The President of MTS — RBC: “the Sources of income lying under the feet”

The President of MTS Andrey Dubovskov in an interview with RBC about the reasons for the decline in revenues of mobile operators in 2016 about how the company is going “to get closer to customers,” and why will not consider in its strategy the risks associated with the “law of Spring”

“We are ready to give the services that you’ve received on our networks not of us”

— In the third quarter of last year, MTS ‘ revenues in Russia fell for the first time in the history of the company. Players of the Telecom market put forward the thesis that to survive you have to transform into a technology company. “Megaphone” has bought a controlling stake in the Internet holding company Mail.Ru Group, owner VimpelCom announced the renaming of VEON and the change of business model. Do you share their pessimism?

In the third quarter of last year we had a precedent — revenue fell by 0.8%. This is not due to the fact that we devalued as a telecommunications business. This was mainly due to the fact that people have less to go and spend in roaming. We, as a company that provides roaming services to about half of all departing subscribers in Russia, of course, lost income. So it was rather natural problem related to macroeconomics, not a trend. Therefore, when in the fourth quarter of roaming the high season has passed, and with it the negative pressure on revenue, we returned to growth.

Thus we see the changes in the behavior and consumption of people under the pressure of digitalization. Therefore change too on the one hand, trying to be part of this new pattern of behaviour, on the other — often it is prejudice. This is normal, and no pessimism here.

— Judging by the statements of “MegaFon” and “VimpelCom”, the market is not in the best condition…

— Frequently, the attribution of specific figures to some global trend has a ceiling. Especially for short-term periods. Especially if the business is huge. Plus 3% or minus 5% for the quarter, six months or a year is irrelevant in order to try to find a specific trend and begin to exploit it. In General, modern telecommunications business gradually transformirovalsya in the direction of the business, which is difficult to call traditional. All telcos in the world trying to be, sorry for the triviality, closer to the customer. Over the last five to ten years between traditional Telecom and the end user got up those who are end-users began to trust more. It is companies like Google, Facebook, Amazon, Uber and others. The client required their services but not ours. We paid great attention to the quality of those services that are provided by those who stood between us, was at the height, because of the state I don’t mean specifically just the state required quality of service, coverage, and other things. We all provided, and put billions and tens of billions of dollars, but eventually the fruits of these investments in greater use of those who stood between us and the client.

Now the telcos are trying to say to the client: we have done everything to make sure you have good call quality, but now we are ready to give the services that you’ve received on our networks is not from us. This, for example, due to the acquisition by MegaFon Mail.Ru Group. And it’s not just the Russian trend — look at American, European markets. They have long been trying to absorb the Internet company, to find some kind of synergy between service companies and traditional Telecom. Today there is no old classic Telecom but there is still something fundamentally new.

— What in this situation makes MTS?

— We do not yet have a global solution. In each situation, operate individually. Somewhere we go to the partnership that is trying to do on their own; something, possibly, will buy.

For example, today the demand for all of our mobile apps that are downloaded tens of millions of people, from the point of view of the Russian user audience comparable to the number of active users of all known social networks taken together are numbers of the same order.

— What new services you are willing to offer through mobile apps to get closer to the customer?

— Many new services. Stay tuned. We expect that as our knowledge of more than 100 million subscribers in the end transformirovalsya in more popular services. And, of course, primarily in the area of e-commerce (e-Commerce. — RBC). Now, many startups and companies trying to create their own marketplaces (sites of electronic Commerce. — RBC). And we, as the owners of the huge volume of information about our subscribers, we hope that our knowledge will be demanded not only by us.

— How are you going to monetize them? It is not clear how you can dispose of these data.

— The law States that you can use depersonalized data; transfer personal data to a third party without the subscriber’s consent impossible. Here is yet to develop common approaches, to clarify wording. For example, to differentiate itself from big data big data and user personal data, etc. But we work with what we have. And yet in all our projects from the field of big data (big data. — RBC), we see that the effect for ourselves higher than what we could monetize the outside. In the past year, the economic effect from the use of big data for us amounted to 536 million rubles, of which only about 20% — the contribution of external projects. That is, until the demand from the market is not as large as we would like.

— Why?

— Set of reasons. The mental side is difficult to change, traditional marketing is more familiar to subjective Economics: why spend money if it will not bring money immediately. Need time to make people understand that without investments and development of advanced technologies, they will remain on the sidelines.

— You mentioned the marketplace. You create your site?

— We will not.

But at the same time want to create products that are alternative to those that stood between you and the consumer?

— Of course. On the same marketplace is a system of payment, discount services, loyalty system, a lot of things.

You can’t just set a goal — to create a second Alibaba and their investments, resources and the will to try to do the same, what has been someone with talent, circumstances, perseverance and inherent in the time window of opportunity. Thus it is necessary to move to learn a new context to do their work and then as you move the contours of what in the future may become a real breakthrough, will begin to emerge more clearly. Most importantly to you, your business technologically, psychologically, etc. at any time were ready to let go of what is not fires, and invest in something that evolves.

