Dec 2, 2024
Show Notes:
Gerd Schenkel discusses
his experience in creating new telco businesses and how to analyze
a telecommunications company. Gerd has spent over 10 years as a
consultant and 15 years as an executive in banking and telco. He
aims to make a differentiation in consulting work by bringing
together both worlds.
Developing a Telco
Company
Gerd spent six years at Telstra,
Australia's incumbent telco, and three years as the CEO. He talks
about his experience there and moves on to his first experience at
creating a business which was for National Australia Bank, where he
launched a digital bank called EuBank. He later worked as the CEO
of a digital team and was tasked with building a telco division.
Gerd discusses the creation, development and success of a telco
project. He talks about launching a project, what it requires, and
what he learned through the process, including accepting and
meeting a 10-week launch deadline. He talks about key learnings
from his time there, managing the team, product pricing, and
making the process of developing and delivering a product simple
and effective.
A Telstra Broadband Brand
Success
Telstra's internet broadband product
was competing with its parent company's product, but the difference
was not in speed or quality. The brand and marketing strategy was
more about the connection to the local exchange, where the
availability of ports was crucial for competitive dynamics. A
former Telstra employee and artist was hired to help develop the
brand. The team knew they would need to market locally, and in some
areas, they would spend more money. However, they turned this
limitation into a positive, creating a brand story called "Belong."
The name "Belong" was about belonging to the local neighborhood,
and the advertising would be with local shops. The brand was
launched with white lists, indicating that the product was only
available in certain areas. The name "Belong" was part of the
"local connection" concept, and the bank "Eubank" was launched to
create a national brand story.
Challenges Faced by Telco
Startup
Gerd discusses the challenges faced
by a startup telco, Telstra, in complying with specialist
regulations. The telco license had provisions for executing
government and police directions, which were not widely known and
not widely discussed. Our team was unaware of these requirements
until a dedicated Telstra person contacted us about it. The team
found a solution by flying a UK-based technician to install the
necessary technology in exchanges. Gerd explains that, in terms of
regulation, startups can do all their work upfront, but there are
always unknowns and unexpected issues that need to be addressed.
Flexibility and agility are essential in finding creative
solutions, as demonstrated by Telstra's experience.
Customer Service,
Operations, and Billing
Gerd shares an example of changes
made to billing, and communication at Telstra. He explains that pro
rata was a major cause for complaints due to the high cost of first
bills. He talks about costs involved in rolling out a new billing
system and how they chose a low-cost platform and how this solution
cost them nothing and was immediate, meaning no complaints or phone
calls.
Gerd emphasizes that the mindset
should be on the customer side, focusing on providing the best
possible service and experience for customers. Gerd also mentions
that Telstra had to configure routers with customers' accounts,
which was impossible. They found a solution that was cheaper and
more efficient, saving them $3 each. This resulted in no phone
calls or track roles, and customers were happy.
On the Moving Home
Process
The conversation turns to the
redesign of the moving home process for Telstra, which had a
negative NPS of perhaps minus 50 and a churn rate of 85%. The
process was outsourced for decades and was a nightmare for
customers with multiple products and separate tech stacks. Gerd
suggested that they started with a small percentage and then rolled
it out to everyone. They used their control of channels to impose a
better process, routing website orders wherever they wanted. They
then convinced call centers to enter orders on the website instead
of the internal system, resulting in a reversal where the website
became the internal interface for employees. This principle was
also applied to mobile phone ordering, resulting in faster and
easier ordering for all employees. Gerd explains that importing
these mindsets into Telstra was harder due to the bigger scale,
complexity, and politics involved. However, the benefits were 100
times bigger in terms of cost, with savings of 40 minutes per
mobile order. He now works for a telco in North America, applying
similar mindsets to their operations.
The Business Model of
Telecommunications Companies
Gerd discusses the business model of
telecommunications companies, particularly telcos. Telcos spend
billions of dollars on infrastructure and technology, which is then
used to make monthly subscriber payments. This complex system
results in an average return on capital of 8% over the long term.
However, telcos are less customer-centric than banks due to their
network businesses where customers are not even a customer, but
rather a subscriber. Gerd offers how telcos could reduce churn and
increase revenue by being more customer centric. He suggests
offering free basic services, such as data and advertising and
shares a few working examples=.
Analyzing a Telco’s
Monetization Base
Gerd suggests analyzing a telco's
monetization base by separating out non-network access revenue per
customer. He suggests that if network access is the only revenue
source, it will go towards a marginal return on capital (ROC).
Telcos have unique access to populations and good brands, which can
lead to increased revenue. Gerd also discusses the concept of local
office apps, where users can opt in to receive local offers based
on their location. This approach has been successful, but it has
faced political debates over ownership of the PLC. He states that
telcos can potentially generate 1,000,002 million in a country with
20 million people if done properly. Secondarily, telcos typically
report the split between network access revenue and non-network
revenue. However, Gerd suggests measuring this separately. To
evaluate the non-network revenue, he suggests using incentives,
reporting, and management tools. A consulting firm can help with
this process, although it may require hiring a consultant. By
valuing the non-network revenue dollar, telcos can better manage
their costs and maximize their revenue.
Timestamps:
02:42: Creating a New Telco Business at Telstra
05:08: Implementing the New Telco
15:25: Branding and Market Strategy
20:21: Regulatory Challenges and Solutions
24:08: Customer Service and Operations Improvements
29:10: Impact on the Parent Company
32:51: Analyzing a Telecommunications Company
40:23: Monetizing the Customer Base
47:45: Final Thoughts and Contact Information
Links:
Website:https://www.gerdschenkel.com/
LinkedIn: https://www.linkedin.com/in/gerdschenkel/
Resource: https://umbrex.com/resources/how-to-analyze-a-telecommunications-company/
Unleashed is produced by Umbrex, which has a mission of connecting independent management consultants with one another, creating opportunities for members to meet, build relationships, and share lessons learned. Learn more at www.umbrex.com.