Group says it’s primarily centred around the perception; if customers see distinct value in the service, they might be convinced to pay an extra premium for that. What’s needed is a better understanding of the customer behaviour, innovative customised value propositions and the right execution model to implement it in practice.
du has ambitious plans to become an ICT provider and has a whole host of revenue streams that it is currently targeting. Al Hassawi says: “We continue to innovate and strengthen our mobile services which currently contribute to 33% of our revenues. As well as enhancing our unconventional revenue opportunities which currently represent 2%, this year we will focus on further developing our enterprise mobility, managed and cloud services and push further into the digital space, increasing opportunities around smart homes and smart cities.”
Talking of smart cities, or for that instance, internet of things or virtual reality and connected things, one tends to wonder if all this future planning takes the attention away from the present day challenges. Al Hassawi says: “I don’t see us thinking of the future distracting us from the present challenges. I think they complement each other and this is the evolution of the industry itself.”
Telecommunications as an industry has invested heavily in capex. Even looking at just the UAE market, it can be seen that both du and Etisalat have been investing heavily in networks, trying to make it faster, available everywhere, and they have done far better than many other operators in developed countries of Europe and America. Al Hassawi says that going forward, the operators still need to continue to invest in networks to make them capable of carrying much more data traffic to support all different use cases that could come up from going smart and digital.
du has been selected as a partner by the government’s Smart City arm for deploying smart solutions in Dubai. “Dubai has announced its target of 1000 new smart services; all of this will require the right backbone in terms of network and capabilities to support the services and the use cases,” Al Hassawi says. “Our contribution as the digital infrastructure provider for the Dubai Smart City is a prime example of how we are expanding our horizons in the foreseeable future. We are committed to looking at the complete value offering and provide customers with cloud and co-location services and this represents a growing segment. To sum it up, our systems and infrastructure are flexible and nimble to adapt to the business realities of today and tomorrow.”
Unlike several other countries in the Gulf region, Dubai is relatively better off in terms of connectivity and penetration. Being a saturated market, making profits might tend to get harder. The scenario is also different from the markets with more than two operators. In a heavily penetrated market like the UAE, the prime differentiator is now going to be the distinctive experience offered by the operators. “I don’t think that differentiation in terms of tariff innovation and price is going to be sufficient. We both need to differentiate with the right experience,” says Al Hassawi.
He adds that du is focussing on the differentiation through better customer experience. The operator is moving to digital both by creating new services as well as moving various of its current service models to more digital ones. The rising popularity of Instagram, Snapchat, and other OTT players in the region has set the bar high in terms of experience, and that’s a realm telcos still have much room to grow and catch up.
Al Hassawi says the telcos are mostly well-equipped from a technology point of view; what remains to be done is to define the right experience for the right customer. The customer segment in the UAE is as diverse as it can get, in terms of nationalities, age groups, languages or their overall preferences and usage behaviour. It is crucial to tailor the experience for the right segment in the right way.
Operators until recently were complacent and myopic in their mind-set, simply looking at connectivity. Today, customer’s demand more than just connectivity, looking instead for real-time solutions and information; this offers a perfect opportunity that operators should be looking to fulfill. Al Hassawi says: “The digital transformation is a key aspect to the revenue mix and customers are searching for something different. As an operator we face changes in this paradigm. Due to this we are looking at a more diversified approach with an increased focus on ICT solutions that cut across different industries.”
The industry as a whole is a dynamic environment ripe for disruption, with ongoing uncertainties with regard to privacy. “Converged regulations, spectrum allocation, net neutrality and increasing data-centricity are challenges coming over the horizon. Not only are fixed and mobile convergence adding to the pressure of operators on a regional scale, they are also impacting on a global scale,” says Al Hassawi. He stresses that customer experience is a dominant agenda and one that must be handled with agility, efficiency and a focus on enhanced network quality. “Differentiators including convenience and enhanced trust from customers are a key dynamic in nurturing loyal customer relationships.”
As far as du's service divisions are concerned, Al Hassawi says that the scope of business spans a wide depth of field from pure connectivity solutions for individuals to complex enterprise solutions. “Albeit, the scope of services keep evolving commensurate with the needs of our customers and our business priorities. The noteworthy point is the shift in mindset that is in play to make it happen. This I believe is a true reflection of our aspirations, ” he adds. As an example, in the last three years, du has announced a separate business unit to handle enterprise to give dedicated focus to the segment which is growing very well and the results have justified the efforts.
du has been mostly positioned as a youth-centric brand. One might wonder if the the telco will revise its strategy with the entry of Virgin Mobile into the UAE. Al Hassawi says that while certain commonalities may exist between brand philosophies of du and VM, both have their unique appeal and customers will make a choice depending on the way they prefer to do business with their telco provider.
Basing its strategy around a differentiated experience, the telco has been engaged in several initiatives to revamp its customer service levels. Backed by several focus group discussions, market research data and analytics, the telco has been trying to profile the customers into different segments, understand their likes and dislikes and redefine priorities accordingly to serve them in a better way.
du likes to be perceived as the younger player in the market. “We are a challenger brand,” says Fahad Al Hassawi. “We still want to focus on being innovative. We want to show the customers that we are bold in our digital ambition as well; our move with Virgin is only demonstrating this.”
He re-emphasises the telco’s focus on customer experience and agility, and adds that customer loyalty is something which is hard to achieve, but once attained, it’s an asset. “I would like the customers to feel in terms of customer experience du is providing a much superior service than the competition.”