ITU Regional Workshop on “Strategic HR ManagementITU Regional Workshop on “Strategic HR Management””Cairo Egypt 13-17 April 2008Cairo Egypt 13-17 April 2008
Lecture 3Lecture 3
The changing The changing Market Market
EnvironmentEnvironment
2
The changing market environmentThe changing market environmentPresentation OutlinePresentation Outline
Structure changes Structure changes Major changes in the Service Providers' revenue Major changes in the Service Providers' revenue
structurestructure Pricing policies, Interconnection and PeeringPricing policies, Interconnection and Peering New actors and new business models New actors and new business models Development of Broadband accesses and IP Development of Broadband accesses and IP
based services (fiber and wireless)based services (fiber and wireless) Conclusion : Impact on Human ResourcesConclusion : Impact on Human Resources
3
Telecommunications is the fastest Telecommunications is the fastest changing industrychanging industry
Regulation, privatization and competition are key drivers Regulation, privatization and competition are key drivers
Mobile is becoming a substitute to the fixed-line telephoneMobile is becoming a substitute to the fixed-line telephone
Data is overtaking voiceData is overtaking voice
Internet business model has changed the IndustryInternet business model has changed the Industry
For end users, scarcity is being replaced by abundance For end users, scarcity is being replaced by abundance
Telecom demand is driven by need and affordabilityTelecom demand is driven by need and affordability
Networks are gradually becoming multimedia Networks are gradually becoming multimedia
Inefficient operators are driven out of business Inefficient operators are driven out of business
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Vertical integration and monopolyVertical integration and monopoly
Services
Infrastructure
Market
Monopoly
The monopoly owns the infrastructure and provides services
5
Vertical integration and competitionVertical integration and competition
Services Services
Infrastructure
Market Market
Incumbent Competitor
The incumbent still owns the infrastructure and provides services.
Accounting separation of infrastructure activities
6
Vertical separation and competitionVertical separation and competition
Services Services
Infrastructure
Market Market
Incumbent CompetitorThe infrastructure is vertically separated but still owned by the incumbent, which also provides services
7
Vertical separation and competitionVertical separation and competition
Services Services
Infrastructure
Market Market
Incumbent CompetitorThe infrastructure is vertically separated to an independent company, which is not permitted to provide services
Independent firm
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Services Services
Infrastructure
Market Market
Incumbent CompetitorThe infrastructure is vertically separated to an independent company, jointly owned by the incumbent and the competitor. Both permitted to provide services
Joint – ownership of infrastructureJoint – ownership of infrastructure
Jointly owned
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Infrastructure or facility-based competitionInfrastructure or facility-based competition
Services Services
Infrastructure
Market Market
Incumbent Competitor
InfrastructureInterconnection
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Assignment: Example Sweden. The actual situation in Fixed line. Vertical Assignment: Example Sweden. The actual situation in Fixed line. Vertical separation and competitionseparation and competition
Services Services
Infrastructure
Market Market
TeliaSonera CompetitorThe infrastructure is vertically separated but still owned by the TeliaSonera, which also provides services
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Assignment: Example Sweden. The preferred situation in Fixed line. Assignment: Example Sweden. The preferred situation in Fixed line. Vertical separation and competitionVertical separation and competition
Services Services
Infrastructure
Market Market
TeliaSonera CompetitorThe infrastructure is vertically separated to an independent company, which is not permitted to provide services
Independent firm
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Assignment: Example Sweden. Mobile telephone 2G. Assignment: Example Sweden. Mobile telephone 2G. Infrastructure or Infrastructure or facility-based competitionfacility-based competition
Services Services
Infrastructure
Market Market
TeliaSonera Vodafone (Telenor)
Infrastructure
Interconnection
Services
Infrastructure
Market
Tele2
Interconnection
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Services Services
Infrastructure
Market Market
TeliaSonera Tele2
Assignment: Example Sweden. Mobile telephone 3G. Joint – ownership of Assignment: Example Sweden. Mobile telephone 3G. Joint – ownership of infrastructureinfrastructure
Jointly owned Infrastructure
Market Market
Services Services
Jointly owned
Vodafone Hi3G
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Changes in revenue structureChanges in revenue structure
Changes impact both developing and developed countries with Changes impact both developing and developed countries with different consequences different consequences
ExamplesExamples• End user revenue market in a developed country
• Overall market view in a developing market in a highly competitive environment : Lithuania
