Tapping into a dynamic market

THE MOBILE service market is a very dynamic sector with price-sensitive clients, a characteristic that the crisis has even deepened. This presents mobile operators with a challenge in continuing to provide quality services for the most reasonable price and to keep pace with competitors while at the same time implementing the latest technologies.

The Slovak Spectator spoke to John McGuigan, chief executive officer of the newest mobile operator in Slovakia, Telefónica O2, about the challenges the telecommunications sector faces today, the current position of Telefónica O2 Slovakia and its plans for the future.

The Slovak Spectator (TSS): What are the greatest challenges that the telecommunications sector faces today? What have been the impacts of the global economic downturn on the telecommunications sector?

John McGuigan (JMcG): The main result of the crisis is that customers are becoming more price-sensitive. They are cutting their expenses and they want to know what they are paying for. With the O2 Fér programme, we are offering our customers very good prices and a simple product with a transparent structure. From our perspective, the financial crisis is an opportunity to attain changes in customers’ behaviour. We are ready for this kind of development.

TSS: Telefónica O2 Slovakia (O2) began operating in Slovakia in February 2007, at which time two mobile operators were already established and the market was relatively saturated. What sort of challenge did this present for O2?

JMcG: The mobile service market is very dynamic and customers make regular decisions whether to stay with their current operator or to move to another provider while keeping their current phone numbers. We made use of this dynamic quality of the market. Statistics about the number of numbers transferred to O2 prove that today we can make better use of this potential than our competitors can.

TSS: O2 began operating in Slovakia using a rented mobile network. How does the situation look now? Has O2 built its own network? What is O2’s current coverage in Slovakia?

JMcG: To us, the network is of great importance. It is also vital that we have the right partner. At this moment, we are satisfied with the current solution and don’t plan any changes. Telefónica O2 Slovakia currently provides its clients with mobile services throughout Slovakia (approximately 100 percent), combining coverage of its own network O2 Slovakia with national roaming. O2 Slovakia’s own network currently works for 91.76 percent of population. This is why as many as 85 percent of our customers’ calls are made within O2 Slovakia’s own network, while the rest are realised through national roaming.

TSS: The telecommunications market is highly regulated. How do you perceive the current level of regulation? Which areas do you believe should be the subject of stronger regulation and which areas should be not regulated at all?

JMcG: This is a highly discussed topic not only in Slovakia but in all of Europe. Slovakia should get fully involved in the European trend to decrease termination rates.

TSS: O2 has announced that it will test LTE technology in Slovakia. Do you think that the Slovak market is ready, or mature enough, for fourth-generation technology? What advantages will this technology bring compared to existing technologies?

JMcG: The LTE project is being developed corporately. At the present time, there are a number of various pilot projects being run in all the countries Telefónica operates in. This summer we are launching trials in the Czech Republic and Slovakia. Our priority is to maintain a high level of service for customers.

TSS: Huge investments are flowing into fibre-optic networks in Slovakia, as they offer much greater capacity for internet services compared to mobile internet networks. Does O2 plan any such investment?

JMcG: Telefónica O2 Slovakia is an innovative provider of mobile services that has been continuously bringing to the market services tailored to customers’ needs. As a mobile operator we are currently focusing on mobile services which are based on our customers’ needs.

TSS: O2 has made agreements with two retail chains as well as an alternative telecommunications operator and started to sell its services under a brand-reseller model. Why has O2 opted for such a model? What kind of customers are you seeking to address with this approach? Has this method brought the results you expected?

JMcG: In Britain we have been cooperating with Tesco over the past six years. In Slovakia, on the other hand, it has been four months – which is why it is too soon to speak about results here. What I can tell you though is that we are positively determined to develop the brand.

TSS: Slovak customers are price-sensitive, but on the other hand they not only want to make calls, but also to surf the internet, check their e-mail and watch videos on their mobile phones. Is the Slovak population technologically advanced enough to accept newer technologies or will they instead push for lower prices for mobile services?

JMcG: There is a certain natural order of things in how the market works. I would be speculating to claim there will be room for lower prices. On the other hand, when we set our prices we already anticipated lower mobile termination rates. Consequently we believe we already give great value to our customers.

TSS: In which segment do you expect the toughest fight for customers in the telecoms business? Which segments do you see as the most promising for future development?

JMcG: It is important to be flexible. We strive to compare the quality of services that our customers find with us to the customer experience with different sellers. We will continue to look for the business model we need. The fact we have been awarded the Mobile Operator of the Year prize for 2009 has proved our model to be an effective one. We are on the right track.

TSS: You arrived in Slovakia from Great Britain, where you served as customer service general manager at Telefónica O2 UK. Do the Slovak and British mobile markets differ? In what ways are Slovak and British mobile clients different and in what ways are they alike?

JMcG: What I have learned working for O2 in the United Kingdom is that to be successful in the mobile communication business means building long-term relationships with your customers. This observation also holds true in Slovakia. The technologies are mostly the same and customers also behave similarly in this time of economic crisis. They try to reduce their daily expenditures, their household costs and their monthly bills.