|Asia-Pacific III 2008
|Driving sustained growth in emerging markets
|Vice President for Strategy and Corporate Development,
|Mobile TeleSystems OJSC
Michael Hecker is the Vice President for Strategy and Corporate Development at MTS. Prior to joining MTS, Dr Hecker worked at A.T. Kearney Europe consulting in the fields of strategy, marketing and finance in European telecommunication and consumer goods industries. Prior to that, he worked in several positions as a junior lawyer in Berlin and Brandenburg (Germany). Michael Hecker graduated with a degree in International Politics and Administration from the Pierre-Mendez-France University in Grenoble, France, and is a graduate in Law and Modern History of the Georg-August-University in Goettingen, Germany, with a PhD in Constitutional History.
Developing markets are unique but have much in common and can learn from each other’s best practices. Russia, a vast country with a wide variety of cultures, is an emerging market with an increasingly sophisticated mobile market that includes users in the surrounding CIS states. The challenge in developing markets is to deliver ubiquitous communications. Since mobile phones are often consumers’ first access to communications, operators have a unique opportunity to grow offering mobile value-added services, content and broadband.
Every developing market is unique, but there are common traits that companies can choose to follow to enjoy long-term growth. Russia is a very special emerging market – a vast country with an increasingly sophisticated mobile market surrounded by the CIS states that look to Russia for communications development. The region has an extremely diverse population that witnessed rapid growth in GDP and disposable income level over the past few years. This has allowed many people to buy their first mobile phone and the communications spend has significantly increased. As we have learned, driving growth in emerging markets requires establishing a quality-focused brand and leading the market in innovative practices. With an average GDP growth of seven per cent per annum, the CIS is one of the fastest growing regions in the world with a population that has enjoyed a rapidly rising disposable income level. For mobile operators, this presents an excellent opportunity to replicate the levels of mobile penetration and revenues seen in the developed countries. Mobile communications is a service that consumers are eager to try and, once they are comfortable, it becomes a vital part of their everyday life. For instance, over 50 million people are expected to buy their first mobile phone in the CIS over the next five years, presenting an excellent opportunity for regional mobile operators to offer them innovative and market-leading communication solutions. One of the greatest challenges for mobile operators in developing markets is to deliver ubiquitous communications to consumers. Operators in these markets supply what, in many cases, is likely to be consumers’ first access to communications, opening up a world of opportunities and experiences previously unavailable. By doing this, companies have a unique opportunity for growth by building high-quality networks and offering innovative services, such as value-added services, mobile content and mobile broadband. Building the brand In order to capitalize on the growth in GDP and disposable incomes, operators need to employ aggressive marketing aimed at attracting subscribers, stimulating usage and delivering new services. The key to this marketing strategy is harnessing the power of a strong brand. As the market develops, differences in network quality will become less pronounced among competitors. The next stage, following technology leadership, starts when superior offers and products begin to define the market. The final stage of market development is when the brand itself becomes a clear differentiator, through which a mobile operator is making a promise – which he must always deliver on. By building a solid and trustworthy brand, operators create an avenue for direct communication with consumers. This allows effective delivery of consistent and powerful messages across all markets of operation. Building a strong brand has proved vital in Russia and the CIS, where messages have to reach a very diverse and eclectic population. It is also important to employ the best marketing talent available, whilst a mix of local and expatriate management ensures the development of the best-in-class strategy. The brand needs to be based on something concrete, and superior quality-to-value ratio is a very strong underlying message. The delivery of high-quality networks and services demonstrates that an operator can serve a growing subscriber base and ultimately deliver a new medium of communication. Another vital part of the marketing strategy is a localized approach to customers and tariff offers. Segmentation proved to be a key growth factor in Russia and the CIS. A segmented approach to consumers allows operators to tailor plans to cater for diverse customer groups such as women, migrants and businessmen. Detailed segmentation of customers by socio-economic and cultural profiles leads to the adoption of segment-focused tariff plans. Finally, partnerships with the leading local international brands are particularly effective in emerging markets. Consumers are already familiar with these brands and see them as reliable and high-value, so partnerships can aid credibility and strengthen the core message of quality of the local operator. For instance, we have partnered with leading local companies such as Odnoklassniki (the largest social network), Mail.ru (the most popular email service), Yandex (the dominant search engine) and such international brands as Microsoft, Fujitsu Siemens Computers, and Universal. Moving beyond voice Innovation and market-leading execution present the next frontier for mobile operators to drive revenue growth in emerging economies. Although voice services form the basis for revenues in high-growth markets, as these markets mature, additional services such as content services and mobile broadband are becoming central to sustain growth. As operators in developed markets have witnessed, once mobile penetration nears 100 per cent and the growth in voice usage slows, mobile Internet and content services present the best opportunity for growth. Given the wide adoption of HSPA networks and devices, delivering mobile broadband presents a viable strategy for growth. HSPA has already been selected as the preferred 3G network choice; as of July 2008, over 267 operators have committed to deploy HSPA networks and 193 operators have launched these networks in 90 countries worldwide (GSM Association data). HSPA networks were launched across Russia in May 2008, with commercial launches in St Petersburg, Kazan and Sochi; there are aggressive plans to deploy networks in all the major Russian regions by 2010… As in many developing markets, fixed lines are scarce in Russia and the CIS, so many consumers’ first Internet access may come through the mobile network. As these markets become increasingly sophisticated, the demand for value-added services increases and operators are able to build additional revenue streams. At the same time, while many western countries face the burden of legacy networks, developing markets’ have little legacy infrastructure to contend with, so they do not face the same network upgrade challenges – rather, these markets can leapfrog older technology and deliver superior services from the get-go. In Russia and the CIS, 3G-enabled handset penetration is growing rapidly as the stylish devices with innovative capabilities enter the market. Consumers are eager to explore the latest technology, this leads to an uptake in the data services that are often integral to the functionality of these devices. Advances in equipment design and the opportunity to launch services with speeds comparable to DSL makes 3G networks a compelling product for consumers who previously may not have had a suitable broadband alternative. Operators in emerging markets can learn a lot from looking at the best practices in Russia and the CIS. All developing markets are different, but some things are true everywhere – consumers are eager to communicate and realize the potential that mobile networks and Internet access brings to them. By laying a foundation of quality and strong brand values, operators can develop forward-looking solutions that enrich consumers’ lives and subsequently help deliver sustained growth to their shareholders.