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ITU Regional Workshop on “Strategic HR Management ” Cairo Egypt 13-17 April 2008

The changing Market Environment. ITU Regional Workshop on “Strategic HR Management ” Cairo Egypt 13-17 April 2008. Lecture 3. The changing market environment Presentation Outline. Structure changes Major changes in the Service Providers' revenue structure

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ITU Regional Workshop on “Strategic HR Management ” Cairo Egypt 13-17 April 2008

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  1. The changing Market Environment ITU Regional Workshop on “Strategic HR Management”Cairo Egypt 13-17 April 2008 Lecture 3

  2. The changing market environmentPresentation Outline • Structure changes • Major changes in the Service Providers' revenue structure • Pricing policies, Interconnection and Peering • New actors and new business models • Development of Broadband accesses and IP based services (fiber and wireless) • Conclusion : Impact on Human Resources

  3. Telecommunications is the fastest changing industry • Regulation, privatization and competition are key drivers • Mobile is becoming a substitute to the fixed-line telephone • Data is overtaking voice • Internet business model has changed the Industry • For end users, scarcity is being replaced by abundance • Telecom demand is driven by need and affordability • Networks are gradually becoming multimedia • Inefficient operators are driven out of business

  4. Vertical integration and monopoly Monopoly The monopoly owns the infrastructure and provides services Services Infrastructure Market

  5. Vertical integration and competition Incumbent Competitor The incumbent still owns the infrastructure and provides services. Accounting separation of infrastructure activities Services Services Infrastructure Market Market

  6. Vertical separation and competition Incumbent Competitor The infrastructure is vertically separated but still owned by the incumbent, which also provides services Services Services Infrastructure Market Market

  7. Vertical separation and competition Incumbent Competitor The infrastructure is vertically separated to an independent company, which is not permitted to provide services Services Services Independent firm Infrastructure Market Market

  8. Joint – ownership of infrastructure Incumbent Competitor The infrastructure is vertically separated to an independent company, jointly owned by the incumbent and the competitor. Both permitted to provide services Services Services Jointly owned Infrastructure Market Market

  9. Infrastructure or facility-based competition Incumbent Competitor Services Services Interconnection Infrastructure Infrastructure Market Market

  10. Assignment: Example Sweden. The actual situation in Fixed line. Vertical separation and competition TeliaSonera Competitor The infrastructure is vertically separated but still owned by the TeliaSonera, which also provides services Services Services Infrastructure Market Market

  11. Assignment: Example Sweden. The preferred situation in Fixed line. Vertical separation and competition TeliaSonera Competitor The infrastructure is vertically separated to an independent company, which is not permitted to provide services Services Services Independent firm Infrastructure Market Market

  12. Assignment: Example Sweden. Mobile telephone 2G. Infrastructure or facility-based competition TeliaSonera Tele2 Vodafone (Telenor) Services Services Services Interconnection Interconnection Infrastructure Infrastructure Infrastructure Market Market Market

  13. Assignment: Example Sweden. Mobile telephone 3G. Joint – ownership of infrastructure Vodafone TeliaSonera Tele2 Hi3G Services Services Services Services Jointly owned Infrastructure Jointly owned Infrastructure Market Market Market Market

  14. Changes in revenue structure • Changes impact both developing and developed countries with different consequences • Examples • 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 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)

  15. End user revenue marketin developed countries Electronic communication end user market in France Mobile services including SMS, VAS, MMS, 3G Internet and multimedia mobile services Fixed telephony including PSTNand invoiced Telephony over IP (excluding ToIP part of multi-play bundles) Internet services including fixed Internet access, VAS, IP TV and multi-play services Change in accounting Source ARCEP, France

  16. Telephony becomes IPin developed countries Part of IP in fixed telephony services originated traffic (France) • Delivered as a value added service on top of broadband access, IP telephony is a qualified substitute to traditional telephone services Source ARCEP Fixed IP telephony services offered by High Speed Internet access, providers excluding VoIP services on best effort Internet

  17. 50% 100% 36% 90% 30% 80% 34% 33% 22% 10% 70% 35% 53% 60% 50% 8% 8% 30% 42% 40% 30% 2500 -1% 20% 2000 -18% -22% -10% -4% 10% 1500 0% 2005 2001 2002 2003 2004 1000 500 0 2001 2002 2003 2004 2005 Overall communication market revenues in Lithuania Market overall revenues (in million LTL)and growth over the preceding year in % Revenue distribution in % 1% 3% 5% 9% 11% 22% 34% 48% 50% 18% Leased lines + Data Internet access services Interconnection Mobile communications Fixed telephone transmission services communications Source : Communication Regulatory Autority, Republic of Lithuania

  18. Study case : Telecom PolandA rather stable business (at first glance) TP Group results 2002-2006 20 15 Billion PLN 10 5 0 2002 2003 2004 2005 2006 Net profit Operating profit Revenue 1 PLN = 3.9 € Source : TP group annual reports and presentations of financial results

  19. and employment 60 000 45 000 Employees 30 000 15 000 0 Stable and profitable, but … TP Group results 2002-2006 20 15 Billion PLN 10 5 0 2002 2003 2004 2005 2006 Net profit Operating profit Revenue Source : TP group annual reports and presentations of financial results

  20. What preparations • Staff count – present jo – classification • Future job demand – competence gap • Define capacity building strategy • What training resources needed – where to find

