“Megaphone” has presented the development strategy until 2020

Photo: Oleg Karsaev / “Kommersant”

Cellular operator “Megaphone” has presented the development strategy until 2020. He intends to forsake the pursuit of new subscribers, but will increase the number of client services to increase revenue from them by 2-5% annually

Cellular operator “MegaFon”, a member of Russian “big three” operators, presented on Thursday, may 25, his new strategy for 2017-2020 years (the previous was a five year covering 2011-2015). As the Director for strategy of “MegaFon” Alexander Sobolev, the focus will now be not a mass recruitment of new subscribers, and attracting the “digital customer” and this category already existing users. Under the “digital customer” the operator understands subscribers that monthly consume large amounts of mobile Internet traffic, mobile apps, chatting messengers, and also use the phone to pay for goods.

“The last few years the telecommunications market has ceased to grow, — said General Director of “MegaFon” Sergey Soldatenkov. — And not only in competition, but that does not appear to be new subscribers: penetration [cellular] has reached 180%, Russia is among world leaders for this indicator”. The pursuit of a share in connectivity brings new revenue, but causes a high churn rate. Reduction of prices on service, unlimited calling, bundled offers with increased volume of services also led to a change in shares of operators in the market, Soldatenkov said.

In the first quarter, the share of digital customers in the subscriber base of MegaFon accounted for 32%, they were brought to the operator 60% of revenue. The level to which the operator plans to increase these figures by 2020, is not disclosed. A company representative only said that “digital” should be the majority of their subscribers. On March 31, 2017 total subscriber base of the company amounted to 77,3 million people, of which 75,57 million in Russia.

“Digitalization” subscribers is that the operator focuses on the increase of time that a customer spends in the network, and will try to encourage him to use the large amount of services. It will be as existing products — TV-service “the Megaphone.TV” banking service “the Megaphone.Map” and other and new services to be created on the principle of more for more (“more services for a greater cost”). According to the representative of “MegaFon” on Monday, may 29, the operator will introduce a new tariff line that will offer with additional services (unlimited access to social networks, OTT services that are not tied to a specific network operator, Internet telephony or online cinemas, etc.).

The new strategy of “MegaFon” also implies the differentiation of the brands. The brand of “MegaFon” will be positioned as the operator for the traditional users, Yota (owned subsidiary of “MegaFon”, the company “Skartel”) — for active people and lovers of the Internet, VKMobile (virtual mobile operator, which is created in cooperation with “Vkontakte”) — for users of the social network. VKMobile has to be run on July 15 in St. Petersburg at VK FEST. “We have incorporated services that are relevant to this audience: unlimited Internet traffic in the app VK, refund part of the cost of buying content to social networks, and subscribe to music in VK”, — said the representative of “MegaFon”.

To implement the strategy “the Megaphone” plans to enter into partnership with global digital brands and create at the expense of resources Mail.Ru Group “the largest digital ecosystem in Russia”, which will use the digital audience. According to the operating Director of the operator Anna Serebrenikova, the company’s objective is by 2020 to become a choice number one among digital customers in tangible quality. “We will continue to be technological innovators, using a four-fold advantage in a key for the development of 5G the 2600 MHz band, as well as the leadership base stations”.

Photo: Eric Gaillard / Reuters

In addition, the strategy pledged the active participation of the operator in the “digitization of the economy.” The representative of “MegaFon” said that the company will develop the integration of services in the field of communications for government and business. He explained that the operator intends to provide them in bulk. “For example, when a customer approach us about partnerships, we do not discuss neither the minute or the megabyte, because customers order the services under the key. This includes monitoring system, dash-boards and other reports. A similar project is one of the examples of participation in the program “Digital economy”.

According to the forecast of “MegaFon”, the successful implementation of the new strategy will allow to 2020 the annual increase of service revenues (revenues from services to mobile and fixed network) at 2-5%, OIBDA — by 3-6%.

In the first quarter of 2017 (also was presented may 25) revenue increased by 14.8% compared to the same period last year to 86.25 billion. This growth was obtained through consolidation Mail.Ru Group, 15,2% of the ordinary shares which (by 63.8% of voting shares), acquired at the end of 2016. Excluding this, the revenue of MegaFon declined by 0.9% to 74,494 RUB billion OIBDA decreased by 4% and amounted to of 29.03 billion.

Investors are cautious about the statements of MegaFon — 20:15 GMT 25 may quotes of the company on the London stock exchange decreased by 0.23%, to $11.2 per share.

“Great service three”

The main competitors of “MegaFon” has already made changes in their strategy. Owning 100% of the Russian “VimpelCom” holding VEON Ltd (until recently VimpelCom Ltd) in February announced that the company is getting from the sphere of digital technologies, and the launch of a new technology platform (also called VEON). This is an Internet messenger that allows subscribers to exchange calls and messages even when they have no money. Through the service you can also get other services such as taxi order, etc. the Company is now working to expand the number of partners. Until the end of 2017, the service will be launched in all countries where the company operates.

MTS in March announced the adjustment of the strategy: among its priority provisions appeared digitalization. Underneath the operator understands the expansion of services for customers: providing services in the field of financial technology (e.g. the technology “e-wallet”), OTT, big data (big data), Internet of things, ecommerce. As noted by the President of MTS Andrey Dubovskov in an interview with RBC in recent years between traditional Telecom and the end user has risen, companies like Google, Facebook, Amazon, Uber and others. The client began to trust them more than operators require their services. Operators who have to invest billions and tens of billions of dollars in the quality of coverage and services, are now willing themselves to offer the services that now give the Internet company.

Analysts agree that mobile operators need to find a new growth point. Raiffeisenbank analyst Sergei Libin said that in “the Megaphone” are optimists. “They expect growth of the market, not what they due to its competitive advantages it will greatly outperform — he explains his thought. — In principle, now all the operators are talking about one, so if this is all they will consistently implement growth in the market is possible.”

The analyst “Uralsiba” Konstantin Belov considers that “the Megaphone” quite ambitious plans. “The question is, is it possible to achieve all this without breakthroughs and major benefits, he says. — The market is stagnant, rich, the incomes of consumers fall, and it will be difficult to get them to pay more for services.”

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