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This article first appeared in Forum, The Edge Malaysia Weekly on January 15, 2018 - January 21, 2018

Southeast Asia’s mobile telephone markets, long characterised by take-no-prisoners price wars and boisterous marketing campaigns, have entered a new phase. Some markets are beyond saturated — they have penetration rates greater than 100%, meaning that there are more mobile phone accounts in use than there are people who use them.

In such an environment, operators can no longer prosper by endlessly cutting rates in the hopes of wooing customers away from competitors. An obsessive 

focus on customer acquisition has driven down revenues and crimped margins. Across major Southeast Asian markets, average revenue per user has been stagnant or falling since 2006.

Forward-looking carriers are developing approaches that focus on providing a superior customer experience, not the lowest price. They are investing heavily in their networks, with the aim of delivering fast and reliable service, especially for the data-intensive videos and apps that are overtaking voice and text as the main reasons people use their phones.

Customers themselves have made their priorities clear. They want strong voice connections with no dropped calls, fast video downloads and hassle-free social media access, according to a Bain & Company survey of over 4,000 customers in the five largest economies in the region — Indonesia, Thailand, the Philippines, Malaysia and Singapore. Customers across Southeast Asia give their carriers particularly low marks for data-intensive episodes such as video streaming.

Leading telcos realise that their customers’ priorities have changed. No longer solely interested in the cheapest plans with the most minutes, they are willing to pay for high-quality connections, broad network coverage and reliable service, especially for data.

In Thailand, for example, TrueMove H was the first operator to roll out 4G service, and it established itself as a leader in network coverage. TrueMove H’s prepaid revenue grew 229% from 2013 to 2016.

Telkomsel of Indonesia has used a differentiation strategy aimed at another segment of customers — those who value a superior experience for more basic activities such as calling and texting. In fiscal 2016, Telkomsel’s revenue grew 13.5% and its earnings before interest, taxes, depreciation and amortisation rose 15.7%.

In some markets, operators can still compete on price, establishing a value-for-money proposition that is based more on the rates charged than the experience delivered. This approach requires a lean cost structure and an agile ability to react quickly to market trends. Malaysia-based 

DiGi.Com Bhd, for example, is a company that has established cost leadership in its home market.

One operator that has combined a differentiated pricing and segmentation strategy is Philippines-based Globe Telecom. The company offers a wide variety of usage plans, including some for short periods, at prices that consumers find attractive. The company also offers special plans for heavy users of certain apps. Globe’s revenues have grown around 30% over the past three years.

As Southeast Asian telcos develop strategies in a rapidly evolving marketplace, their first step is to determine what kind of usage experience specific customer segments are looking for. This is no easy task.

Operators typically measure performance from the perspective of their network, not the user. These metrics can be misleading. For example, the average dropped-call rate for an individual cell may be relatively low on a particular day, but it may not show that many users are experiencing repeated dropped calls during peak periods such as the morning and evening commutes.

When operators make investment decisions, they often aim for a uniform capacity threshold across the network. Using such an approach, a company may choose to upgrade a cell serving a sparsely populated rural area to bring it up to a minimum standard rather than further enhancing the service in a densely populated urban area — even though the latter investment would generate more value for both the company and its customers.

Operators can avoid falling into these measurement and investment traps by using sophisticated technology and advanced analytics to track actual customer experiences. Instead of talking about managing for average performance across the network, operators can then focus on which customers are having poor experiences, when and why, and then take steps to fix the problems.

As operators achieve a better understanding of how their customers are using the network, they can escape the destructive price wars and customer-acquisition battles that lead to restless users and excessive churn. By thoroughly understanding how their customers use their phones and what they value, companies can build differentiated strategies. That can lead to a more rational deployment of capital, higher revenues — and happier customers.


Florian Hoppe and Emmanuel Coucke are partners at Bain & Company’s telecommunications practice in Singapore and Kuala Lumpur respectively

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