Convergent products are becoming more attractive to customers, so Telekom Austria has merged fixed and mobile operations in its home market under the unified brand A1, says CEO Hannes Ametsreiter
 
 

 
Hannes Ametsreiter: no changes in staffing levels in 2010, employees are promised 

 
  
 
 
 
Telekom Austria has merged the fixed and mobile operations in its home territory into a single business, with a new corporate structure that will run the company’s businesses across eight countries in central and eastern Europe, with 16,000 staff and 21 million customers.
Outside Austria, the brands — which are focused on mobile services — will stay unchanged, but at home there is a new unified brand for the company, A1 Telekom Austria.
Innovation and efficiency are the main objectives of the new corporate structure — and they were two of the key words used by CEO Hannes Ametsreiter in his interview with Global Telecoms Business.
“Efficiency is key, scalability is key, innovation is key,” he says. The reorganisation, says the company, will also pave the way for reengineering the network infrastructure.
“The new corporate structure will enable a more intensive exchange of knowledge at the group level and, therefore, strengthen our innovative power,” says Ametsreiter. “Furthermore, we will be able to leverage cross-country synergy potential and enhance our efficiency, providing more added value for our customers.”
Though executives in the company’s businesses across eastern Europe from Belarus to Croatia will be affected, the main focus is the creation of a new company that will take ownership of the original fixed incumbent operations in Austria and its mobile business, formerly Mobilkom Austria — though the group preferred to spell it “mobilkom austria”.
“We see many operators in Europe and globally doing this,” says Ametsreiter. “The situation is that we see convergent products as very attractive in the market. We have many bundled products on the market and we see them selling very well. We are now taking the next step: bringing together the operations of Mobilkom Austria and Telekom Austria and merging them to be better prepared for a convergent future.”
 
 
Apple iPad market
 
This convergent trend is already visible in the latest devices, he notes. “Look at the Apple iPad: what is it? Is it a fixed line phone? Is it a mobile phone? It’s both at the end of the day.”
And the company is already looking at the possibility of using wifi to offload some of customers’ mobile data onto the fixed network. “We have found out that for mobile broadband, 80% of the usage is at home. This means if we have a good working wifi solution — using DSL or fibre — then this would provide a better product for the consumer and for us a better and more efficient network.”
Ametsreiter and other leaders in the industry are struggling to cope with the surge in demand for mobile data. “We do see an explosion in data,” he says. “It’s doubling every year. We’re sitting on a resource that’s highly requested by consumers — which is great.”
He notes that “10% of the people are producing 50% of the data volume”, a similar finding to that of AT&T and other pioneers of mobile broadband.
Overall the company’s mobile network has registered a 250-fold increase in its monthly data volume over the past five years. The number of mobile broadband customers has reached more than 500,000, a sevenfold increase since 2006.
“On the other hand we need additional capex to cope with data volume and the customer expects a fixed price. We need to find the right pricing model. We need usage based pricing — that would be a topic for us.”
At the same time the group is investing heavily on its backhaul network. “That is important for us because data is exploding and so you need to think as an operator how to be extremely efficient in combining technologies. So it is a better product for the consumer and more efficiency for us.”
The company has already deployed HSPA+ across Austria, which is pushing up its ability to carry mobile data.
 
