Talking about the shift from voice-centric to data-centric models in telecommunications Author: Marcel Noordman, Mobile Broadband Engagement Manager, Ericsson Latin America and Caribbean As the telecommunication industry moves from a voice-centric to a data-centric model, operators are adapting all aspects of their business to address the new opportunities. In our interviews with 18 marketing and strategy executives, we found their main challenges centered on sustaining profitable growth, redefining value, delivering customer experience, innovating, competing successfully, and aligning their internal organizations and cultures. Operators who can make this voice-centric to data-centric transition successfully show a superior financial performance compared to their peers in the market.

1. Author: Marcel Noordman, Mobile Broadband Engagement Manager,
Ericsson Latin America and Caribbean
Talking about the shift from voice-centric to data-centric
models in telecommunications
Straight from the CMO:
Marketing perspectives
on an industry in transition

2. contents
Introduction
Value on the move
A tale of top and bottom line
Do you speak data?
Innovictimized
3
4
5
7
9

3. Jobs claimed that day to “reinvent the phone,” and
nothing has been the same in the
telecommunications industry since. The iPhone was
arguably the true start of a long move from a
voice-centric world toward one that is data-centric.
Some countries are further ahead in this transition
than others, but the signs of change are
everywhere, from San Francisco to Sao Paulo; from
Johannesburg to Jakarta.
The iPhone was followed by a wave of other
smartphones that shifted the power in the phone
industry from previously dominant players (such as
Nokia and Motorola) to new players. Today, Apple
and Samsung combined take the majority of all
profits in the mobile phone industry. Global
smartphone penetration is currently around 20%,
but in some markets as many as eight in 10 phones
sold are smartphones.
3
Introduction
The telecommunication market is shifting from a voice-centric to a data-centric model. This has
an impact on all aspects of the business.
As the telecommunication industry moves from a
voice-centric to a data-centric model, operators are
adapting all aspects of their business to address
the new opportunities. In our interviews with 18
marketing and strategy executives, we found their
main challenges centered on sustaining profitable
growth, redefining value, delivering customer
experience, innovating, competing successfully,
and aligning their internal organizations and
cultures. Operators who can make this voice-centric
to data-centric transition successfully show a
superior financial performance compared to their
peers in the market.
On January 9, 2007, a thin man in a black
turtleneck stood alone on a podium in San
Francisco. He announced three new devices: “a
widescreen iPod with touch controls,” “a
revolutionary mobile phone” and “a breakthrough
internet communication device.” The man was, of
course, Steve Jobs, and the three devices he was
talking about were actually just one: the iPhone.

4. As consumers find out how these devices—and the
apps that run on them—make life simpler and more
enjoyable, value perception starts to rise. One in
five people today would rather give up their voice
subscription than data. In some large markets, this
number is as high as one in three.
Operators respond to this by adjusting their
offerings. Whereas the traditional, voice-centric
model starts by asking how many minutes of voice
and how many SMS the customer wants, and then
telling him how much data he can use, some
operators start with the question of how much data
a person is using and what devices he would like to
use with his subscription. In many cases, these
plans come with unlimited voice and messaging.
Money follows value perception, and this is
reflected in the revenues of mobile operators. In all
but a few countries in the world, revenues from data
services have been the main or even only driver for
topline growth. Without mobile data services,
revenues for mobile operators would have declined
over the past two years.
The nature of competition has changed as well,
with different assets becoming strategic (spectrum,
for example) and new players entering the market.
Device manufacturers and “over-the-top” internet
players have become more influential.
As consumer usage patterns move from voice to
data, telecom companies are shifting their
investments accordingly. In the second quarter of
2013, shipment of equipment for the three most
popular technologies (GSM, 3G and LTE) was more
or less equal (about one-third each). In 2014, this
mix is expected to shift further toward data-enabling
technologies (3G and LTE), accounting for 80% of
shipments.
As operators are driving these changes as well as
adapting to new market realities, the strategy and
marketing functions in those companies are leading
the way. To serve their customers, network
technology vendors need to understand the
challenges this transition from voice to data brings
and the strategies that operators deploy to address
them. For this reason, Ericsson interviewed 18
strategy and marketing executives from operators
across the globe to get their perspectives.This
resulted in a collection of 92 documented
challenges and strategies (Fig. 1).
Value on the move
4
ProfitableGrowth
Customer
Experience
Changing
competition
Value
proposition
Innovation
Organization&culture
External
stakeholders
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
% of operators who mentioned
the challenge
% of total challenges mentioned
Challenges mentioned by interviewees