A year and a half ago, we established a Committee on projects in the field of big data, have provided a huge investment, billions of rubles for three years. There were several hundred hypotheses 42 the project has reached the detailed understanding and zifrovaya, 13 of them have been invested, half of them we did not get any results, but the remaining half received the result, which collectively exceeded all our expectations from the projects.

Andrei Dubovskov

Photo: Vladislav Shatilo / RBC

“20% of our entire revenue is generated do not pay for mobile Internet, voice or SMS, and some other services”

— You put forward the thesis that the relationship would need to be free. Moving in this direction? What could replace the fee for the connection?

— Move. Sources lying under the feet, hanging in the air and beg: please, take us. About 20% of our entire revenue is generated do not pay for mobile Internet, voice or SMS, and some other services. Sooner or later, I am convinced, we won’t depend on the user Board. There are examples. We announced last year. One of the first — cooperation with our MTS-Bank, customer service at the expense of cashback Bank. Cashback — traditional thing, but, as a rule, it overlaps several times subscriber ARPU (average account of the subscriber. — RBC) mass. Here is the answer. Dozens of similar projects being developed.

— When the share of alternative services can reach 50% in your revenues?

I do not know. It is not a linear development. If I’ll extrapolate a speed which was typed, over the next several years, will give some number, this will be irrelevant. I can tell when it will be 50%, and at this time oil will cost $500, not $50 as it is now, or do alternative energy sources displace hydrocarbons, or something else — a huge amount of input, which must be taken into account.

— Of these 20% what services occupy the largest share in the proceeds from any more potential?

— All 20% gain from a huge number of products, including the mentioned project with MTS Bank. Life will show, more shoot.

Operators will be able to earn on alternative services the same as now on communication services?

— A good question. See, on the one hand, we are responsible for a huge business and needs to increase, on the other hand we are constantly changing, we spend a lot of money on development, offer new services, many of which are in demand not immediately or on a smaller scale, in terms of ROI. So it’s more a question of balance: how not to Deplete a resource flow that we aim to support our current business and to invest in the development of new products and present them to the market. The ability of this balance is to observe — one of the main tasks of modern management in Telecom.

— What this bill says in the updated strategy of MTS?

— Nothing revolutionary. Our basic tenets our focus on increasing the data transfer and to pay higher dividends to shareholders do not change. But now we do not see differentiation (introduction of new, non-core lines of business. — RBC) support the postulate of the strategy. Over the past three years we have more or less exactly imagine, what direction of differentiation is fired, what is really valuable.

Now we focus on the digitalization (translated into a digital format. — RBC). We understand that data transmission, the first “e” of our strategy should be transformed not into something we groped some other niches and markets and the digitalization, which will allow us to pick up subscribers, money, partners, anywhere, regardless of what economy they work and what kind of service are interested in. We must not isolate our business is something that will be something innovative, correct, smart and be closer to the customer. We have our own business, a great business to do the right, smart and integrated into people’s daily lives.

And of course, the digitalization starts with the transformation of the internal culture of the company and eventually change the aspirations and demands of the subscribers. A classic example in which the service company move is not the first year is the transfer to digital service all client requests. Here you ever tried to get through to the call center services Uber or Gettaxi? Nobody comes to demand from Uber to include a contact center with tens of thousands of telephone operators to serve customers. But, in fact, it is the same service that we provide, however in the Russian practice service through the contact center — tradition. Sooner or later it will refuse in any industry.

— What else is included in the concept of digitalization in addition to the refusal of the call center?

— The process of digitalization is developing several parallel transformations: changing internal culture, business processes, environment, customer interaction, and all this will eventually lead to the fact that customers will shape your request to us from anywhere in the sphere of services through the digital channel.

Andrei Dubovskov

Photo: Vladislav Shatilo / RBC

?

— You probably know that in today’s marketing people with mathematics and physical education have already started to replace “the classics”? Why is this happening? Because right now, in terms of sales we need, for example, algorithmic knowledge to accurately predict people’s behavior in terms of the speed of change in the mentality. I am sure that sooner or later, 50-70% of employees in the company people should have knowledge on IT. They must generate not only new ideas, business proposals and provide for their implementation on the principles of digital. First, we tried to get rid of paperwork, which breeds around themselves uncivilized ways of generating business solutions. The automation of the process is including the digitalization of our business processes and customer interactions. It is important to regulatorika were also more adaptive to the present day, so as not to inhibit development and competitiveness.

— Necessary IT-competences of most employees means that they will need to undergo some training?

— This is partly a matter of constant upgrade of the knowledge level of existing employees in part — the issue of hiring “fresh blood”. It is important not to break the corporate spirit, the atmosphere that makes people happy and allows the company to strengthen the market leadership last year. It’s again a question of fine-tuning, balance.