 
Fibre backhaul
 
“We are among the world leaders: we were the first in Europe to deploy HSPA+.” The network is now running at 21 megabits a second, and it will be boosted to 42 megabits shortly. “It’s important not to forget about backhaul. This year we will have 1,400 base stations connected with fibre. This makes us future proof.”
Over the following three years the company will expand the fibre backhaul to 4,000 of its 6,000 base stations within Austria, providing effective mobile broadband over much of the territory.
“The one who is profiting from that is Telekom Austria,” he smiles. The fibre “stays in the family”. But that illustrates another challenge of the unified group: “Balancing the investments — that’s extremely important. There are lots of pressures on the results but it’s important to make the smart moves.”
Meanwhile there are other efficiencies that the converged operation needs to address over the next two to three years, adds Ametsreiter. “We use two databases now, one for the fixed network and one for the mobile network. If we look at the two databases, the customers are defined in different ways. This means we are not allowed — legally not allowed — to exchange information between the two companies.”
That means it is difficult to have a unified picture of the business, “very difficult for us to have a common customer understanding,” he notes. “With one database we can have one common customer understanding and we can see the products a customer is currently using and what products we can sell.”
With one converged company the business will be able to bring the database together. “That’s a big improvement for us because that means cross and upselling can work. With the two separated entities it is not possible — or more difficult. And you are saving both opex and capex for the two databases.”
Staff efficiencies are more complex. “We have said to our employees there will be no changes in 2010. There will be some changes in the management area — this will be solved and decided,” he says.
 
 
Civil servants
 
Beyond that, it’s hard to know. One of the fixed line operation’s serious challenges — shared with many other incumbents across Europe — is inherited from the days when it was a government department. A high number of staff are still classed as civil servants — that is, government employees. “Out of 7,900 working for fixed line in Austria, 6,000 are civil servants,” he confirms. A pause: “Yes, a high number.”
So how will he and his management colleagues decide on how to achieve staff savings? “I made one thing very clear — performance matters,” says Ametsreiter. “Who is the performer? If this person is a civil servant or not, it doesn’t matter. All that matters is performance.”
But this is for later. “We are now at the moment in the consolidation phase. That means we are focusing on cost saving. We are also focusing on customer understanding and innovations, and we are preparing for the next innovations in the telecommunications industry.”
At this point Ametsreiter is more forthcoming: discussing the thorny question of Austrian civil servants makes him uneasy. Innovation is something to look forward to. Innovation is “driven on the one hand by smartphones and the other by mobile broadband”, he says. “We are just at the start of smartphone development. Other devices will come in. We need to have the right technology in place.”
HSPA+ is in operation across Austria and also in the company’s business in Croatia. “We are a leading company with this technology.” Spectrum efficiency is important, which is why the company is looking for wifi offloading and is looking towards the next steps — LTE.
 
 
LTE trials
 
At the end of June 2010 the company carried out its first trial of video over LTE, with engineers in driving round in buses while using telepresence systems. So far Telekom Austria has only a few LTE test transmitters, in Vienna and in Sankt Pölten in Lower Austria, and they are not in commercial service.
“LTE will meet the significant future capacity requirements of mobile usage,” says Ametsreiter, but the company has no licences yet for the service — and Austria will take some time to decide on the use of its digital dividend, the frequency spectrum at the top end of the current analogue TV band which will be freed as broadcasting goes digital.
“We expect data volumes to continue to surge,” says Ametsreiter. “Such sharp rises in data traffic will only be able to be managed by combining the latest mobile and fixed net technologies.”
Efficiency is key, he emphasises. “It is difficult to increase penetration — it is increasing but more slowly than it was.” So where will the extra revenue come from? New customers are creating less revenue that those the company already has.
Machine to machine services will create an income, but not much. “If you implement a SIM card for tracking and tracing or for smart grids, then this means you don’t have voice ARPU,” he warns. They will be simple data-only services, which are incapable of being upgraded to triple or quadruple-play services. “You cannot take the ARPU of voice SIMs and just multiply. Nobody would pay €25 a month for machine to machine.”
He sees opportunity in innovative applications in education, in health care and with elderly people, for example. “That’s the dynamic that keeps us awake. It’s up to us to bring the awareness of the technology into the different target segments,” he says. “Talk to companies, talk to consumers. Try to help, find solutions for them. That’s a very interactive process. That will inspire software developers writing new applications and will inspire industries finding new solutions.”
He wants to “inspire people about the technological opportunities”, something that needs “a lot of customer interaction”, he adds, “trying to bring ideas together”.
But Telekom Austria has always been an innovative company — and Ametsreiter is looking forward to the challenge. GTB