The telecommunication market in 2009
The telecommunication market in 2009 Market survey
About the author Till Roth is responsible at Intrum Justitia for providing credit and risk management solutions to the telecommunications industry in Germany, Switzerland and Austria. Based on several years of experience in the services sector, he has a profound understanding of the telecommunications industry. In his former positions, he held responsibility for developing and implementing outsourcing solutions in the areas of data management, CRM, logistics, and finance. Till Roth holds an MBA from the universities at Mannheim and Toronto, is married and has two children. Contact details Name: Till Roth Function: Credit Management Services Consultant Cell Phone: +49 172 69 20 270 E-Mail: [email protected]
The telecommunication market in 2009 Introduction Today, the IT and telecommunication’s industry is an important segment of the European economy: with more than 800,000 employees in Germany alone, it totalled revenues of 145 billion EUR in 2008. Its gross added value grew by more than 50% since 1995 and now stands for 6% of Germany’s GDP – even more than the gross added value of German car manufacturers. With the global financial crisis in 2009, the past growth rates will not be as easy to achieve. Experts from IDC expect the global economic crises to speed up significantly the ongoing process of change in the IT and telecommunications industry regarding new business models, convergence of technologies and the focus on profitable market segments and thus act like an “economic pressure cooker.”1 Also the telecommunications industry will see the effects of this downturn: as revenues decrease, companies must focus on their core competencies, readjust their market position on profitable market-segments with above-average growth rates.
Impact of the financial crisis on the telecommunications market The IT and telecommunications industry have seen strong growth over the last decade. Historically, its revenue expectations have always been optimistic and well above the revenue-expectations of the overall industry. Recent studies though already considering the financial crisis do show a dramatic decline in revenue expectations for 2009 of 75%, the lowest value in over 10 years.2
Chart 1: Development of revenue expectations 4th quarter 2009: IT & Telco industry3
Interestingly, especially smaller companies see more potential for growth than bigger companies even in this economic crisis and expect revenues in 2009 to rise. As they are more focused on their core-competencies and have already outsourced all non-core functions, they are quicker to adapt and re-focus on profitable market segments than bigger companies. Accordingly, the majority of the latter actually expects a decrease in revenues in 2009.
1 IDC Predictions in 2009: An economic pressure cooker will accelerate the IT industry transformation 2 Ifo-Konjunkturtest: Stand Nov. 2008 3 BITKOM, 25. Branchenbarometer
3
Chart 2: Revenue expectation of IT and telecommunications companies in 2009 4
Market trends in the telecommunication industry The telecommunication industry is in the middle of one of its most fundamental changes since its birth more than 130 years ago. Old paradigms in the fixed line business are being questioned by the fast paced technological developments towards broadband and IT, regulatory measures as well as the creativity of competitors. The technological convergence breaks up the traditional value chain and structures, old borders between market players are diminishing. Established and alternative telecommunication provider as well as cable companies are facing fierce competition amongst each other, while mobile carriers, reseller and service providers without an own infrastructure are also working on gaining their part of the market.
Telecommunication provider To be ready for these new challenges and to better be able to defend their current market position, telecommunication providers are investing heavily in various areas: • • • • • • • •
4
Securing their existing speech telephone revenues which are endangered by substitutional effects, e.g. mobile communication or internet telephony (VoIP) Massive expansion of broadband business with increasing transfer rates by using new data transfer technologies Repositioning from data provider to a content provider, especially in the area of TV (triple play), to get access to new revenue streams High customer involvement into the value chain (customer energy) by reducing complexity in usage for the customer at the same time Expansion of offer towards business clients, especially in the areas of IT, outsourcing, and international offers Optimization of cost structure (processes, procurement and supply chain) to establish the necessary flexibility regarding price and product offering Switch into a client focused organization including mobile communication (fixed mobile convergence FMC) towards a quad-play offering Internationalization via acquisitions as well as via virtual business models (with reseller, MVNO) to raise international synergies
4 BITKOM, 25. Branchenbarometer
Quadruple Play
Triple Play
Chart 3: Convergence in the telecommunications market 5
Mobile carriers After years of continuous dynamic and profitable growth, the mobile communications industry will face a phase of slower growth rates and more stability. Nonetheless, also this young industry faces permanent changes which forces its players to continue to challenge their business models and reinvent themselves, given the • • • •
Increasing price pressure that can only be answered by differentiation Pending regulatory measures by EU or the federal net agency (Bundesnetzagentur) Upcoming converging services through „fixed-mobile-convergence ( FMC)“ and (too) slow growth in data services
Differentiation The price for mobile communication has seen a decrease of more than 10% in Germany over the last 12 months. At the same time, a number of new competitors, so called „Mobile Virtual Network Operators (MVNOs)“ have newly entered the market. As a result, the market is overwhelmed even further by a hard to oversee amount of carriers, “brands”, and prices. A company’s market positioning and its distribution strategy – via own shops, resellers or via the internet – becomes even more important for its long–term success.
