“Test and Scale” Approach to Digital Telco Transformation
While big telcos are increasing coverage and their network speed, the industry struggles to connect on a more personal level with customers as do digital giants like Amazon, Netflix, Apple and Uber. Telecom company net promoter score (NPS), a key customer-satisfaction metric, is the worst industry at 31 vs what has typically been in the 20s, versus more than 50 for many digital powerhouses.
With fixed network investments and significant overhead structures, including legacy physical infrastructure, major telco operators are evaluating cloud-based technologies and digital brand launches as a cost-effective approach to expanding their customer revenue base.
The biggest constraint MNOs face isn’t the market itself...it is their own operating structure. Having an employee base and physical assets that are optimized for efficient operations, and to support an existing organization and network structure, this is at the same time the biggest hinderance to launching new brands that require a more agile approach.
How can an operator best leverage its strengths and avoid the risks of betting the company’s future on an all-or-nothing digital launch or brand change?
Test and Scale
As going digital is the inevitable way forward, why does it make sense for a telcos to test small and then scale?
McKinsey & Company lists several significant reasons telcos should launch a “digital attacker brand that aligns with the test and scale model.
“Within four quarters from launch, the typical digital attacker has contributed close to 25 percent of overall gross additional subscribers (gross adds) to the incumbent operator, while showing total profitability that is more than five percentage points higher.”
Even more interesting…
“70 percent of these gross adds are new to the operator and not cannibalized from legacy parts of the business, with an acquisition cost that is roughly half that of the parent brand”
And it can also deliver the customer connection…
“consistently deliver a better customer experience, with an NPS that can be as much as 30 to 40 percentage points higher than the incumbent competitors.”
Successful brand launches are difficult to predict. What looks great in a planning session may not connect with prospective customers when tested out on the market.
Rebranding an existing telco brand carries huge risk, but launching a targeted digital brand as a test, then iterating that with additional test brands before scaling those that deliver the best results, can be a safer approach.
Applying the marketing test model allows for customer feedback to be implemented and ensures the platform and offering deliver on the brand promise. Key elements include ease of signup, plan flexibility, website navigation, pricing, core messaging, and service model. Making on-the-fly adjustments with a small test is much easier than trying to adjust with a whole company rebrand.
Sometimes the target market is not fully aligned with the main brand and so modifying the main brand’s business model or changing overall company marketing would risk losing their existing customers or not fully connecting with the new target customer. Breaking into a new customer base with a separate test can accommodate both groups.
What telcos are testing digital brands?
Telcos are not new to the digital launch test model. Here are a few who have launched digital brands and successfully scaled them.
T-Mobile
In 2013, T-Mobile merged with budget-priced CDMA-based prepaid wireless service, MetroPCS. In 2015 T-Mobile decommissioned the Metro CDMA network and migrated over to T-Mobile’s LTE system. In 2018, T-Mobile rebranded MetroPCS as “Metro by T-Mobile” as it introduced unlimited plans and bundled features. While not originally launched as a digital brand, Metro demonstrates the desire by the big telco operators to target niche customers and shows how organic acquisition and shift towards a targeted customer market can take years to evolve versus a purely digital brand launch in under a year with a digital brand launch strategy. T-Mobile recently recognized digital brand opportunities and in 2023 agreed to acquire MVNO Mint Mobile.
Verizon
Verizon launched Visible (MVNO) in 2018 as a digital-only prepaid wireless service that operates entirely through a mobile app. It was launched to compete against Metro (T-Mobile), Cricket (AT&T), and Boost (Dish) products. Visible offers unlimited text, talk, data and hotspot for a fixed monthly fee, and is popular for its no-contract policy. Visible has grown rapidly since its launch and added 5G. Verizon has relaunched in 2022 as “Visible by Verizon” and announced plans to expand the service internationally.
AT&T
Founded by Leap Wireless, CDMA-based Cricket Wireless was acquired by AT&T in 2014. AT&T then merged its Aio Wireless prepaid brand with Cricket and rebranded it “New Cricket” with the eventual shutdown of its CDMA network as customers were transitioned over to AT&T’s network. New Cricket competes against T-Mobile’s Metro brand for prepaid customers as AT&T deployed a similar strategy to T-Mobile in terms of target customer (budget-minded prepaid wireless buyer). Cricket Wireless has since expanded its coverage and now operates nationwide, with over 12 million customers.
Digicel
In the face of growing regional competition, Digicel knew it needed to disrupt the local telco market by launching its own digital brand, Wizzee in the West French Indies.
Vodafone
In 2017 Voxi was launched by Vodafone. A digital-only brand, it was targeted to younger customers. With flexible plans and unlimited data on social media and messaging apps, it has gained popularity for its customer-centric approach. In 2019 Voxi began offering 5G services and has now grown to over 550,000 subscribers.
Digital brands as part of a larger transformation
While many telcos target cost-conscious younger demographics with their budget digital brand offerings, others are taking a wider-ranging approach to capturing market share. In some cases, going beyond a digital wireless service launch and reinventing the mobile telco model and customer experience.
