Tuesday, October 24, 2006

Operators must cut costs!!!!!!

Mark Newman justifies his Thought Leader title over at Informa Group. With a well argued feature on what were the drivers behind the Vodafone CPW split.

He states that the issue in a market in which everyone who wants a phone has one is churn and the high cost of SACs. Over the last few months conversations with other Consultants has shown that the networks are currently running at SACs of €6 billion in the larger markets in Europe BEFORE advertising. Hence the networks current efforts to get as many as possible onto a contract at that contract to last as long as possible.

The new mantra is CLV when it comes to judging the value of a customer. It is no longer about my ARPU or MOU as with margins falling these metrics are not likely to give a network a view on my value.

The issue that I have with the cost reduction strategy currently in play. What will hold back the drive to cut costs is that fact that Vodafone is a twenty plus year old business and as such has a vast legacy system. It is this legacy anchor that is stopping networks moving forward.

What stopped O2 from following the others leaders in the UK towards the adoption of 3G services? It was not the fact that the Executive did not have a desire to jump into broadband wireless services. It's the fact that its billing system is a basket case and as such its has forced the Executives to manage the assets better than rivals!

I am sure that Vodafone has the same issues when it comes to legacy systems holding back the delivery of services that might just cause customers to increase spending.

With Orange and T-Mobile the businesses are only teenagers but as a parent I know too well what that means in terms of growing pains.

So my question to those working in the Networks is this, what are you going to do to remove the issue of legacy systems? In talking to some of the brighter guys, the issue does not seem to be IMS because that will take too long to come to market but rather SDP. The Network at present with the benchmark for SDP seems to be TurkCell who have something that a large number of others can only wish for when it comes to a blackbox that makes all the new and old stuff work.

For the rest out there I guess what the CEO needs to start talking about at investor presentations is the need to resolve the "legacy anchor" with a Y2K type approach that says we have to stop rushing forward to new technology and do some housekeeping if we are to become more than just a dumb pipe because if we keep going on at this rate thats all we will be able to do. Now which of the Networks has a CEO brave enough to tell the truth?

1 comment:

Guy Kewney said...

Spot on. I've just linked to this story at NewsWireless because I think it's really important.

Someone has to start the cries of "But the Emperor is stark bollock naked!" and in the absence of an innocent little child, I'm happy to say it!