• An instructive case study analysis : Telecom Poland (TP Group) revenue structure analysis based on the last 5 years Annual Reports + number of employees
• How does it compare with a telecom operator in Africa? (Tel One Zimbabwe)
Impact on operator strategiesImpact on operator strategies
Note on case studies : All figures are directly derived from published market figures by Telecom Regulation Authorities and from TP and TKL (chosen for case exemplarity and company reactivity on market changes)
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End user revenue marketEnd user revenue marketin developed countriesin developed countries
Electronic communication end user market in France
Fixed telephony including PSTN and invoiced Telephony over IP (excluding ToIP part of multi-play bundles)
Internet services including fixed Internet access, VAS, IP TV and multi-play services
Mobile services including SMS, VAS, MMS, 3G Internet and multimedia mobile services
Source ARCEP, France
Change in accounting
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Telephony becomes IPTelephony becomes IPin developed countriesin developed countries
Delivered as a value added service on top of broadband access, IP Delivered as a value added service on top of broadband access, IP telephony is a qualified substitute to traditional telephone servicestelephony is a qualified substitute to traditional telephone services
Part of IP in fixed telephony services originated traffic (France)
Source ARCEPFixed IP telephony services offered by High Speed Internet access, providers excluding VoIP services on best effort Internet
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Overall communication market Overall communication market revenues in Lithuaniarevenues in Lithuania
Market overall revenues (in million LTL)and growth over the preceding year in %
Leased lines + Datatransmission services
Internet access services Interconnection Mobile communications Fixed telephonecommunications
Revenue distribution in %
0
500
1000
1500
2000
2500
2001 2002 2003 2004 2005
-18% -22% -10% -4%-1%
42% 30% 8% 8%
53% 35% 10%33%
36%30%
34%22%
50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2001 2002 2003 2004 2005
18%
48%
22%
9%
3%
50%
34%
11%5%
1%
Source : Communication Regulatory Autority, Republic of Lithuania
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Study case : Telecom PolandStudy case : Telecom PolandA rather stable business (at first glance) A rather stable business (at first glance)
0
5
10
15
20
2002 2003 2004 2005 2006
Bill
ion
PLN
Revenue Operating profit Net profit
Source : TP group annual reports and presentations of financial results
TP Group results 2002-2006
1 PLN = 3.9 €
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Stable and profitable, but …Stable and profitable, but …
TP Group results 2002-2006
0
5
10
15
20
2002 2003 2004 2005 2006
Bill
ion
PLN
Revenue Operating profit Net profit
Source : TP group annual reports and presentations of financial results
0
15 000
30 000
45 000
60 000
Empl
oyee
s
and employment
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What preparationsWhat preparations Staff count – present jo – classificationStaff count – present jo – classification Future job demand – competence gapFuture job demand – competence gap Define capacity building strategyDefine capacity building strategy What training resources needed – where to findWhat training resources needed – where to find
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… … with a deep and fast change in with a deep and fast change in business and revenue structurebusiness and revenue structure
TP Revenue distribution 2002-2006
0
5
10
15
20
2002 2003 2004 2005 2006
Bill
ion
PLN
Other
Data services
Mobile services
Interconnection to Mobile
Interconnection to Fixed*
Fixed Telephony services
* Includes incoming from International
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Impact of Economical ChangeImpact of Economical ChangeLooking for margins and new revenuesLooking for margins and new revenues
Revenue decline on voice traffic Revenue decline on voice traffic (e.g. from 80% of fixed incumbent revenues in 1995 to 20% in 2006 -Due to VoIP pricing model and competition)
• Incumbent operators to lose margin and renounce to use voice traffic revenues to subsidize Access costs
Interconnection still growing Interconnection still growing • but Bill and Keep and Peer-to-Peer trends
will make it decline later on
Wireless communication is strongly Wireless communication is strongly growing in traffic and penetrationgrowing in traffic and penetration
• but will be impacted by revenue decline on voice traffic
Broadband access and services are Broadband access and services are strongly growingstrongly growing
• With high competition in service offering
New prioritiesNew priorities Operation cost Operation cost
reductionreduction Broadband accesses Broadband accesses
and IP networkingand IP networking Becoming customer Becoming customer
centriccentric Need to innovate and Need to innovate and
be first on marketbe first on market Need to invest on IT, Need to invest on IT,
Service platforms, Service platforms, OSS, Business and OSS, Business and Service ManagementService Management
Re-engineeringRe-engineering
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How will these New Priorities How will these New Priorities impact on the Management of impact on the Management of
Human CapitalHuman Capital??
