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The Telco Dilemma: Transform or Re-Imagine?

-CaseStudy Competition

NaTTel is a leading Telecom Operator in the Nordics Region. They are headquartered in Finland,
but provide services to the entire Nordics Region, with a minimalistic presence in some other
parts of Europe – notably Austria and Czechoslovakia. They are the market leaders in Finland
and Norway and in the number 2 or 3 positions in the other Nordic countries. NaTTel went
public in the year 2001. Since then NaTTel has been showcasing good results quarter - on -
quarter until 2012.
NaTTel provides Wireline, Wireless and TV services in the Nordics region servicing different
types of customers – Retail, Small and medium Businesses (SMB) and Large Enterprises. NaTTel
has traditionally been known to be a ‘customer focused’ Telco, providing the best pricing for its
customers. They are touted to be the pioneers of the communications industry in the Nordics
Region. They were the pioneers in setting high benchmarks for good customer service via the
call center. They were also one of the first Telcos to provide bundled services across wireline,
wireless and TV products. NaTTel had more than a hundred stores across the Nordics region in
2003 in addition to agents. They created their online website www.NaTTel.com in 2006 and
since then have made an effort to close down 10% of store in order to push up the utilisation of
their online website.

Of late the company is facing challenges to its leadership position in the Nordics Region. The
quarterly results have almost remained flat. The company saw a considerable decline in the
subscription to the traditional products like fixed line voice & data. Though there has been
significant increase in number of subscriptions for fixed line data, but the rate of growth lagged
industry growth by wide margins. Market share witnessed a considerable decline shaking
investors’ sentiments which consequently eroded equity by 10%. Its closest rival UniversalTel
has been increasingly dominating the market with its attractive product bundles, competitive
pricing & new products. In the last two quarters, almost 10% of NaTTel’s longtime customers
have moved to UniversalTel. New subscriptions to NaTTel have also shown a south-ward
movement which is not a healthy sign indicating the deterioration in the mind-share it has
amongst its prospective customers. Within a span of two years, UniversalTel rose to the second
position from its earlier 7
th
position two years back and is now challenging NaTTel, a leader for
more than a decade in the Nordics region. UniversalTel is a relatively young organization and
employs cutting-edge digital technologies, and fast moving business/operating models and
accelerated go-to-market strategy in action.

The Telecom Industry globally, as also in Nordics, is in a flux with new players entering into the
market, changing preferences of the customers, emergence of newer technologies and
regulatory changes. And this is having an impact on NaTTel. Over the last couple of years there
has been an increase in the number of Over the Top Players (OTT). These OTT Players seem to
be targeting services, especially messaging, which have traditionally been provided by telcos
like NaTTel. Consumers seem to be quickly adopting these new services provided by the OTT
Players. Revenues from SMS and other value added services have hence seen a considerable
decline across the industry. Fixed line business, which has been the “cash cow” for several
decades suddenly, seems to be declining.


NaTTel is rattled with the changes in the industry and very concerned about their flat growth in
revenues. , John Eiser, CEO of NaTTel is very worried about the customer churn especially in the
‘long timers’ Category. John is worried that their current strategy does not seem to be
stemming the outflow of customers.

NaTTel has a “five-point” high level strategy which they are currently working towards:
 Customer First –Customer Centric Approach across the business in everything we do
 Online First – Focus on promoting www.NaTTel.com. Encourage customers to use the
online website first before calling the call center.
 Outsourcing First – Reduce cost by aggressively increasing outsourcing of IT Operations
and Delivery
 First in the market – Improve Time to Market by productivity improvements, process
simplification, reduce product creation cycles, focused marketing
 Strengthening leadership position - Expanding the products & services in the fixed line
business segment to offer best in class offers to the customers and strengthen the
leadership position

With tons of unanswered questions in mind and baffled by the shakeup in industry dynamics,
leading to higher churn rate and negative customer sentiments, John Eiser, CEO of NaTTel has
called for an executive meeting with the senior leadership team consisting of COO, CIO, CTO &
CFO to get to the root of the matter and devise a strategy in order to maintain the leadership
position in the market.

