Telenor focuses on cost cutting

Listening to Telenor’s Capital Market Day 2011 showed that many of Telenor’s regional operations were now focused intently on cost reduction by transforming IT holistically, rather than just depending on business as usual in a rapidly expanding market.
 
India’s Uninor’s presentation to its shareholders could be excused for thinking that they were an IT company rather than a telco, with much of the focus being on driving down IT costs and a focus on bringing IT competence back into the organization rather than rely on traditional outsourcing models.
 
Uninor Managing Director Sigve Brekke explained how his market with 23 million subscribers was focused on ultra low-cost operations. Today, the huge market has 70% SIM penetration, or an estimated 50% real penetration, with plenty of room for growth. Interestingly, most calls are local and by that, not just in-state, but local with a small geographical area.
 
Despite this being early days, Uninor is already huge with 27,000 sites in its limited 13 operational circles, with the next biggest of Telenor’s operations having around 10,000 sites. India is still very much a voice market with 700,000 erlangs an hour at peak, according to Yogesh Malik, Uninor COO.
 
What is different is that they only have 4.4 MHz of spectrum with which to operate. This scarcity has led to a need to innovate.
 
With just 4.4 MHz, Malik said that they bought in expertise from those involved with the original iPhone launch to help with capacity planning. Using synchronized solutions, careful, automated frequency planning and high capacity antennas, they were more than able to double capacity per site from 40 erlangs to more than 100 erlangs, or from 1,200 subscribers to 3,000 subscribers per site.
 
More importantly, Uninor was able to meet extra demand in 2011 without having to add a single base station. Without this careful planning and dense spectrum re-use, more than 3,000 additional sites would have been needed. Put another way, it is 30% percent more spectrum efficient than its nearest competitor.
 
Power consumption was also high on the agenda, as were integrating campaigns with capacity planning. Malik had a surprise up his sleeve when he spoke of the IT side of operations.
 
 
Uninor broke IT conventions and brought IT back in as a core competency. Rather than simply outsource operations and manage SLAs, Malik said that they had to work closely with partners to bring them along with Uninor in the IT transformation process, sharing risk and benefits along the way. Outsourcing has inherent inefficiency in it with buffers along the way.
 
Virtualization features heavily with 10:1 consolidation.
 
The bottom line is an impressive 40% reduction in IT costs to serve 70% more subscribers than in 2010.
 
Earlier, Henrik Clausen, CEO of DiGi in Malaysia, spoke of a market with no voice growth, but with a 30% CAGR in data projected from 2010 to 2013. Digi is the number three operator with 9.3 million subscribers in a country of 28.3 million.
 
But the highlight was how DiGi is on its way to replace its entire network with a new low-cost, LTE-ready, single RAN network to be completed by the end of 2012. This, Clausen claims, will reduce DiGi’s costs and achieve a Capex/Sales ratio of not more than 10% moving forward.
 
Strong focus was also on empowering the sales channel with better IT. Digi only launched 3G in the second quarter of 2009, two years after Celcom and Maxis, yet is succeeding in growing faster than the market with its slogan of “broadband done right”.

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