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Telcos are fighting back against the OTTs: By not being telcos

By September 13, 2018 No Comments

There were two threads on LinkedIn this week that indicate that telcos are turning themselves around to start making money from digital content services.

First up was the presentation from Turkcell CEO, Kaan Terzioglu, at Huawei’s OTF event in Munich. It’s fair to say that Turkcell have been a strong proponent of digital content services. They have been changing from “being an infrastructure player to being a real digital operator focusing on the real things that the customers care about”.  To do this, they have been building up a portfolio of content services that they can provide to their customers. As well as increasing revenues, Turkcell is using content to increase the levels of engagement that their customer have with them.

Turkcell have a range of services from music, TV, games, digital magazines / publications that they promote to their customers. These are driving improved company performance across the board. The results they reported in their Q2 2018 report are impressive:

  • Revenues – up 52% in the last two years
  • EDITBA – up 108% in the last two years
  • Mobile ARPU – up 15% in the last two years
  • Churn – down from 8% to 5.5% (they report their competitors’ average as 7% in the last year)
  • NPS- highest in the market and increasing (12 points ahead of 2nd best company, 23 point ahead of 3rd best company)

What’s interesting here is that Turkcell have been trying out new digital services for the last few years and it is now paying dividends. This increased level of activity is, not surprisingly, causing data volumes to grow. The average 4.5G user on Turkcell’s network is now using 7GB of data / month. With 31M Turkcell subscribers using 4.5G services, that’s a lot of data. But the ongoing increase in data volume is viewed not as a concern, but as an opportunity for Turkcell. To quote Kaan Terzioglu “We thought: How to stop being a company — actually an industry — complaining about demand growth and really turning that demand growth data consumption into something useful.”

A key measure that Turkcell has is time spent on customer interaction. They want their customers using their apps and services. Currently, the average Turkcell customer listens to 24 minutes of music, watches 57 minutes of TV and spends 31 minutes reading newspapers and magazine over Turkcell’s digital platforms. According to Turkcell, the average operator has 32 minutes of daily customer interaction. So Turkcell’s interaction numbers are good, and they want to increase them.

Then there’s the venture into payment service with their Paycell offer. This offers direct carrier billing as well as mobile payment / wallet services through their Paycell app. In Q2 2018 there were 169 Million Turkish Lira (about US$30 M) worth of transactions through Paycell and they have 5M mobile Paycell users.

Turkcell are showing that operators can increase content services revenues from their customers. It’s often the culture change and not thinking like a traditional telco that can help open up new digital content services revenues.

But telcos don’t need to go out and develop their own content. We’ll see more partnerships as content companies / digital services companies want to get access to the large customer bases of the telcos who have established payment mechanism set up.

And this brings me on to the second new item from LinkedIn from early this week.

James Crawshaw, a senior analyst Heavy Reading, posted a comment about Fortnite. For anyone who doesn’t have teenage kids, Fortnite was the video game sensation of the summer and helped keep thousands of teenagers away from the sun’s harmful rays and other dangers, like exercise.

Fortnite was developed by Epic Games and currently has 100M active users and generates $300M / month. Next stage is to grow the mobile version. Fortnite is already number 1 on Apple App Store, but it’s not on Google Play. The reason, Epic Games have decided to bypass Google to go straight to Samsung to optimise Fortnite on Android for Samsung devices. What this means is that Epic won’t have to give a 30% cut to Google. (Check out the full background in the Radio Free Mobile article).

Anyway, with content companies potentially bypassing Google Play to offer content on Android, James Crawshaw made a very good point.

“Why don’t telcos bridge the trust and payment gaps by creating app stores within their customer care apps and charge consumers 15% less than Play Store for the same apps (only bothering with the top 20 grossers). The app developer cut would increase from 70% to 80%, the Telco would take 5% (free money) and the consumer would still get a 15% discount”.

As we seen from our recent research, consumers trust their mobile operators more than they trust OTTs. Turkcell have proven that they can get people using their apps and digital services. The opportunity is for other telcos to do the same and succeed by not being a traditional telco.