Tom Selbek, CMO & COO of NaTTel makes his presentation where he focuses on the mounting
pressure from the operations side which is eroding the annual revenue of the company and
deteriorating customer experience. He puts forth some of the pain points from the operations
department which includes:
1. Rise in customer complaints which are mostly repeat problems or follow up to the
existing problems.
2. Utilisation of the online website is 30- 35 %
3. Fall of Net Promoter Score (NPS). NPS reduced to 8 out of 21 markets from 11 out of 21
markets the previous year

In his opinion, huge capital expense which was made few years back for scaling up fixed line
infrastructure capability has shown a much lower than expected rate of return hitting the
margins. Operational expenses have significantly increased which is mainly contributed by call
center costs and new customer acquisition costs. Increased number of customer complaints
and failure to resolve them in the first time has also significantly eroded customer experiences.

He suggests that NaTTel should completely revamp their operations and Business Processes in
order to enhance customer experience. He proposes that another area of focus would have to
be to improve their online utilization from 35% to 70%. He also laments a lack of consistency

across different customer channels leading to a lot of confusion in the customer mind and
increasing the cost of doing the business.

John Eiser likes the idea of improving utilization on their online website, but is not convinced
that Tom has a holistic solution. In his view, Tom is predominantly focusing on revamping the
existing channel strategy but, is missing the point on enhancing the channels holistically which
can entice digital customers more and can keep them engaged. Online portal in his mind can
only reach a subset of customers and other channels will continue to remain valid at least in the
short to medium term. Secondly, he felt that channels cannot be a complete solution but only a
part of the solution.

Tejwinder Singh, the only Indian on the company’s board & CIO of NaTTel made his
presentation to the CEO. He suggests that the existing legacy systems do not offer the flexibility
in building product bundles and also inhibit faster go-to market strategy. A significant amount
of capital expenses and operational expenses would be required to consolidate the existing
legacy systems and build on the next generation digital capabilities. He suggests that they build
a completely new greenfield IT stack while also investing on disruptive technologies like Big
data, Analytics, Artificial Intelligence, Cloud services and mobility were essential in order to
develop next generation ‘digital capabilities’ like an analytics platform or a data aggregation
platform. This would in turn not only aid in improving customer retention, but would also
provide a way to attract new customers with attractive products and offers. Creating real-time
personalized offers and mass customization is what CTO organization is aiming to build. For
example, Ms. Penny, who is a voracious reader, gets an offer to download latest eBook of
DanBrown at 40% discount upon using NaTTel’s Wi-Fi services at railway station to read book
review on “Da-Vinci Code”.

John agrees partly with Sam, but feels that NaTTel is not in a position to make as much
investment at this point of time, especially when they have spent considerable amount of time
and money over the last 2 years to integrate new products and Value added services on their
existing legacy stack. High debt-equity ratio on company’s balance sheet and a poor gearing
ratio have brought down its credit rating inhibiting company to raise more funds. John was in
dilemma to invest in building digital capabilities as he feared the financial health of the
company would deteriorate further if the returns are not as expected.

Last but not the least, It was time for Bradley Jenks, CFO of NaTTel , who was worried about the
mounting pressures from both operations and technology areas due to increasing CAPEX &
OPEX costs, dwindling topline and lower margins hitting the bottom-line of NaTTel. Following
were the key points presented by him in the meeting.

a. Organic revenue growth dwindled by 1.9% compared to previous year
b. EBIDTA Margin reduced to 29.1 % from 34% in the previous year
c. Free cash flow reduced to $5.6 bn from $6.1 bn in the previous year
d. Returns to shareholders almost remained flat

e. ROCE also declined by 2% affecting shareholders' sentiments
f. Capital Expense is around $2.5 bn which is 8% more compared to previous year
g. The group revenue increased to $17 bn which is only 1.8% Y-o-Y increase

The scenario in the board room was gloomy and John Eiser, the CEO looked unimpressed with
the facts and numbers on the table. John Eiser decides to hire a renowned global consulting
firm ‘Orton Consulting’ for advice and consultation and to help NaTTel create a new strategy for
this ‘Digital Age’.

You are the consultant hired to advise John Eiser and his team at NaTTel in this situation. You
are the head of strategy at Orton Consulting. You are resident Telecom expert and have vast
experience with helping Telcos draft their strategy as well as in the creation of the roadmap to
implementation. You have a group of consultants, business analysts and engineers, who help
you with research and perspectives. You have one month to speak to senior executives at
NaTTel and come up with suggestions for NaTTel. Do you agree with Tom Selbek, Chris Spillberg
or Bradley Jenks? Or Do you have a completely different point of View? What should NaTTel do
to retain its leadership position? How should they plan for the future?

