Strategy

Growing as part of a global group

What is the right strategy for a company like the Telekom Austria Group in this environment when it is rather one of the medium-sized or even smaller players — even with its seven markets — on the international stage? 'Taken alone, we may be relatively small from a global perspective,' said CEO Alejandro Plater. 'However, we are playing in a different league now with América Móvil as majority shareholder.' Indeed, the Telekom Austria Group's position has changed significantly. As a part of América Móvil, it is no longer only a regional provider in Central and Eastern Europe, but a member of the third largest telecommunications provider in the world with 285 million customers in the mobile sector alone. This offers a wide range of new opportunities.

Focus on growth and efficiency

In this position, the Telekom Austria Group is focusing on two main goals, as Alejandro Plater states here: 'We are particularly focusing on growth and improved efficiency. We strive for growth in various ways: The Group is, first of all, seeking organic growth by excelling in its existing core business and developing new business areas, but also by enlarging its footprint thanks to M&A activities.'

Telekom Austria Group’s Strategy
Telekom Austria Group’s Strategy

Excel in the core business

Within its core business, the Telekom Austria Group is focusing in particular on improving its sales execution and targeted cross-selling and upselling activities in its existing customer base. This involves the key objective to optimise the ratio of households that are covered and those already connected. In other words, the Group is seeking to gain more households as customers, which are already covered with its infrastructure. As previously mentioned, convergence is a key element here: In addition to Austria, the Group already has the possibility to offer fixed-line and mobile services to its customers in Bulgaria, Croatia, the Republic of Macedonia and recently in Slovenia. The Group particularly focuses on the premium customer segment with convergent product bundles that also contain TV and music streaming services or cloud solutions. As a result, the Telekom Austria Group is capable of meeting the generally increasing customer demand for seamless access to a wide range of services at home or on the go using various devices. In this context, the Telekom Austria Group particularly focuses on safeguarding its infrastructure leadership as well as the optimisation of customer service, as both are key differentiation factors against competition.

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There is indeed a lot of talk about market saturation but this relates only to network access per se. However, this can be used on a significantly wider basis.

Alejandro Plater

CEO Telekom Austria Group

Expansion of products and services

The fact that customers want to use ICT services at all times and in all places is one trend. A second trend lies in the fact that telecommunications solutions encompass an increasing number of areas of life. The Telekom Austria Group is also making use of this trend in a targeted manner to expand its business and thus its value chain. To do this, the Group is addressing existing as well as new customers or customer segments.

'There is indeed a lot of talk about market saturation but this relates only to network access per se,' said Alejandro Plater. 'However, this can be used on a significantly wider basis. New ideas and applications are being developed practically on a daily basis.' In the private customer segment, the focus increasingly turns addressing the entire household, where all needs are covered by package solutions. New content solutions, additional OTT services or internet TV are only a few examples in this context. Furthermore, there is also a trend towards an expansion of products and services for business customers. Inspired by América Móvil, the Telekom Austria Group is already operating a cloud brokerage platform with which it can offer backup services, virtual server capacity or Microsoft Office 365. Customers have the following advantage: They no longer need to maintain and have access to costly hardware and software locally since these are always available and up-to-date in the cloud. 'Various business fields are opening up in Austria, an economy dominated by SMEs, for which having its own IT can be very expensive.' CFO Siegfried Mayrhofer seems positive about this new service. 'The focus here is not on providing numerous individual applications but rather standard modules that can be designed and combined in line with demand. That leads to an attractive offer for our customers, also in terms of costs.'

Value accretive M&A

The Telekom Austria Group also aims to generate growth by means of mergers & acquisitions. 'The objective here is to play an active role in the consolidation of the fragmented European markets in order to grow,' said Alejandro Plater. 'We are thinking of continuing our convergence strategy and expanding into new markets where opportunities can be found.' For example, we succeeded in acquiring the Slovenian unbundler Amis last year, which means that the Group is now convergent on this market as well. In Bulgaria, the takeover of the cable operator Blizoo led to a threefold increase in the number of Telekom Austria Group's fixed-line customers on this market. When tapping into new markets, emphasis is placed more on a pan-European perspective than synergies. This is because telecommunications providers can tackle cross-border challenges, such as roaming, more efficiently if their activity radius covers more countries.

Efficiency is not an end in itself but rather the basis for our growth. Funds available through improved efficiency can be used for investments and the desired expansion of our business.

Alejandro Plater

CEO Telekom Austria Group

Improved efficiency forms the basis

However, such investments require adequate financial flexibility. The Telekom Austria Group has achieved this by improving its efficiency and its cost structure in a targeted and consequent way. Alejandro Plater: 'Efficiency is not an end in itself but rather the basis for our growth. Funds available through improved efficiency can be used for investments and the desired expansion of our business.'

There are no restrictions on free thought. Quite the contrary — everything is possible. 'To remain competitive, you cannot put blinkers on. Everything has to be called into question again and again,' said Plater. 'That applies to structures, processes as well as individual investment decisions. We are continuously sounding out everything to see if it will really pay off for us.' This can be in the form of numerous small improvements or even a complete redesign. Extensive optimisations in purchasing, in sale and service processes as well as the complete restructuring in the technology department also serve this purpose. Thanks to the latter, households can be connected considerably quicker at a lower cost in the course of the broadband expansion. 'Simplification, harmonisation and acceleration are the benchmarks for all of these measures,' summarised Alejandro Plater.

This also affects customer interfaces. Streamlined processes are key in an industry that depends on quality and speed. This is because even if the service has been provided efficiently from the viewpoint of the company, it must by no means be efficient in the eyes of the customers. It is only when customers believe that they have received quick and high quality service that they are satisfied and loyal — and eventually feel ready to upgrade to other or higher-quality products. A regional presence and call centre may be important, but digital business processes and customer service using online platforms are becoming the preferred method of choice. In that case, products and services need to be designed in a user-friendly way. In this context, rational functionality is becoming increasingly important for the Group: 'It has to work properly and be efficient but it does not have to be super pretty or super perfect,' as Alejandro Plater put it plainly.

In order to increase cost efficiency, the Telekom Austria Group literally thinks twice about every cent, also in terms of investments. 'Money is spent only if new revenues can be generated in the mid-term or costs can be reduced,' explained Siegfried Mayrhofer. Therefore — whenever possible — the Group deliberately invests into technologies, which, in turn, improve efficiency. Network function virtualisation (NFV) serves as a good example. This new concept combines network functionalities and services in a virtualised cloud-based infrastructure. This will allow for significantly more efficient operating processes at lower costs as well as a quicker market launch of new services. For that reason, the Telekom Austria Group is also playing a leading role in testing this innovative technology in live applications.

This concept of efficiency also applies to the network expansion. The combination of fibre and innovative copper-based transmission technologies in the fixed-line business serves as a particularly good example. For instance, the accelerated fibre rollout in Austria can be achieved faster at a significantly lower cost in this way.