The effect of commoditisation on value management strategies in the South African telecommunications sector .

Abstract

The South African mobile telecommunications industry has been going through rapid transformation since its inception in 1994, which has been characterised by year-on-year decreases in voice revenues, increased penetration of smartphones and the adoption of over-the-top applications. This development, amongst other factors, has made it increasingly challenging for operators to continue to differentiate their products. In addition over-the-top providers are now able to offer most of the applications previously offered by the existing South African telecommunications mobile operators as value added services, which, according to industry leader opinions in the South African telecommunications industry, these over-the-top providers are better suited and positioned to develop solutions to meet customer needs. As a result of this, the main question is whether the operators still have the ability to innovate in this new reality or if they are simply going to be reduced to what some refer to as just a “dumb pipe,” a utility or commodity, like water and electricity. The goal of this research paper is to assess the effects of commoditisation on value management strategies given the current regulatory requirements and technological disruptions in the form of over-the-top (“OTT”) providers. In doing this, the researcher identified and recommended strategies for the South African mobile telecommunications operators to assist them with thriving in an industry moving towards commoditisation. The research explored the levels of commoditisation, the types of value management strategies, as well as the key buying factors for customers during their purchase decision journey when in search of mobile services, the impact of OTTs on the industry and finally, the impact of the South African regulators on the telecommunications sector. The researcher conducted twelve in-depth interviews with various senior industry opinion leaders who had at least five years’ experience in the South African telecommunications industry in a senior management role either in marketing, networks, product development, or strategy and transformation. The interview data content was analysed to identify themes used in drawing recommendations on the types of responses the South African mobile telecommunications operators should employ. The key findings resulting from the research are that operators should focus on taking care of the hygiene factors which include network and service quality which are top of the customer's list when choosing between the different South African mobile telecommunications operators. Another key finding is that the mobile telecommunications operators should seek to partner with the over-the-top providers and monetise these partnerships through some form of revenue sharing agreements, using the power of analytics and big data to better segment customers and develop products and offers that speak to each one of their segments. Lastly but not least, the South African mobile telecommunications operators will need to start diversifying their product offering and product strategies and this can be done by leveraging the customer relationships that the South African mobile telecommunications operators are known to have.