5. The first observation from these interviews is that
operators acknowledge the transition from a
voice-centric to a data-centric mobile
communication business model as well as the
challenges this shift brings. In the words of one
executive: “Voice will die. Who is going to step
forward first and sell it fastest? Who will be first to
build the base and receive the benefits before
anyone else?”
It is clear to these executives that the changes
needed are profound and touch on all aspects of
their business. As one CMO put it, “The market
changes so frequently, and because of that, we
have to adapt. And in order to adapt, we have to
change the way we do things. In part, that means
how we organize ourselves.”
The challenge that was mentioned most often is
related to financial performance: how to sustain
profitable growth as we move from a voice- to a
data-centric world? The short-term opportunity to
sell more data services to a broader audience of
smartphone owners is obvious. As one CMO
mentioned, “I disagree with anyone who says that
it’s difficult to make money from data. I have seen
proof that consumers will pay a premium with only
one service provider that will deliver the best quality
of service.”
There is, however, a lot of uncertainty about the
impact of traffic growth on the network, new
competition and the consumers’ value perception.
As a vice-president of consumer business from a
mature mobile market explained, “From a
connections perspective, we see the economics of
net additions is much different from what we
previously saw when we were still capturing a lot of
new growth.”
A tale of top and
bottom line
5
“I have seen proof that consumers will
pay a premium with only one service
provider that will deliver the best
quality of service”.
CMO, Latin America

6. I clearly see many operators being
great machines for mobile data
monetization for OTT players”.
CMO, Latin America
6

7. Another group of new competitors identified by the
executives interviewed are companies that provide
internet-based content and services without the
involvement of the operator. Operators seem to be
split on the best response to these “over-the-top”
(OTT) players: fight, flight or cooperate. One CMO,
with his eyes firmly on the money, was quite
confident: “OTTs are now actively engaged in
discussions with the operators about what they can
do to leverage the mobile data opportunity. I clearly
see many operators being great machines for
mobile data monetization for OTT players. We
already bill people every month, so it is something
that people accept from us. This could become
important for OTT players who want to monetize
their services.”
To grow profitably with mobile data services, the
interviewees in the project believe they need to
rethink their product and value propositions, and
communicate this to the market in a clear way.
Talking about Gigabytes and Megabits per second
might not do the job, as one CMO from Latin
America explained: “Mobile data does not mean
anything to our customers. Megabytes and
Gigabytes; this is like a foreign language to them.
There is a disconnect between what we want, what
we offer and what our customers get in the end.”
The question is, how do operators make the mobile
data proposition warm and friendly, and relevant to
the daily lives of ordinary people?
A cornerstone in any competitive mobile data
strategy is the need to create a great customer
experience. Network performance is important in
creating this experience. As one executive
explained: “None of the operators in this market
have stood up and claimed that they have the best
data network. I do think that whoever delivers
consistent data performance and is bold enough to
stand up and lead this market will probably capture
this market.”
Good network performance is not enough. How
would the world be if shopping at your local
operator were the same as any best-in-class retail
experience? People taking an interest in your
specific needs, explaining how to use the phone
and the service, and tailoring their offer to what you
really need—no more, no less. Unfortunately, we
are not living in such world, but some CMOs do see
the opportunity.
The shift from a voice-centric to a data-centric world
has also created new competition and players in
the market. Smartphone companies have become
more powerful, as they can promote or block new
technologies, put quality requirements on networks
for their devices, and even steer traffic away from
the mobile networks (to Wi-Fi, for example).
Apple, especially, is seen as a potential adversary.
As one executive explained: “If Apple decides they
are going to steer traffic based on where they want
customer to be, then that could hamper the
operators in being able to fully monetize the data
opportunity. If the operator has a plan to offer
mobile money services based on NFC, and Apple
decides not to put that technology in their next
model (as they have done), that is a barrier to full
monetization.”
Do you speak data?
7

8. Whoever delivers consistent data
performance and is bold enough to
stand up and lead this market will
probably capture this market”.
CMO, Latin America
8

9. Innovictimized
9
Growing smartphone numbers, offering good data
subscriptions and improving the experience of
customers are good strategies to support growth in
the coming years. However, to secure long-term
financial performance, CMOs see the necessity of
innovating beyond good internet connectivity. This
might pose a problem; as most CMOs
acknowledge, operators have not been very good
at this. As one executive put it: “When is this
industry going to take the lead when it comes to
innovation? I think we are far away from that; we
are victims of innovation.”
To address the growth challenges in the short and
longer terms, operators see the need to transform
not only their offerings and networks, but also their
organizations, cultures, competencies, and
processes. This internal change might prove to be
one of the toughest to manage. In the words of one
head of marketing, “We have to change the way we
do things. This partly means changing the way the
company organizes itself. We need to be nimble to
adapt.”
From Ericsson’s own research, it is clear that some
operators are better then others in monetizing
mobile data opportunities. These “frontrunners,” as
we call them, show double-digit revenue growth
with best-in-class profitability, whereas their market
peers show zero growth or even decline. Listening
to what these leading operators are thinking and
doing might point others in the right direction.

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11. ERC-14:000063 Uen
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