You need to come up with a recommendation to be presented to John Eiser and his team at
NaTTel. You can structure your presentation to create maximum impact with the NaTTel team.
Please note that your presentation should cover the following key areas

1. What are the market needs?
a. A thorough analysis of Nordic telecom market - trends, products, key players,
market positioning, customer preferences , telcos undergoing transformation
journey, Major investment areas etc..
b. Competition Analysis
c. What are other Telcos (for e.g. UniversalTel) doing different?

2. NaTTel’s Strategy for the Future (2, 5 and 10 year plan)

3. Business Case for this strategy along with the high level roadmap

4. Create a visual representation of the Future End State of a Telco to strengthen your
business case.
This can be done with a user story showcasing how a retail customer and an enterprise
Customer will enjoy the products & services of NaTTel in future digital era. This can be
done by using power-point, or any available video tools.

While devising the strategy make use of a multi-dimensional strategic decision making table
charting out various strategy themes using excel/macros enclosing all the
suggestions/recommendations substantiated with analytical/logical reasoning. The framework

should be a working model which can be used to make recommendations to any Nordic based
Telco and the model can be re-used for presentation to any other geography. Refer to the
appendix section for facts on the market share, subscription & revenue break-up.

Note: Use credible sources of data only for any number crunching. Make a note of assumptions & pre
conditions before starting the analysis. Analysis can be submitted either in the form of a word document
or a power point presentation. Include all references. The guidelines mentioned above can be used as
reference but do not strictly restrict to the guidelines. Participants can explore beyond the mentioned
guidelines if they find anything relevant. Make assumptions around financial estimations. The focus is
more on the thought process than the accuracy of numbers.

Appendix
Total Revenue
(NaTTel)
Q42013
(In ‘000 $ million)
% Contribution
Mobile Services 90.5
24.88%
PayTV Services 19.7
5.42%
Broadband Services 56.3
15.48%
Fixed Network Services 197.3
54.23%
Total 363.8
Total Revenue
(UniversalTel)
Q42013
(In ‘000 $ million)
% Contribution
Mobile Services 40.5
24.50%
PayTV Services 19.7
11.92%
Broadband Services (Fixed Line) 26.3
15.91%
Broadband Services (Mobile) 40.5
24.50%
OTT Services – ehealth, GrpChat,
mobile TV, etc.
13.5
8.17%
Connected Device Management 7.5
4.54%
Fixed Network Services 17.3
10.47%
Total 165.3



Subscription Base
(NaTTel)
x 1000 (as on Q4 2013)
Fixed Line Services 2351
PayTV Services 220
Broadband Services 448
Fixed Network Services Extends More Than 2000kms in Finland & connects 800
commercial buildings
(N.B. The values mentioned in the tables above are approximate values only.)
Subscription Base
(UniversalTel)
x 1000 (as on Q4 2013)
Fixed Line Services 2351
PayTV Services 220
Broadband Services 448
Broadband Services (Mobile) 800
OTT Services – ehealth, GrpChat,
mobile TV, etc.
1500
Connected Device Management Around 200 SMB & SOHO clients
Fixed Network Services Extends around 800kms in Finland & connects 300
commercial buildings
(N.B. The values mentioned in the tables above are approximate values only.)




Market Share in Finland

Market Share in Austria


33.40%
27.70%
25.90%
Market Share
NatTel
UniversalTel
Others
25.40%
27.70%
25.90%
Market Share
NatTel
AusTel
Others

Market Share in Czech Republic

(N.B. The values mentioned in the graphs above are approximate values only.)


Deliverables for Round 1
1. Blueprint of the solution to the case study in the template provided on Campus
Commune.
2. Format- PPT/ PDF
3. Font Type-Times New Roman/ Arial/Myriad Pro/Calibri; Font Size-12/14.
4. Template can be downloaded from below link
Nextstep > Campus Commune -> Click on Casewiz Banner -> Related Communities (at
right side) -> TCS Casewiz Telecom Unit
Deliverables for Round 2
1. Solution to the case study in the template which will be shared with those qualifying for
the Round2.
2. Format-Word/PDF
3. Font Type-Times New Roman/ Arial/Myriad Pro/Calibri; Font Size-12/14
Deliverables for the Grand Finale
1. Solution to the case study in the template which will be shared with those qualifying for
the Round3.
2. Format- PPT/PDF
3. Font Type-Times New Roman/ Arial/Myriad Pro/Calibri; Font Size-12/14.
18.40%
37.70%
25.90%
Market Share
NatTel
CezTel
Others