From the growing importance of mobile marketing to e-commerce opportunities on smartphones, having an internal digital-friendly mentality is more crucial than ever for MENA telcos to best serve the needs of its digital-savvy customers and businesses. Globally, telcos are placing digital innovation at the core of their strategies to meet the needs of digitally savvy world. AT&T is “driving to make 80% of customer interactions digital and online by 2020”1. In Europe, Orange is aiming for half of all its customer interactions to be via digital channels by 20182. What about MENA? In an exclusive interview, Sany Kabbani, Telecom Industry Analyst at Google, talks about the global digitalization trend and the progress in digital transformation across MENA.

Why is digital transformation critical for Telcos in MENA?

Consumer behavior and expectations are rapidly evolving across MENA. Users are spending more and more time online - and more so than their counterparts in western markets. The majority of Saudi consumers - for example - 86% - are online everyday3. In the UAE, 43% of internet users watch online videos compared to 33% in the UK and 30% in France. In light of these trends, telcos in MENA need to provide fully digitized experiences to deliver on user expectations. This requires an overhaul of the various touch points they have with their users across the full customer journey - from the products users demand, to how they buy, receive care, or even how they interact with the brand through its various communication channels. Beyond the value delivered to users, digitizing customer touchpoints can yield significant improvement in profitability - a top priority as industry dynamics and market competitiveness across MENA place pressure on margins. A study by McKinsey & Company estimates that digital transformation can yield more than a 30% increase in gross profit for telecom operators4.

How are MENA Telcos approaching the digitization challenge?

Across MENA, product innovation is the most prioritized digitization area on the management agenda. This is natural given the telcos DNA - a product development powerhouse in their respective markets. Telcos adopted multiple strategies to digitize their products - from successfully grooming a new breed of product managers to launch services in-house, to partnering with digital players (Anghami, Shahid, etc.) or even stepping into the venture capital ecosystem to tap into the latest startup innovation - STC Venture & Mobily Ventures as example. However, the risk of focusing on digital products is falling in the trap of narrowing the focus of digital transformation and losing focus on other areas. Digital transformation requires a holistic program to fully capitalize on the potential of digital.

““Users in MENA are making decisions online and buying online. Faced with this new consumer reality, telecom operators in MENA are embarking on digital transformation programs.” "

Sany Kabbani, Telecom Industry Analyst, Google

Are telecom operators capitalizing on the digital advertising opportunity?

MENA operators have come a long way with developing internal digital capabilities and moving more of their communication budgets online but they are still far from fully capitalizing on the advertising opportunity. While many Telcos continue to take the digital media opportunity in small but steady steps, we see that some operators already crossed the 25% of their media budgets online. This percentage is expected to increase as users spend more time online. By comparison, telecom operators in North America and EMEA are spending around 46% of their marketing budget online5. Telecom operators in MENA have been especially successful in pushing the boundaries on YouTube. In KSA, STC is now considered a global pioneer with its innovative digital-first content approach and its advanced use of digital media strategies to distribute its content with near-surgical precision. As a result, STC became the largest telecom YouTube channel globally in terms of number of subscribers. Although operators are moving in the right direction, some Telcos are failing to capitalize on the potential of their data and web analytics to deliver yet more effectively on online advertising.

How are telecom operators riding the eCommerce wave in MENA?

eCommerce in MENA is now a reality. PayFort estimates eCommerce in MENA at $9 Billion in 2015 with a potential to reach $26.7 Billion in 20206. For telcos, eSales can be transformational, Some advanced markets have seen up to 20% to 30% of telecom sales shift online7. MENA operators are embracing this challenge with different models. Some operators took a first step in launching online lead generation forms to capitalize on their traffic and turn it into actual sales. Case in point - Virgin Mobile KSA cut its subscriber acquisition costs by 25% by providing customers the chance to book their numbers online before picking it from the store. Other telecom operators launched full eSales solutions with obvious challenges - a clear upside remains for those who move first.

What do you think are the key success factors for a digital transformation program?

Successful programs have two factors in common - CEO endorsement and internal capability building focus. Firstly, embracing digitization across the different functions requires a DNA change - not possible without senior management ownership and integration. Second, operators need to identify and build internal digital capabilities across the organization. This will allow initiatives and efforts to develop and outlive the scope of a digitization program - and drive the culture of innovation from within.

Finally, what is Google’s role in helping telecom operator on their digitalization journey?

Google is actively supporting telecom operators in their digital transformation, working closely with select partners across the region. Google’s engagement ranges from advisory role (innovation, insights and strategy) to capability building (trainings and workshops) on to full implementation support (in areas as web analytics, user experience design and app development). Our engagement spans across product partnerships, digital communications, eSales, as well as measurements and data analytics.

Sources:

1. AT&T CEO Randall Stephenson, Q4 2013 Earning Call.

2. Orange Essentials2020 strategic plan, March 17 2015.

3. 2015 Connected Consumer Survey, Consumer Barometer

4. Mobile must migrate: Digital as an imperative, not an option, McKinsey & Company, Inc, January 2013

5. Adobe/Econsultancy Digital Marketing for telecom sector, 2014

6. State of Payments 2016, Payfort

7. Google Internal Analysis