5 Bundesnetzagentur, Roland Berger
5
Regulation While up to now mobile communication carriers have only been little exposed to governmental regulation, this is changing at the moment with the government strongly the markets and competition. Voluntary price reduction (e.g. in international roaming) have not been sufficient in the past. And while fixed line operators are already used to realign their product calculations according to the regulator, for many mobile carriers this is new turf.
Convergence After years in which „fixed-mobile-substitution (FMS)“ was the center of attention, convergence is now taking its spot. While media companies have been feeling the effect of data digitalization already for some time, telecommunication providers are just now putting an interest in converging technologies. Both mobile carriers with their “home zone” offerings as well as fixed line operators with their corresponding “one phone” offering are bringing a new point of view to the market. The question via which net, access form or end device a consumer handles his communication is increasingly becoming irrelevant. The focus is much more on identifying the most profitable customer segments and their optimal penetration.
Data services The establishment of third generation wireless network (3G or UMTS) is vastly finished. Thus, a majority of inhabitants could now take advantage of these data services. On the contrary though, usage numbers are still not developing as the industry had hoped for. On the one hand, the most popular offerings – which happen to be the most lucrative for the carriers at the same time – like ring tones and background pictures can also be send via the existing GPRS (General-Packet-Radio-Service). On the other hand, there are still no “killer applications’ that require a 3G data transfer and cannot be otherwise realized. The industry hopes that mobile games, mobile TV, and picture telephone will be these applications. These though require the enhanced UMTS HSDPA/HSUPA (high speed downlink/uplink package access) which are currently just being built into the network. Only „no frills operators“ want to abstain from higher value added services, which will lead to a further differentiation of the market.
6
7
Mobile penetration in Europe and the US Today the number of mobile lines in Europe is still increasing – despite the fact that in many countries on average already more than one mobile device (incl. prepaid-cards) per inhabitant exists already. More and more people use business and private mobiles devices separately. Also, the number of pure data cards is still increasing, with approximately 12 million UMTS-cards in the market at the moment. The European market is lead by Italy and Sweden, with 124 and 116 mobile connections per 100 inhabitants respectively. Traditionally, mobile penetration in the Nordic countries has always been high, but with strong growth in the United Kingdom and Germany over the last years, they are also amongst the leading countries with regards to mobile penetration. Comparing the European average of 98 mobile connections per 100 inhabitants to the USA, it shows that European mobile penetration is higher than in the US. Different technology standards, a strong regionalization of mobile carriers, and the lack of roaming agreements have led to lack of acceptance on the customer’s side there.
Italy Sweden United Kingdom Norway Denmark Germany Finland Spain Western Europa Switzerland France Eastern Europe USA Japan World Chart 4 : Mobile phones per 100 inhabitants in 2007 6
8
6 BITKOM, Basis: EITO
Cable companies With the expansion of their infrastructure nearly at a finish, cable companies are just now ready to strike established telecommunication companies in their traditional markets. This will bring about a fundamental paradigm shift in how consumers use media technology, which will also pose significant challenges onto these new market players: • • • • •
Targeted expansion of cable infrastructure for higher band width, higher household penetration and twochannel communication Transfer of the existing business model of free TV in Germany into a chargeable version Bundling of attractive packages regarding content, services, and devices (triple-play) and expansion of the offering towards mobile (quad-play, MVNO) Development of new value added services together with content providers (interactive TV) considering regulatory restrictions Establishing the company’s brand and increase sales efforts for higher market penetration
Comparing the European situation to the USA, it shows that fast internet access and broadband-technology is far more common overseas. With the strong growth of e.g. DSL-connections in Europe over the last 5 years, the US’ ledge could be reduced, nonetheless, the use of TV-cable for quick internet access is still on a slow growth path in Europe. Today, in the US, more than half of US-households already use broadband access via cable; in contrast, in Europe mobile technologies are more commonly used.