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The changing market environmentThe changing market environment
Major changes in the Service Providers' revenue Major changes in the Service Providers' revenue structurestructure
Pricing policies, Interconnection and PeeringPricing policies, Interconnection and Peering New actors and new business models New actors and new business models Development of Broadband accesses and IP Development of Broadband accesses and IP
based servicesbased services Impact on Human ResourcesImpact on Human Resources
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Voice pricing is impacted byVoice pricing is impacted bythe disruptive Internet pricing modelthe disruptive Internet pricing model
« Bill and Keep » and peer to peer agreement is the basis of Internet « Bill and Keep » and peer to peer agreement is the basis of Internet pricing modelpricing model• Currently applies to flat rates Internet access and for unlimited Telephony over
broadband for local or national calls to fixed telephone lines
Usage based pricing used to be the traditional model for voice Usage based pricing used to be the traditional model for voice servicesservices• CPP : Calling Party Pays
• CNP : Calling Network Pays (Interconnection fees)
• RPP : Receiving Party Pays (applies to mobile in the US)
• Call connection/attempt fee
• Volume or Call duration based pricing (even when it is a bulk price for x hours of usage as in mobile)
Development of Mobile networks worldwide (outside the US) Development of Mobile networks worldwide (outside the US) benefited from CPP, CNP modelsbenefited from CPP, CNP models
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The future of voice service pricingThe future of voice service pricing
Unlimited flat rate already almost generalized for voice (VoIP) and Unlimited flat rate already almost generalized for voice (VoIP) and Internet connectivity on fixed networks Internet connectivity on fixed networks
• The transition to a flat rate is facilitated by the huge capacity made available on networks by recent technology improvements and by the aggressive drive of some players seeking to build market share.
Trend towards flat-rate charging expected to continue at a Trend towards flat-rate charging expected to continue at a moderate pace and include moderate pace and include
• national/local voice services, internet (broadband) access and usage
• International to all networks where Bill and Keep or RPP prevails
• Internet access and basic multimedia/IPTV services
Billing on duration for international calls (several different Billing on duration for international calls (several different international termination rates) and on duration or by event for international termination rates) and on duration or by event for new services or value added voice and multimedia services likely new services or value added voice and multimedia services likely to continueto continue
• Billing by minutes and interconnection (CNP) fees should continue when Peer to Peer may not apply : Case of developing countries for fixed and more specially for calls to mobile for which Interconnection plays a strong role in the prepaid model of business
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In Africa Price Wars have broken out in In Africa Price Wars have broken out in Nigeria, Uganda, KenyaNigeria, Uganda, Kenya
Free Cares after MidnightFree Cares after Midnight
Uganda 50% free Airtime (MTN & Uganda 50% free Airtime (MTN & CELTEL)CELTEL)
Response by regulator was for free calls Response by regulator was for free calls at certain hoursat certain hours
Price WarsPrice Wars
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The changing market environmentThe changing market environment
Major changes in the Service Providers' Major changes in the Service Providers' revenue structurerevenue structure
Pricing policies, Interconnection Pricing policies, Interconnection and Peeringand Peering
New actors and new business models New actors and new business models Development of Broadband accesses and Development of Broadband accesses and
IP based servicesIP based services Impact on Human ResourcesImpact on Human Resources
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Two New Mobile Operators Licenced in Two New Mobile Operators Licenced in Uganda bringing total to 5Uganda bringing total to 5
One more Mobile Operator licenced in One more Mobile Operator licenced in Kenya, plus fixed Operator getting a Kenya, plus fixed Operator getting a mobile licencemobile licence
New Operators need Staff to roll out New Operators need Staff to roll out their networks. Who is the likely victim?their networks. Who is the likely victim?