The state will be less? After digitalization should help to optimize costs for personnel, the same call center — minus the…

— We do not touch call center. Traditions do not change overnight. Numerically, it all depends on the specifics of the directions, its business objectives and market strategy of the company at that particular time interval. For example, in the technical division of the number of engineers we have not changed for five or six years, despite the fact that we’ve doubled the network number of base stations, the level of automation right now is that one engineer can service more base stations. In other directions there has been a decrease, where-that — a considerable increase, for example in retail. The growth of the number it is associated only with a specific competitive situation on the market. We would not build their own retail, if we were not smoked out of multi-brand stores (meaning “Euroset” and “Svyaznoy”. — RBC) .

The digitalization will help to reduce retail? People can buy online all that they need, to services.

— If to speak about phones, smartphones and other hardware, we now sell via the Internet more than all of our colleagues together. But we are unable yesterday to sell five phones through the Internet and tomorrow 25: economy is growing steadily. But you’re right, e-commerce will masnatta, the scale will increase. Physical retailing we will inevitably be reduced.

— How?

— Depends on the behavior of competitors and market situation. The number of our stores is still less than the total number of sales points of “MegaFon” and “Beeline” subject to their control in “Euroset” and “Coherent”. While the difference with the nearest competitor — about 2 thousand shops — allows us to exist comfortably: we hold the leadership in terms of subscribers, revenues, profitability and so on. But we can’t hold conventionally 2 thousand salons, despite the fact that, for example, MegaFon or VimpelCom (operating under the brand “Beeline”. — RBC) will control for 8 thousand We can have a quarter less of each of the competitors due to the fact that we have the outflow less the loyalty of the subscriber base is higher, etc., but not significantly.

— Will be responsible for the separation of “Euroset” between “MegaFon” and “VimpelCom”, which is expected to happen in the near future?

— If the result of the partition of competitors number of points will be reduced against what is each of them now we also reduce the network. Again we will have a quarter less.

“Regulatorika is much higher and the proper level”

— In the strategy you take into account the risks associated with changes in the Russian legislation, “Spring law”, regulating “big data user”?

— The strategy has an indirect relationship. Build your strategy depending on that, you have to spend 100 billion rubles for the implementation of the law or not, is fundamentally wrong. The strategy depending on technological trends, your vision of how to grow the business, and international experience.

But do you think that the performance of the “law of Spring” you will need to spend a significant amount? Prepare some reserves?

— Of course, not ready. How can you do that? Here we have the CAPEX of the current year to 80 billion rubles, and, for your thoughts, I have to spend the money not on the network, IT, customers and the rest, and put in the Bank for interest, add more and wait you need money for the fulfillment of the law?

— Could the Russian regulator to make life easier for telecommunications companies?

— Honestly, the question does not like. On the contrary, consider that unlike other countries regulatorika is at a much higher and proper level. In General changes of the last years for us in this area — it’s like the transition from steam engines to the internal combustion engine. Maybe not electric cars go, but the fact of the introduction of auction principle of allocation of frequencies, clearing a huge amount of archaic in regulatore and so very happy. A lot more then it would be correct to do, and I’m sure that work is carried out.

— Can receive additional benefits, something else?

— Don’t expect or ask for. The sector is in normal healthy condition. We do not see in this area, some critical downside (disadvantages. — RBC).

— Your competitors continues to decline, the revenue, you look rather the exception…

— Yes, revenue and absolute profitability we have several years in a row, increase the gap with peers. Everyone is trying to work, and so are we. Apparently, we have a balance of ambition, capabilities, skills, etc. is in better condition than the market average.

What does MTS

MTS offers mobile and fixed communications, Internet access, pay television and others. Has a controlling stake in Telecom companies in Ukraine, Turkmenistan, Armenia, and 49% of the operator in Belarus. At December 31, served in the amount 109,9 million mobile subscribers, 80 million in Germany (market leader according to this indicator). Revenue in 2016 amounted to 435,7 billion rubles., net profit — RUB 48.5 billion of AFK “Sistema” Vladimir Yevtushenkov, directly and indirectly, owns 51,11% of MTS, the rest is traded on the new York stock exchange and the Moscow exchange. The current capitalisation on NYSE — $11 billion.

What is known Andrey Dubovskov

Andrei Dubovskov graduated from all-Russian state Institute of cinematography. S. A. Gerasimov, specialty “Director”. In the telecommunications industry began to work in 1993. In 2002-2004 he was the Director General member of the group company Tele2 in Nizhny Novgorod. In 2006-2007 — Director of the regional division of “MTS Ural”. In 2007, he joined the “MTS-Ukraine”, in 2008 he headed the company. Since April 2011, he has the entire MTS group.

 

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