9
Revenue opportunities and risk management challenges Recent surveys show that the market for telecommunication services will decrease by 1.1% in 2009 vs. 2008. It becomes ever more important for telecommunication companies to target the right customers and avoid debtor losses through inefficient credit management processes. With the entry of new players into the market and the increasing strong pressure for technology convergence, companies must readjust their market position. It becomes crucial for a company’s survival to know its customers in detail in order to be able to offer the right products at the right price to the right people. Telecommunication companies cannot afford to lose market share because of lack of information. Instead, companies must take advantage of all externally available information from professional credit management companies to help them improve their risk management processes and to help them in identifying profitable customer segments and focusing their marketing efforts to differentiate between current and future high potential costumers and customers who generate more costs than additional revenue. A core challenge for telecommunication companies will be to manage the entire customer lifecycle always taking into account additional market information. With respect to diverging individual consumer life situations in European countries, different legal regulations and restrictions, different payment terms and payment behaviour, a professional risk management for credit decisions and new product offerings are crucial to avoid payment losses and to preserve liquidity. As a consequence, business intelligence methods and processes using consumer data to obtain information about their solvency, payment behaviour in the past, their social and economical environment, and a customer’s creditworthiness over his life-cycle will become more and more essential to realize cross- and up-sell potentials, using marketing budgets more efficiently, and to minimize credit decision risks. As a consequence, business intelligence methods and processes using consumer data to obtain information about their solvency, payment behaviour in the past, their social and economical environment, and a customer›s creditworthiness over his life-cycle will become more and more essential to realize cross- and up-sell potentials, using marketing budgets more efficiently, and to minimize credit decision risks.
10
With decreasing revenues and constant costs, telecommunication companies must maintain a certain level of customer satisfaction. To keep up their service it is crucial to make sure that customers are being provided with the service or product they have bought. Before a dunning process is being started, professional credit management companies like Intrum Justitia make sure that the service or product have actually been provided and thus prevent a dissatisfied customer who is being dunned even though the reason for his non-payment is lack of service on the company›s side, not lack of money on the customer›s. Differentiation through better service exceeding the customer expectations can therefore be a significant success factor for telecommunication companies. Professional credit management companies like Intrum Justitia have long years of experience and can provide exactly the information that helps a company to continue to act successfully, and know about their customers behaviour in a dynamic and fast-changing market.
1,95
Pharmacies
1,99
Opticians
2,01
Automobile clubs
2,05
Book dispatch and clubs
2,10
2,12
Tour operators (+/- 0)
2,13
Automobile assurances
2,20
Pet equipment markets (+5)
2,22
Hearing aid audiologists (-8)
2,24
Drugstore markets (-1) / health insurance funds (1)
2,26
Banks and thrifts (+3)
2,30
Legal protection insurances (-6)
2,32
Attorneys (-19)
2,37
Furniture markets (+4)
2,38
Building societies (-2)
2,40
Food markets (-7)
2,44
Letter post (-6) / Airlines (2)
2,47
Telecommunication market (+3)
2,49
DIY superstores (-1)
2,54
Post agencies (-2)
2,58
Internet providers (-4)
2,69
Fund companies (-10)
2,77
Electric companies (-4)
2,00
2,20
2,30
2,40
2,50
2,60
Chart 5: Service as a differentiation criterion against your competitors
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Intrum Justitia – your navigator for better business management challenges Intrum Justitia is the leading European provider of credit management services (CMS) to businesses and government authorities and manages receivables of 11 billion for our customers. Founded in Sweden in 1923, the group today has 3,100 motivated and competent employees in 24 European markets who look after more than 90,000 clients. Our global network covers more than 160 countries. Intrum Justitia has amassed a huge wealth of payment knowledge and expertise that can optimize the credit management process within a company. We help our clients to improve their sales, profitability and cash flow. The combination of panEuropean coverage and local expertise creates unrivalled value for our clients. By integrating its expertise, Intrum Justitia is able to provide customers better insight into the qualitative and quantitative performance of their processes and the payment behaviour of both, their present customer portfolio and potential customers. Companies can only prosper if they have a stable basis in which services they provided are paid for as agreed by the client. Intrum Justitia is able to provide exactly the right instruments to facilitate a company’s decisions as to whom it can safely do business with.
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Better business for all Intrum Justitia understands that integrated credit management is a permanent cycle. We therefore recommend a continuous exchange of information with our clients in every phase of the customer process (customer identification and segmentation, payment processing and receivables management). Through this active communication, we ensure that the right action is taken at the right time, and that the individual processes are continuously optimized as our cooperation progresses. By combining a company’s customer data with our credit data base, a company can evaluate its risk position in the market in comparison to a market benchmark and target its marketing campaigns to the most profitable market and customer segments. Through this integrated CMS approach Intrum Justitia can achieve results for its clients that a conventional national provider of Credit Management Services cannot.
