Network performance determines operator profitability

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The acceptance of mobile broadband is accelerating in almost all markets across the world and we are witnessing especially fast growth in Asia Pacific. Global mobile broadband subscriptions reached around 1.7 billion in Q1 2013, and are predicted to reach 7 billion in 2018. Most mobile broadband devices are and will continue to be smartphones. The ever increasing availability of smartphones has seen consumers accessing the internet more frequently throughout the day, both indoors and outdoors. Over time apps and data have become just as much an integrated part of everyday life as SMS and voice calls. More and more people are connecting to the internet. They expect to be connected anytime and anyplace with a high network quality and highly reliable connectivity.

 
This widespread change in user behavior and expectation poses challenges for mobile network operators and also brings opportunities to stand out from the crowd and deliver exactly what the growing number of users expect. In order to deliver a superior smartphone experience, it is essential to have a superior network  performance and this become the key differentiator for operators to generate competitive advantage and also help them monetise mobile broadband. Superior network performance is a key differentiator in attracting new users and turning existing ones into loyal brand promoters. 
 
Heavy users have high expectations and their loyalty is easily lost if those high expectations are not met with a sufficient standard of performance. In order to retain these users, ensuring good network performance is key. Customers who are very satisfied with their network’s performance are more likely to recommend their operator to others. Users’ word-of-mouth and recommendations turn into powerful brand promotion tools for operators leading to additional market share gain and reduced churn. Research has shown that most network operators are yet to offer the ‘wow factor’ that will entice their customers to generate positive recommendations.

 

Increasing customer loyalty has significant benefits when it comes to generating long-term value. This means there is potential for each subscriber to generate more revenue across his or her lifetime.
 
Network performance and value for money are closely correlated; improving consumer satisfaction with network performance also improves perceived value for money – without actually lowering tariffs. A pleasant smartphone usage experience is also likely to stimulate and encourage more usage, and potentially increase the ARPU for each user if data plans are designed correctly. It has also been observed in some markets that device ecosystem vendors are also putting significant requirements on network performance for enabling certain device functionalities, having networks with best performance can capitalise on these new device functionalities to acquire early adopters.

 
Recent market studies have found that addressing network performance has twice the impact on customer loyalty compared to measures such as improving customer support, and is four times more effective at increasing satisfaction than loyalty rewards.
 
Having a high-quality and superior network has definitely paid off for a leading Australian operator. Superior network performance has resulted in superior mobile business results, well ahead of the competition. For the last financial year ending Q2-2012 for mobiles, the operator enjoyed strong year-on-year revenue growth (8.5 percent), market-leading profitability (36 percent EBITDA), growing market share (signing up 1.6 million new customers) and increased customer satisfaction (customer complaints reduced by 26 percent) ? all achieved in a highly-mature market with over 130 percent mobile subscription penetration.

 
As mobile broadband becomes ever more pervasive and instrumental to people’s daily lives, operators have an opportunity to enhance their customers’ experience by making offerings ever more useful, convenient and relevant. Operators need to find ways to not only deliver the capacity to meet these demands cost-effectively, but also to monetise the value these services represent in the wider ecosystem – maximizing the value of the data they deliver to users. And this is where network and the support systems, processes and services around it have the potential to be the engine of growth in operators business.
 
Providing an excellent network with great coverage and fast data speeds where apps run smoothly is absolutely essential. They command higher user spends and are the strongest drivers of mobile broadband customer satisfaction. A strong correlation exists between highly satisfied customers and their likelihood to stay with their current service providers - and furthermore to positively recommend them to others.  A network with superior performance is a strategic asset that operators must create, proactively monitor and sustain to attract new users and, perhaps more importantly, keep existing users happy.

 
 The author is Practice Head - Communication Services & Mobile Broadband, Ericsson India