Yoodo
Yoodo is a digital startup launched in 2018 by Celcom, Malaysian partner of Vodafone and the oldest mobile telco in Malaysia. Leveraging Celcom’s 4G network, Yoodo is a digital mobile service that challenges legacy providers’ fixed plans and contracts by providing plans that the customer designs themselves matching their individual needs. The user chooses the amount of voice, data and messaging they want.
By launching Yoodo as a separate entity with its own employees, offices and culture, they are able to create a flexible, customer-driven experience, without the restrictions created inherent in a big telco infrastructure. This helps it respond quickly to the market.
Orange Flex
Orange Poland launched digital brand “Flex” to capture a customer segment that doesn’t want to be tied down to fixed plans, contracts and a mobile service that is designed around the telco, not the customer. Rather than proceeding down the typical digital telco launch approach, they focused on building a great customer experience and modeled the approach used by digital players outside of telecom, like Netflix and Revolut, to “Uber-ize telecom”. You just download the app, quickly complete the application process, and you’re set – no contract, no bill, no visiting a physical store.
Flex is built on this customer-centric approach to further align with their users’ interests. They are a “climate neutral telecom” – 50% smaller SIM card (or eSIM), planting a “forever forest,” and FSC®-certified SIM packaging. Flex also allows their customers to transfer data balances among friends and family and add music and video streaming passes, all through the app, so customers stay fully in charge of their experience and plan usage.
Giffgaff
Launched in 2009, Giffgaff (Scottish word for “mutual giving”) has focused on caring for others and the environment from the beginning. They and their members support small and large charities all over the UK and have taken a radical approach to sustainability, not typical of other telcos, with over 75% of its phones being refurbished (keeping them out of landfills).
Giffgaff’s operations are build to minimise their environmental footprint too, as they contract out account-related customer service inquiries and rely on their online community and remote workers as community moderators, to address other service-related questions, eliminating the need for a typical company call center.
Bouygues Telecom
Bouygues Telecom launched "Source", France’s first eco-friendly digital telco brand. Being responsible for 1.6% of the global CO2 emissions, Telcos can play a significant role on Sustainability. Bouygues Telecom recognised this opportunity and aimed to be a trend-setter in driving social responsibility by adopting innovative ways to engage with its customers.
Reliance Jio
Jio, subsidiary of Reliance Industries and an Indian-based MNO, launched its digital brand in 2016. Unlike other operators that bolted on their digital brand to their existing networks to capture a focused subset of the market, Jio took a unique approach – their mission was to disrupt the Indian telecom market to become the dominant player.
They leveraged an advantage of being the only company that won all 22 circles in India in the 2010 4G spectrum auction (under the IBSL entity). This provided the base they needed for a greenfield 4G network launch (bypassing 3G). They made their commercial launch on the back of a free voice (VoLTE) and data offering that was a seismic shift from the high-priced plans in the market at the time. This helped Jio rocket to 16 million subscribers in the first month, over 50 million by month three and 100 million in under six months.
Since its launch, Jio has grown rapidly to over 400 million subscribers, the largest mobile network operator in India and the 3rd largest worldwide. It has expanded its service into a range of digital services and apps, including music and video streaming, and now operates at the 5G level in several cities while working on 6G. Jio's success demonstrates the power of the digital brand focused on delivering scalable offerings aligned with the market.
How are telcos testing and scaling digital brands?
The approaches telco operators are taking vary based on their unique needs, resources, and available opportunities.
- Acquisition Focus: T-Mobile and AT&T took an acquisition-based approach, buying operators with prepaid plans targeted at the younger crowd - Metro and Mint (T-Mobile) and Cricket (AT&T). Mint is an interesting acquisition for T-Mobile because Mint has a high-profile marketing campaign under Ryan Reynolds that is popular with younger generations.
- Funding Source: With Visible, ex-Verizon employees launched the brand but it was funded by Verizon. This allowed for its independence but the ability to stay connected and a test by Verizon without impacting their core operations.
- Marketing Focus: Voxi was created with users under 25 years old in mind. It allows users to access social and chat apps without affecting their data allowance, and to call and text as much as you want. No contract. No credit checks. Basically, it was designed with the younger consumer in mind. To support the brand, a community of young creatives are providing content on the channel. All this is run through Vodafone’s network.
Technology options that support the test and scale model
As 5G expands worldwide and digital platforms and cloud operations become ubiquitous, MNOs and MVNOs both will be able to leverage digital technology advances to quickly launch digital brands without needing to jeopardize existing operations, acquire companies, or spend huge sums to get a brand off the launchpad.
With the new iPhone shift to 100% eSIM, the physical sim friction in the buying process will soon be a thing of the past. And with it, brands can be launched and tailored to their customers’ needs quickly and easily.
triPica is helping new MVNO entrants launch market-disrupting digital mobile brands and MNOs test out new markets. Operators can leverage trPica's BSS technology and focus on the core marketing functions to grab market share. triPica helped operators launch digital telcos in as little as 4-6 months, at a fraction of the cost of a traditional BSS and CRM solution.