The Intrum Justitia approach to the telecommunication market Intrum Justitia’s aim is to support telecommunication companies in continuously strengthening their credit management processes and helping companies to identify and market their products to the most profitable market segments. At the same time, we ensure, that all actions are based on and according to the company’s risk profile. The solutions and working methods we develop are designed to support our clients in adapting to a quick-changing environment such as the telecommunication industry. We do this in combining a telecom company’s strength in enhancing the total communication needs of their customers with the intelligence and expertise of Intrum Justitia’s credit management. By combining our credit information database with the company’s data, we are able to target specific market segments and are supporting telecommunication companies in retaining more profitable and sustainable customer relations with higher revenues, reduced operating costs and improved cash flow. ES MANAGEMENT PR OCE EIVABL SS REC
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/M ON IT
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PA YM EN
WRITE-OFF O D IRE XP
CREDIT MANAGEMENT SERVICES FROM INTRUM JUSTITIA
D
Y PA
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EE AGR
THE RIGHT ACTION IN EVERY PHASE OF THE CMS PROCESS IMPROVES THE PROSPECT OF SUCCESSFUL BUSINESS TRANSACTIONS
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ON TATI CUSTO MEN MER IDENTIFICATION AND SEG
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Best practice: benchmark-studies for telecommunication companies When working together with telecommunications companies, Intrum Justitia performs an in-depth analysis of the effectiveness of the existing credit management processes by combining the company’s customer data with Intrum Justitia’s credit and address data base. Thus we generate deep insight on the company’s customer base that will help a company to further optimize its processes individually and achieve operational excellence. By combining Intrum’s credit data with a company’s client data, we can evaluate a company’s risk exposure against the overall telecommunication market and establish best-in-class practices. Based on the information provided and our extensive expertise and data, Intrum Justitia develops a customer specific scorecard that provides predictive insight into the payment behavior a company can expect from an existing or potential customer. With such a risk exposure benchmark, Intrum Justitia also supports a company in targeting its marketing spendings more effectively. The information gained allows for more accurate evaluation of customers before money is spent on acquisition, delivering goods/services, invoicing and your dunning process. Our task is to support clients in tailoring their process flows in the most profitable way thus increasing their revenue and avoid future losses through notpaid claims. This result can best be ensured when Intrum Justitia’s expertise is considered in a very early stage of the campaign to make sure the right customer segments are targeted with the right product, pricing, and risk exposure. Our risk reports comprise of two sections: the Customer Portfolio Analysis (CPA) section provides insight into the quality of the data and processes, performance and market penetration of the actual customer portfolio. The Customer Development (CD) section gives a detailed insight into the total market potential based on segments in combination with the payment behaviour we know about those segments. In addition, we map the total market with the actual customer data base, thus measuring the individual company’s risk profile against a market benchmark. Based on custom-made risk profiles scored from the data resources, we then define action chains per profile. For a company, this allows not only a risk-individual approach to specific market segments, but also lets it improve its market position by measuring its risk exposure against the market benchmark. All of our studies conclude with a number of recommendations about how a company could handle customer’s receivables and acceptance policy in a more profitable way and how a company’s risk profile is performing against a market benchmark. Such customer insight delivers a substantial contribution to the overall objectives of a company in the area of customer satisfaction, revenue stimulation, and reduced operating costs. Intrum Justitia points to improvements in managing the customer portfolio and ways to increase sales growth from new customers who would have once been rejected using present methodology. The combination of a risk profile of the customer and the individual customer’s value determines the choice of the customized treatment plan. 500
Total
Low risk profile
16%
9%
11%
5%
6%
47%
Medium risk profile
11%
5%
6%
3%
3%
28%
5%
5%
6%
4%
5%
25%
32%
18%
23%
13%
15%
100%
High risk profile
14
A
Low risk profile, high value
D
Medium risk profile, low value
B
Low risk profile, low value
E
High risk profile, high value
C
Medium risk profile, high value
F
High risk profile, high value
Summary Also on the telecommunications market the financial crisis will have a significant impact. In 2009, we will see only modest average growth of 1% p.a., primarily induced by new offerings and services through digital entertainment products. The convergence of technologies will bring new players into the market, which will aggravate the already existing crowdingout effects. Telecommunication companies must continue to focus on their core competencies and develop new solutions and products for their customers. At the same time, they must manage their risks against best-in-class practises. Only companies with a profound understanding of their customer base will be able to target their marketing spendings effectively on profitable market segments, reducing their risk exposure and gaining a competitive advantage in the market. Cooperating with a professional credit management and information companies such as Intrum Justitia supports telecommunication companies in increasing their revenue, reducing their risk exposure and preventing future losses. The described benchmark-study is a good first step to evaluate a company’s risk position in the market and accordingly develop actions to target the right market segments.