New Market EntrantsNew Market Entrants
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New services are booming, each with New services are booming, each with different actors and different revenue modeldifferent actors and different revenue model
I can make a phone call on my PCI can make a phone call on my PC I can receive mails on my mobileI can receive mails on my mobile I can watch TV on my PCI can watch TV on my PC I can connect my old telephone set on ADSL modemI can connect my old telephone set on ADSL modem I can connect my TV on ADSL modem instead of an antenna, I can connect my TV on ADSL modem instead of an antenna,
a cable or a disha cable or a dish I hear music and watch movies on my home cinema, my PC I hear music and watch movies on my home cinema, my PC
or even on my mobileor even on my mobile I can pay my parking of my car with my mobileI can pay my parking of my car with my mobile Change in social behaviorChange in social behavior
Technological evolution, Economical revolutionTechnological evolution, Economical revolutionNew business models, multiple interactionNew business models, multiple interaction
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Communication services are not any more Communication services are not any more the private domain of telecom operatorsthe private domain of telecom operators
End User Retailer
AccessProvider
ServiceProvider
(open)
ServiceProvider
(Wholesaler)
Multiservicesubscription
applications
accesswholesales of
network resourcesor revenue sharing
subscriber datanative applications
ConnectivityProvider
ConnectivityProvider
wholesalesof services
Interaction
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The changing market environmentThe changing market environment
Major changes in the Service Providers' Major changes in the Service Providers' revenue structurerevenue structure
Pricing policies, Interconnection Pricing policies, Interconnection and Peeringand Peering
New actors and new business models New actors and new business models Development of Broadband accesses and Development of Broadband accesses and
IP based servicesIP based services Impact on Human ResourcesImpact on Human Resources
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In many countries ADSL is the initial In many countries ADSL is the initial driver for broadband and IP servicesdriver for broadband and IP services
ADSL subscribers as % of Country main lines
0%
5%
10%
15%
20%
25%
30%
35%
40%
dec-
01
jun-
02
dec-
02
jun-
03
dec-
03
jun-
04
dec-
04
jun-
05
dec-
05
jun-
06
dec-
06
France
Morocco
Lithuania
Turkey
Poland
Senegal
South Africa
Egypt
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High speed Internet access is a facilityHigh speed Internet access is a facilityThe issue is to grow revenues and marginsThe issue is to grow revenues and margins
35
The broadband revolutionThe broadband revolution
DSL is shaping the market in terms ofDSL is shaping the market in terms of• Growth pattern and need to have:
• Service delivery oriented business models
• NGN architecture deployment
• Competitive landscape and service providers’ interactions
Wireless broadband access (e.g. WiMAX, 3G 4 G) Wireless broadband access (e.g. WiMAX, 3G 4 G) likely to take over the marketlikely to take over the market• Nomadism and Mobility,
• Access to service where DSL is not available
• Affordability in remote areas, even dense areas diversification, fair competition
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The changing market environmentThe changing market environment
Major changes in the Service Providers' Major changes in the Service Providers' revenue structurerevenue structure
Pricing policies, Interconnection Pricing policies, Interconnection and Peeringand Peering
New actors and new business models New actors and new business models Development of Broadband accesses and Development of Broadband accesses and
IP based servicesIP based services Impact on Human ResourcesImpact on Human Resources
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Key strategic move impacting HR Key strategic move impacting HR managementmanagement
Accelerating broadband access penetration (+ local loop Accelerating broadband access penetration (+ local loop unbundling when applicable)unbundling when applicable)
• Impact on subscriber line management and outside plant quality handling, reduction of cost of ownership by automation of operation support systems and processes
• Deployment and management of new Broadband Wireless Access
Introduction of new servicesIntroduction of new services• Marketing and Market Strategy in Company driving seat• Aggregating content and dealing with Content Providers
Deep change in commercial practice and organizationDeep change in commercial practice and organization• Convergent Point of Sales for residential and mass users• Reinforce (or create) business customer sales including Key Account Managers• New distribution channels• “Flexible” pricing strategies
Maintaining cost control and rebalancing resourcesMaintaining cost control and rebalancing resources• Re-engineering and restructuring into separate business units• Replacing static remotely localized teams by centralized mobile intervention teams
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Human ResourcesHuman ResourcesWhat is changing what ?What is changing what ?
