Morten Brøgger: The common denomination everywhere is the need to grow revenues
                
                
MACH, a provider of mobile roaming and related wholesale data clearing, financial clearing and settlement, interconnect billing, mobile content billing, messaging and EDI services originated as part of the Millicom Group in 1987 and was established as an independent company in 1989. The company takes its name from the acronym Multinational Automated Clearing House and is now headquartered in Luxembourg with offices in 12 countries. The company is venture capital owned and employs more than 1,000 people worldwide serving more than 650 mobile network operators, as well as technology providers, fixed network operators, application stores, SMS aggregators and supply chain management customers in nearly every country in the world. Morten Brøgger became chief executive on April 1 2011 having previously served as the company’s chief commercial officer.
Having joined the company in 2006, Brøgger knows both the company and his customers. “I know the company very well from the inside having held various positions in the last four and a half years,” he says. “I also bring relevant experience from before my time at MACH when I worked on the operator side at TDC.”
Brøgger spent six years at the Danish operator and the last two years of his tenure with the group was as chief operating officer of the fixed network division of Sunrise in Switzerland. He was responsible for the sales, marketing and product management activities of the Fixnet division and for Sunrise’s entire enterprise sales organisation. “During this time, I gained a great perspective on the challenges operators face and what their necessary requirements are. This level of understanding is essential to the CEO role. So for the first time the shareholders of MACH have appointed a chief executive from inside the company and I’m very proud of this fact.”
That perspective on operators’ needs is enhanced because of the almost unique view that Brøgger has into global roaming activity. “I see strong signs that the global financial crisis is over because people are travelling again,” he says. “I know this because roaming is up and about 70% of roaming traffic goes through MACH’s clearinghouse.”
He also sees sustained growth in SMS and voice, driven by growing economies like China and India, as well as an explosion in data roaming, which he puts down to the increasing mass adoption of smart phones and tablets. He describes travel, handset availability and pre-paid roaming as the core drivers of roaming growth. “Economies like China and India are strengthening and users now travel more frequently,” he says. “The increasing availability of smart phones and tablets now mean users are data roaming more and not just for email. Plus, increasing numbers of pre-paid users are travelling.”
Voice though remains the core of the roaming market. “Voice is still around two-thirds of the revenue in the industry,” Brøgger confirms.
Nevertheless, operators face clear challenges to voice margins and Brøgger acknowledges these and the efforts operators are making to uncover new services and generate replacement revenues. “In the majority of the world, if not everywhere, you can go in and read the strategic objectives of operators,” he says. “The common denominator everywhere is their need to grow their revenues. In saturated markets with a high level of competition, there’s no way to grow by increasing the number of subscribers so competition drives down prices. The challenge for these operators is how to introduce new services and maintain margin.”
Even in large, not yet saturated markets, the challenge is similar, adds Brøgger. “In huge markets like China where eight or ten million subscribers are being added each month the problem is the same because these are in the long tail and the ARPU they generate is extremely low,” he says. “It is these operator challenges that are driving MACH to offer new services and solutions to help drive revenue growth and business optimisation for mobile operators.”
The natural attributes of a clearing provider are at the heart of Brøgger’s expansion of MACH. “A clearing provider has to perform operations in a very cost efficient way at massive scale,” he says. “We use that capability and the scalability of our platform to make roaming a very efficient service that operators can use to launch specific price plans around roaming. We call this retail roaming and it uses our capabilities to provide operators with the requisite subscriber level information to analyze usage patterns and define specific customer segments to whom they can target tailor made roaming packages. Going one step further our new Data Roaming Engine applies the same logic to creating tailored tariffs specifically for data roaming.”
Providing the capability for operators to microsegment and implement price plans in a very short time is at the heart of MACH’s proposition. “It normally takes months to implement a price plan, we can do it in weeks,” says Brøgger. However, although MACH will demonstrate examples of segments to target using its analytical tools, it’s not MACH’s strategy to do operators’ strategic jobs for them. “They have to validate the business case for themselves,” he says. “We’ll put in the platform and provide the tools so they can do it themselves. We limit our prospects if we have to come up with all the inspiration for operators, we don’t have the mission to take over the world’s product management, that’s way beyond our creativity.”
Another aspect of opportunity and increased complexity within roaming that MACH is addressing is cross-technology roaming. “Inter-standard roaming is becoming more in demand,” says Brøgger. “Enabling CDMA subscribers to roam on a GSM network is very important from a customer experience perspective, especially now that we have data roaming capability from CDMA to GSM networks. We’ve also launched pre-paid CDMA to GSM roaming in Africa – a world first by the way - which stems the flow of subscribers, and their associated revenues, migrating to competing GSM networks.”
MACH has recently announced an agreement with Microsoft to provide direct operator billing and Brøgger sees that as an exciting opportunity. “Typically, app stores have managed their own businesses and users have paid with credit cards but there is clear interest in operators and app stores coming together and utilising the relationship operators have with their end users to charge for purchases. We call that direct operator billing and we think it will be a great success,” he says. “People are 13 times more likely to complete a purchase if they can make the payment through their mobile phone bill rather than by credit card and it opens opportunities in markets where credit card penetration is very low such as in India, China or Africa. It enables operators to be part of the value chain in a very cost effective way and contribute what they are good at.”
Brøgger is unconcerned by the EU’s proposal to eliminate national boundaries. Although on the face of it that eradicates the need for international roaming between western European countries – the most lucrative roaming market in the world, the reality is there will still be in-region roaming as operators hand-off to each other. “The fundamental issues with roaming won’t change,” says Brøgger. “You will always have hand off between operators because of licence regulation. I see taxation as the greater issue. Regulation on pricing will probably be finished before the harmonisation of tax in the EU. There will still be the need for someone like us to perform that hand off, it might result in increased price plans but that will be offset by increased usage.”
Although Brøgger sees extensive room for expansion of roaming-related services, growth in roaming is highly dependent on the markets involved. “The growth opportunity comes in many different shapes,” he says and, just as markets have different shapes, so do operators and that affects their appetite for outsourced roaming services. “Operators are struggling to grow in the most saturated markets and in all markets are working on reducing the cost side of their business. The challenge for operators continues to be how to deploy new markets without having the expertise for every new platform and new technology. We’re a managed services company and they can use us to deploy new services without making the investment. Outsourcing is definitely a trend and outsourcing on a managed service basis is a really, really hot trend now.”
Brøgger is very clear about how he sees the market changing and developing over the next five years. “It will look a lot like it does today, but in fact it will be very different,” he explains. “A lot of what we do is about automation and economies of scale and I don’t see that changing because it’s a fundamental requirement. However, I believe that two aspects will look very different. Firstly, the retail environment will change dramatically as operators seek to stimulate growth and provide access to competencies before their competitors, or, if they are beaten to market, to catch up with them quickly. Secondly, the cross-technology roaming market will also look very different as LTE comes into play. With LTE, we will have a very complex technical market but with the added benefit of increased data speeds. Competition will increase and roaming will become far more complicated between the different LTE frequencies, and the legacy 3G and 2G systems. On top of that all these challenges will need to be addressed with far fewer resources.” GTB