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Intrum Justitia GmbH Pallaswiesenstraße 180 – 182 64293 Darmstadt GERMANY Phone +49 (0) 61 51/81 60 www.intrum.de [email protected]
Intrum Justitia GmbH Franz-Brötzner-Strasse 11 5071 Wals bei Salzburg AUSTRIA Phone +43 (0) 662 83 50 77 www.intrum.at [email protected]
Intrum Justitia AG Eschenstrasse 12 8603 Schwerzenbach SWITZERLAND Phone +41 (0) 44 806 56 56 www.intrum.ch [email protected]
About the author Till Roth is responsible at Intrum Justitia for providing credit and risk management solutions to the telecommunications industry in Germany, Switzerland and Austria. Based on several years of experience in the services sector, he has a profound understanding of the telecommunications industry. In his former positions, he held responsibility for developing and implementing outsourcing solutions in the areas of data management, CRM, logistics, and finance. Till Roth holds an MBA from the universities at Mannheim and Toronto, is married and has two children. Contact details Name: Till Roth Function: Credit Management Services Consultant Cell Phone: +49 172 69 20 270 E-Mail: [email protected]
The telecommunication market in 2009 Introduction Today, the IT and telecommunication’s industry is an important segment of the European economy: with more than 800,000 employees in Germany alone, it totalled revenues of 145 billion EUR in 2008. Its gross added value grew by more than 50% since 1995 and now stands for 6% of Germany’s GDP – even more than the gross added value of German car manufacturers. With the global financial crisis in 2009, the past growth rates will not be as easy to achieve. Experts from IDC expect the global economic crises to speed up significantly the ongoing process of change in the IT and telecommunications industry regarding new business models, convergence of technologies and the focus on profitable market segments and thus act like an “economic pressure cooker.”1 Also the telecommunications industry will see the effects of this downturn: as revenues decrease, companies must focus on their core competencies, readjust their market position on profitable market-segments with above-average growth rates.
Impact of the financial crisis on the telecommunications market The IT and telecommunications industry have seen strong growth over the last decade. Historically, its revenue expectations have always been optimistic and well above the revenue-expectations of the overall industry. Recent studies though already considering the financial crisis do show a dramatic decline in revenue expectations for 2009 of 75%, the lowest value in over 10 years.2
Chart 1: Development of revenue expectations 4th quarter 2009: IT & Telco industry3
Interestingly, especially smaller companies see more potential for growth than bigger companies even in this economic crisis and expect revenues in 2009 to rise. As they are more focused on their core-competencies and have already outsourced all non-core functions, they are quicker to adapt and re-focus on profitable market segments than bigger companies. Accordingly, the majority of the latter actually expects a decrease in revenues in 2009.
1 IDC Predictions in 2009: An economic pressure cooker will accelerate the IT industry transformation 2 Ifo-Konjunkturtest: Stand Nov. 2008 3 BITKOM, 25. Branchenbarometer
3
Chart 2: Revenue expectation of IT and telecommunications companies in 2009 4
Market trends in the telecommunication industry The telecommunication industry is in the middle of one of its most fundamental changes since its birth more than 130 years ago. Old paradigms in the fixed line business are being questioned by the fast paced technological developments towards broadband and IT, regulatory measures as well as the creativity of competitors. The technological convergence breaks up the traditional value chain and structures, old borders between market players are diminishing. Established and alternative telecommunication provider as well as cable companies are facing fierce competition amongst each other, while mobile carriers, reseller and service providers without an own infrastructure are also working on gaining their part of the market.
Telecommunication provider To be ready for these new challenges and to better be able to defend their current market position, telecommunication providers are investing heavily in various areas: • • • • • • • •
4
Securing their existing speech telephone revenues which are endangered by substitutional effects, e.g. mobile communication or internet telephony (VoIP) Massive expansion of broadband business with increasing transfer rates by using new data transfer technologies Repositioning from data provider to a content provider, especially in the area of TV (triple play), to get access to new revenue streams High customer involvement into the value chain (customer energy) by reducing complexity in usage for the customer at the same time Expansion of offer towards business clients, especially in the areas of IT, outsourcing, and international offers Optimization of cost structure (processes, procurement and supply chain) to establish the necessary flexibility regarding price and product offering Switch into a client focused organization including mobile communication (fixed mobile convergence FMC) towards a quad-play offering Internationalization via acquisitions as well as via virtual business models (with reseller, MVNO) to raise international synergies
4 BITKOM, 25. Branchenbarometer
Quadruple Play
Triple Play
Chart 3: Convergence in the telecommunications market 5
Mobile carriers After years of continuous dynamic and profitable growth, the mobile communications industry will face a phase of slower growth rates and more stability. Nonetheless, also this young industry faces permanent changes which forces its players to continue to challenge their business models and reinvent themselves, given the • • • •
Increasing price pressure that can only be answered by differentiation Pending regulatory measures by EU or the federal net agency (Bundesnetzagentur) Upcoming converging services through „fixed-mobile-convergence ( FMC)“ and (too) slow growth in data services
Differentiation The price for mobile communication has seen a decrease of more than 10% in Germany over the last 12 months. At the same time, a number of new competitors, so called „Mobile Virtual Network Operators (MVNOs)“ have newly entered the market. As a result, the market is overwhelmed even further by a hard to oversee amount of carriers, “brands”, and prices. A company’s market positioning and its distribution strategy – via own shops, resellers or via the internet – becomes even more important for its long–term success.