Competition (driven by Internet, Regulation and Globalization)Competition (driven by Internet, Regulation and Globalization)
improving internal efficiency improving internal efficiency (process transformation)(process transformation)
Improving CRM* supporting Improving CRM* supporting platform and associated platform and associated processesprocesses
Reducing time to market for Reducing time to market for new servicesnew services
Managing customer satisfactionManaging customer satisfaction
Ability to carry out instant deployment of the staff
Growing guidance provided by the Marketing and Finance Departments
New skills required from ALL Managers: financial, legal, regulatory, coaching ability, team leadership, etc,…
New corporate requirements in terms of career management
*CRM : Customer Relation Management
39
Technology, New Services and ConvergenceTechnology, New Services and Convergence
Towards all-IP networks and Towards all-IP networks and services services
Regrouping fixed line / Internet / Regrouping fixed line / Internet / mobile commercial organization mobile commercial organization to mass usersto mass users
Developing and marketing Developing and marketing convergent solutions for convergent solutions for residential and mass usersresidential and mass users
Developing and marketing Developing and marketing convergent solutions for business convergent solutions for business users and application providersusers and application providers
Growing number of virtual Job positions
Drastic reduction of the number of technical staff
Growing dependence of the staff from the Management Information System
Growing number of “nomad” employees
Intensive use of Knowledge Management (learning entreprise)
Human ResourcesHuman ResourcesWhat is changing what ?What is changing what ?
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Changing Mentality and Changing Mentality and OrganizationOrganization
From infrastructure and basic service delivery operations to From infrastructure and basic service delivery operations to customer-centric commercial activities in a competitive customer-centric commercial activities in a competitive environmentenvironment• In depth changing of mentality toward innovation, sales and marketing
and streamline operations
• Setting up and managing a strong CRM system and organization
• Ensuring that each employee benefits from end-to-end visibility on the network as well as on the delivery of services
Enterprise and business customers as a key target for the Enterprise and business customers as a key target for the former incumbent operatorformer incumbent operator• Country coverage Network and Points of Presence
• New converged communication service handling : IP VPN, IP Centrex, fixed and mobile voice and data services.
• Communication management services offered to large enterprises and organization (outsourcing)
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Major issues in HR managementMajor issues in HR management
Change in employee status (from Public Administration to Change in employee status (from Public Administration to private company rules)private company rules)• Ability to hire qualified personnel for accelerating the development of new
services• Ability to promote and managed the careers of most qualified and efficient
personnel
Developing new capacity building to handle new range of Developing new capacity building to handle new range of activity activity
Managing and defining new job families (design)Managing and defining new job families (design) Setting up talent review and focused career development Setting up talent review and focused career development
programs for highly qualified employeesprograms for highly qualified employees Setting up extended personnel conversion programs and Setting up extended personnel conversion programs and
organizing career-oriented deployment scenarioorganizing career-oriented deployment scenario Facilitating staff mobility and personal initiativesFacilitating staff mobility and personal initiatives
42
Without an Understanding of the Without an Understanding of the Business, its direction and Challenges, Business, its direction and Challenges, HR cannot be in a position to make a HR cannot be in a position to make a meaningful contribution in terms of meaningful contribution in terms of planning and responding.planning and responding.
The environment is changing too fast and The environment is changing too fast and only those who invest in anticipation have only those who invest in anticipation have chances of survival.chances of survival.
CONCLUSIONCONCLUSION
43
Telecoms is a Technical field. We need to Telecoms is a Technical field. We need to understand the technical aspects of this understand the technical aspects of this business.business.
But business is about money. HR needs to But business is about money. HR needs to understand the financial aspects of the business.understand the financial aspects of the business.
Even in Regulation, you cannot regulate Even in Regulation, you cannot regulate businesses you do not understand. Those who businesses you do not understand. Those who practice HR in a regulatory environment need to practice HR in a regulatory environment need to understand the businesses of their industry.understand the businesses of their industry.
CONCLUSIONCONCLUSION