  21. … with a deep and fast change in business and revenue structure TP Revenue distribution 2002-2006 20 Other 15 Data services Mobile services 10 Billion PLN Interconnection to Mobile Interconnection to Fixed* 5 Fixed Telephony services 0 2002 2003 2004 2005 2006 * Includes incoming from International

  22. Impact of Economical ChangeLooking for margins and new revenues New priorities • Operation cost reduction • Broadband accesses and IP networking • Becoming customer centric • Need to innovate and be first on market • Need to invest on IT, Service platforms, OSS, Business and Service Management • Re-engineering • 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 • but Bill and Keep and Peer-to-Peer trends will make it decline later on • Wireless communication is strongly growing in traffic and penetration • but will be impacted by revenue decline on voice traffic • Broadband access and services are strongly growing • With high competition in service offering

  23. How will these New Priorities impact on the Management of Human Capital?

  24. The changing market environment • Major changes in the Service Providers' revenue structure • Pricing policies, Interconnection and Peering • New actors and new business models • Development of Broadband accesses and IP based services • Impact on Human Resources

  25. Voice pricing is impacted bythe disruptive Internet pricing model • « Bill and Keep » and peer to peer agreement is the basis of Internet pricing 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 services • 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) benefited from CPP, CNP models

  26. The future of voice service pricing • Unlimited flat rate already almost generalized for voice (VoIP) and 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 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 international termination rates) and on duration or by event for new services or value added voice and multimedia services likely to 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

  27. Price Wars • In Africa Price Wars have broken out in Nigeria, Uganda, Kenya • Free Cares after Midnight • Uganda 50% free Airtime (MTN & CELTEL) • Response by regulator was for free calls at certain hours

  28. The changing market environment • Major changes in the Service Providers' revenue structure • Pricing policies, Interconnection and Peering • New actors and new business models • Development of Broadband accesses and IP based services • Impact on Human Resources

  29. New Market Entrants • Two New Mobile Operators Licenced in Uganda bringing total to 5 • One more Mobile Operator licenced in Kenya, plus fixed Operator getting a mobile licence • New Operators need Staff to roll out their networks. Who is the likely victim?

  30. New services are booming, each with different actors and different revenue model • I can make a phone call on my PC • I can receive mails on my mobile • I can watch TV on my PC • I can connect my old telephone set on ADSL modem • I can connect my TV on ADSL modem instead of an antenna, a cable or a dish • I hear music and watch movies on my home cinema, my PC or even on my mobile • I can pay my parking of my car with my mobile • Change in social behavior Technological evolution, Economical revolutionNew business models, multiple interaction

  31. Communication services are not any more the private domain of telecom operators Service Provider (open) Service Provider (Wholesaler) Interaction applications wholesales of services End User Retailer subscriber data native applications Multiservice subscription wholesales of network resources or revenue sharing access Access Provider Connectivity Provider Connectivity Provider

  32. The changing market environment • Major changes in the Service Providers' revenue structure • Pricing policies, Interconnection and Peering • New actors and new business models • Development of Broadband accesses and IP based services • Impact on Human Resources

  33. ADSL subscribers as % of Country main lines 40% France 35% Morocco 30% Lithuania 25% Turkey 20% Poland 15% Senegal 10% South Africa 5% Egypt 0% jun-02 jun-03 jun-04 jun-05 jun-06 dec-06 dec-01 dec-02 dec-03 dec-04 dec-05 In many countries ADSL is the initial driver for broadband and IP services

  34. High speed Internet access is a facilityThe issue is to grow revenues and margins

  35. The broadband revolution • DSL 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) likely 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

  36. The changing market environment • Major changes in the Service Providers' revenue structure • Pricing policies, Interconnection and Peering • New actors and new business models • Development of Broadband accesses and IP based services • Impact on Human Resources

  37. Key strategic move impacting HR management • Accelerating broadband access penetration (+ local loop 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 services • Marketing and Market Strategy in Company driving seat • Aggregating content and dealing with Content Providers • Deep 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 resources • Re-engineering and restructuring into separate business units • Replacing static remotely localized teams by centralized mobile intervention teams

  38. Human ResourcesWhat is changing what ? Competition (driven by Internet, Regulation and Globalization) • improving internal efficiency (process transformation) • Improving CRM* supporting platform and associated processes • Reducing time to market for new services • Managing 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. Human ResourcesWhat is changing what ? Technology, New Services and Convergence • Towards all-IP networks and services • Regrouping fixed line / Internet / mobile commercial organization to mass users • Developing and marketing convergent solutions for residential and mass users • Developing and marketing convergent solutions for business users 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)

  40. Changing Mentality and Organization • From infrastructure and basic service delivery operations to customer-centric commercial activities in a competitive environment • 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 former 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)

  41. Major issues in HR management • Change in employee status (from Public Administration to 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 activity • Managing and defining new job families (design) • Setting up talent review and focused career development programs for highly qualified employees • Setting up extended personnel conversion programs and organizing career-oriented deployment scenario • Facilitating staff mobility and personal initiatives

  42. CONCLUSION • Without an Understanding of the Business, its direction and Challenges, HR cannot be in a position to make a meaningful contribution in terms of planning and responding. • The environment is changing too fast and only those who invest in anticipation have chances of survival.

  43. CONCLUSION • Telecoms is a Technical field. We need to understand the technical aspects of this business. • But business is about money. HR needs to understand the financial aspects of the business. • Even in Regulation, you cannot regulate businesses you do not understand. Those who practice HR in a regulatory environment need to understand the businesses of their industry.

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