5 Bundesnetzagentur, Roland Berger
5
Regulation While up to now mobile communication carriers have only been little exposed to governmental regulation, this is changing at the moment with the government strongly the markets and competition. Voluntary price reduction (e.g. in international roaming) have not been sufficient in the past. And while fixed line operators are already used to realign their product calculations according to the regulator, for many mobile carriers this is new turf.
Convergence After years in which „fixed-mobile-substitution (FMS)“ was the center of attention, convergence is now taking its spot. While media companies have been feeling the effect of data digitalization already for some time, telecommunication providers are just now putting an interest in converging technologies. Both mobile carriers with their “home zone” offerings as well as fixed line operators with their corresponding “one phone” offering are bringing a new point of view to the market. The question via which net, access form or end device a consumer handles his communication is increasingly becoming irrelevant. The focus is much more on identifying the most profitable customer segments and their optimal penetration.
Data services The establishment of third generation wireless network (3G or UMTS) is vastly finished. Thus, a majority of inhabitants could now take advantage of these data services. On the contrary though, usage numbers are still not developing as the industry had hoped for. On the one hand, the most popular offerings – which happen to be the most lucrative for the carriers at the same time – like ring tones and background pictures can also be send via the existing GPRS (General-Packet-Radio-Service). On the other hand, there are still no “killer applications’ that require a 3G data transfer and cannot be otherwise realized. The industry hopes that mobile games, mobile TV, and picture telephone will be these applications. These though require the enhanced UMTS HSDPA/HSUPA (high speed downlink/uplink package access) which are currently just being built into the network. Only „no frills operators“ want to abstain from higher value added services, which will lead to a further differentiation of the market.
6
7
Mobile penetration in Europe and the US Today the number of mobile lines in Europe is still increasing – despite the fact that in many countries on average already more than one mobile device (incl. prepaid-cards) per inhabitant exists already. More and more people use business and private mobiles devices separately. Also, the number of pure data cards is still increasing, with approximately 12 million UMTS-cards in the market at the moment. The European market is lead by Italy and Sweden, with 124 and 116 mobile connections per 100 inhabitants respectively. Traditionally, mobile penetration in the Nordic countries has always been high, but with strong growth in the United Kingdom and Germany over the last years, they are also amongst the leading countries with regards to mobile penetration. Comparing the European average of 98 mobile connections per 100 inhabitants to the USA, it shows that European mobile penetration is higher than in the US. Different technology standards, a strong regionalization of mobile carriers, and the lack of roaming agreements have led to lack of acceptance on the customer’s side there.
Italy Sweden United Kingdom Norway Denmark Germany Finland Spain Western Europa Switzerland France Eastern Europe USA Japan World Chart 4 : Mobile phones per 100 inhabitants in 2007 6
8
6 BITKOM, Basis: EITO
Cable companies With the expansion of their infrastructure nearly at a finish, cable companies are just now ready to strike established telecommunication companies in their traditional markets. This will bring about a fundamental paradigm shift in how consumers use media technology, which will also pose significant challenges onto these new market players: • • • • •
Targeted expansion of cable infrastructure for higher band width, higher household penetration and twochannel communication Transfer of the existing business model of free TV in Germany into a chargeable version Bundling of attractive packages regarding content, services, and devices (triple-play) and expansion of the offering towards mobile (quad-play, MVNO) Development of new value added services together with content providers (interactive TV) considering regulatory restrictions Establishing the company’s brand and increase sales efforts for higher market penetration
Comparing the European situation to the USA, it shows that fast internet access and broadband-technology is far more common overseas. With the strong growth of e.g. DSL-connections in Europe over the last 5 years, the US’ ledge could be reduced, nonetheless, the use of TV-cable for quick internet access is still on a slow growth path in Europe. Today, in the US, more than half of US-households already use broadband access via cable; in contrast, in Europe mobile technologies are more commonly used.
