In today's tough climate for operators, customer loyalty is key

This week has again been a reminder of the difficult conditions that network vendors and operators are fighting against in Europe. Quarterly results from Vodafone highlighted continuing weaknesses in both Northern and Southern Europe, with revenue down in some of its key markets such as Germany and the UK, not to mention in Italy and Spain.

Like all operators, Vodafone is facing a perfect storm of competitive, regulatory and economic pressures in Europe: roaming and MTR revenues are under threat, price wars are raging and economies continue to wilt. Many want the operator to flog its 45 per cent stake in Verizon Wireless to raise a huge amount of cash it can then inject into its troubled markets.

Vodafone remains reluctant to do this, and with good reason, as Verizon Wireless remains one of the few bright spots on its balance sheet. Instead, the operator is continuing to follow its strategy of implementing Vodafone Red plans across its footprint as a defensive strategy against OTT messaging services, rolling out LTE and developing its unified communications services in certain markets.

Essentially, there are really no quick fixes for operators in such difficult times, when so many issues have to be addressed; throwing a load of cash at the problem is not always the best way. Investors may not like it but this is going to take time, although it's not clear how much time operators have to turn things around before things get really scary.

I also had a very interesting opportunity to speak with a leading executive at Russia's MTS this week. Unlike many of its Western European counterparts, MTS feels it does have time on its hand because voice revenue is continuing to hold up while it develops it data strategy. Shared data plans are not on the Russian operator's immediate agenda, but two things clearly are: LTE data services and fixed-mobile convergence.

MTS concedes that it lost the edge on data last time around with the launch of 3G. This time it plans to be in the vanguard with rapid LTE rollouts in strategic markets to attract consumers who are now more than aware of the benefits of mobile Internet. Meanwhile, the main rationale behind convergence, said MTS' B2C marketing director, Vyacheslav Nikolaev, is customer loyalty.

Customer loyalty of course underpins everything that operators do, and they are now seeking new ways of tying users to various services in order to make it harder for them to churn. Quad-play and shared data buckets are obvious ways to do this, but it's going to be a challenge to get the pricing right and ensure quality of service. MTS is already integrating its disparate fixed-line operators under a single billing system to drive its convergence strategy, and sees its first quad-play services arriving in Moscow as early as this year. This operator may feel it has time on its hands, but it's not hanging around.--Anne

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