9
Revenue opportunities and risk management challenges Recent surveys show that the market for telecommunication services will decrease by 1.1% in 2009 vs. 2008. It becomes ever more important for telecommunication companies to target the right customers and avoid debtor losses through inefficient credit management processes. With the entry of new players into the market and the increasing strong pressure for technology convergence, companies must readjust their market position. It becomes crucial for a company’s survival to know its customers in detail in order to be able to offer the right products at the right price to the right people. Telecommunication companies cannot afford to lose market share because of lack of information. Instead, companies must take advantage of all externally available information from professional credit management companies to help them improve their risk management processes and to help them in identifying profitable customer segments and focusing their marketing efforts to differentiate between current and future high potential costumers and customers who generate more costs than additional revenue. A core challenge for telecommunication companies will be to manage the entire customer lifecycle always taking into account additional market information. With respect to diverging individual consumer life situations in European countries, different legal regulations and restrictions, different payment terms and payment behaviour, a professional risk management for credit decisions and new product offerings are crucial to avoid payment losses and to preserve liquidity. As a consequence, business intelligence methods and processes using consumer data to obtain information about their solvency, payment behaviour in the past, their social and economical environment, and a customer’s creditworthiness over his life-cycle will become more and more essential to realize cross- and up-sell potentials, using marketing budgets more efficiently, and to minimize credit decision risks. As a consequence, business intelligence methods and processes using consumer data to obtain information about their solvency, payment behaviour in the past, their social and economical environment, and a customer›s creditworthiness over his life-cycle will become more and more essential to realize cross- and up-sell potentials, using marketing budgets more efficiently, and to minimize credit decision risks.
10
With decreasing revenues and constant costs, telecommunication companies must maintain a certain level of customer satisfaction. To keep up their service it is crucial to make sure that customers are being provided with the service or product they have bought. Before a dunning process is being started, professional credit management companies like Intrum Justitia make sure that the service or product have actually been provided and thus prevent a dissatisfied customer who is being dunned even though the reason for his non-payment is lack of service on the company›s side, not lack of money on the customer›s. Differentiation through better service exceeding the customer expectations can therefore be a significant success factor for telecommunication companies. Professional credit management companies like Intrum Justitia have long years of experience and can provide exactly the information that helps a company to continue to act successfully, and know about their customers behaviour in a dynamic and fast-changing market.
1,95
Pharmacies
1,99
Opticians
2,01
Automobile clubs
2,05
Book dispatch and clubs
2,10
2,12
Tour operators (+/- 0)
2,13
Automobile assurances
2,20
Pet equipment markets (+5)
2,22
Hearing aid audiologists (-8)
2,24
Drugstore markets (-1) / health insurance funds (1)
2,26
Banks and thrifts (+3)
2,30
Legal protection insurances (-6)
2,32
Attorneys (-19)
2,37
Furniture markets (+4)
2,38
Building societies (-2)
2,40
Food markets (-7)
2,44
Letter post (-6) / Airlines (2)
2,47
Telecommunication market (+3)
2,49
DIY superstores (-1)
2,54
Post agencies (-2)
2,58
Internet providers (-4)
2,69
Fund companies (-10)
2,77
Electric companies (-4)
2,00
2,20
2,30
2,40
2,50
2,60
Chart 5: Service as a differentiation criterion against your competitors
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Intrum Justitia – your navigator for better business management challenges Intrum Justitia is the leading European provider of credit management services (CMS) to businesses and government authorities and manages receivables of 11 billion for our customers. Founded in Sweden in 1923, the group today has 3,100 motivated and competent employees in 24 European markets who look after more than 90,000 clients. Our global network covers more than 160 countries. Intrum Justitia has amassed a huge wealth of payment knowledge and expertise that can optimize the credit management process within a company. We help our clients to improve their sales, profitability and cash flow. The combination of panEuropean coverage and local expertise creates unrivalled value for our clients. By integrating its expertise, Intrum Justitia is able to provide customers better insight into the qualitative and quantitative performance of their processes and the payment behaviour of both, their present customer portfolio and potential customers. Companies can only prosper if they have a stable basis in which services they provided are paid for as agreed by the client. Intrum Justitia is able to provide exactly the right instruments to facilitate a company’s decisions as to whom it can safely do business with.
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Better business for all Intrum Justitia understands that integrated credit management is a permanent cycle. We therefore recommend a continuous exchange of information with our clients in every phase of the customer process (customer identification and segmentation, payment processing and receivables management). Through this active communication, we ensure that the right action is taken at the right time, and that the individual processes are continuously optimized as our cooperation progresses. By combining a company’s customer data with our credit data base, a company can evaluate its risk position in the market in comparison to a market benchmark and target its marketing campaigns to the most profitable market and customer segments. Through this integrated CMS approach Intrum Justitia can achieve results for its clients that a conventional national provider of Credit Management Services cannot.
The Intrum Justitia approach to the telecommunication market Intrum Justitia’s aim is to support telecommunication companies in continuously strengthening their credit management processes and helping companies to identify and market their products to the most profitable market segments. At the same time, we ensure, that all actions are based on and according to the company’s risk profile. The solutions and working methods we develop are designed to support our clients in adapting to a quick-changing environment such as the telecommunication industry. We do this in combining a telecom company’s strength in enhancing the total communication needs of their customers with the intelligence and expertise of Intrum Justitia’s credit management. By combining our credit information database with the company’s data, we are able to target specific market segments and are supporting telecommunication companies in retaining more profitable and sustainable customer relations with higher revenues, reduced operating costs and improved cash flow. ES MANAGEMENT PR OCE EIVABL SS REC
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CREDIT MANAGEMENT SERVICES FROM INTRUM JUSTITIA
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THE RIGHT ACTION IN EVERY PHASE OF THE CMS PROCESS IMPROVES THE PROSPECT OF SUCCESSFUL BUSINESS TRANSACTIONS
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Best practice: benchmark-studies for telecommunication companies When working together with telecommunications companies, Intrum Justitia performs an in-depth analysis of the effectiveness of the existing credit management processes by combining the company’s customer data with Intrum Justitia’s credit and address data base. Thus we generate deep insight on the company’s customer base that will help a company to further optimize its processes individually and achieve operational excellence. By combining Intrum’s credit data with a company’s client data, we can evaluate a company’s risk exposure against the overall telecommunication market and establish best-in-class practices. Based on the information provided and our extensive expertise and data, Intrum Justitia develops a customer specific scorecard that provides predictive insight into the payment behavior a company can expect from an existing or potential customer. With such a risk exposure benchmark, Intrum Justitia also supports a company in targeting its marketing spendings more effectively. The information gained allows for more accurate evaluation of customers before money is spent on acquisition, delivering goods/services, invoicing and your dunning process. Our task is to support clients in tailoring their process flows in the most profitable way thus increasing their revenue and avoid future losses through notpaid claims. This result can best be ensured when Intrum Justitia’s expertise is considered in a very early stage of the campaign to make sure the right customer segments are targeted with the right product, pricing, and risk exposure. Our risk reports comprise of two sections: the Customer Portfolio Analysis (CPA) section provides insight into the quality of the data and processes, performance and market penetration of the actual customer portfolio. The Customer Development (CD) section gives a detailed insight into the total market potential based on segments in combination with the payment behaviour we know about those segments. In addition, we map the total market with the actual customer data base, thus measuring the individual company’s risk profile against a market benchmark. Based on custom-made risk profiles scored from the data resources, we then define action chains per profile. For a company, this allows not only a risk-individual approach to specific market segments, but also lets it improve its market position by measuring its risk exposure against the market benchmark. All of our studies conclude with a number of recommendations about how a company could handle customer’s receivables and acceptance policy in a more profitable way and how a company’s risk profile is performing against a market benchmark. Such customer insight delivers a substantial contribution to the overall objectives of a company in the area of customer satisfaction, revenue stimulation, and reduced operating costs. Intrum Justitia points to improvements in managing the customer portfolio and ways to increase sales growth from new customers who would have once been rejected using present methodology. The combination of a risk profile of the customer and the individual customer’s value determines the choice of the customized treatment plan. 500
Total
Low risk profile
16%
9%
11%
5%
6%
47%
Medium risk profile
11%
5%
6%
3%
3%
28%
5%
5%
6%
4%
5%
25%
32%
18%
23%
13%
15%
100%
High risk profile
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A
Low risk profile, high value
D
Medium risk profile, low value
B
Low risk profile, low value
E
High risk profile, high value
C
Medium risk profile, high value
F
High risk profile, high value
Summary Also on the telecommunications market the financial crisis will have a significant impact. In 2009, we will see only modest average growth of 1% p.a., primarily induced by new offerings and services through digital entertainment products. The convergence of technologies will bring new players into the market, which will aggravate the already existing crowdingout effects. Telecommunication companies must continue to focus on their core competencies and develop new solutions and products for their customers. At the same time, they must manage their risks against best-in-class practises. Only companies with a profound understanding of their customer base will be able to target their marketing spendings effectively on profitable market segments, reducing their risk exposure and gaining a competitive advantage in the market. Cooperating with a professional credit management and information companies such as Intrum Justitia supports telecommunication companies in increasing their revenue, reducing their risk exposure and preventing future losses. The described benchmark-study is a good first step to evaluate a company’s risk position in the market and accordingly develop actions to target the right market segments.
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Intrum Justitia GmbH Pallaswiesenstraße 180 – 182 64293 Darmstadt GERMANY Phone +49 (0) 61 51/81 60 www.intrum.de [email protected]
Intrum Justitia GmbH Franz-Brötzner-Strasse 11 5071 Wals bei Salzburg AUSTRIA Phone +43 (0) 662 83 50 77 www.intrum.at [email protected]
Intrum Justitia AG Eschenstrasse 12 8603 Schwerzenbach SWITZERLAND Phone +41 (0) 44 806 56 56 www.intrum.ch [email protected]
