Different marketing approaches single out the lowest rate mobile provider

  • 2010-04-29
  • By Linas Jegelevicius

KLAIPEDA - The telecommunications business is probably one of very few business sectors that can withstand the downturn and continue its attraction on the national stock exchange. While many business sectors teeter on the verge of financial abyss, telecommunications, despite the downturn, keeps counting its profits and plans its expensive marketing campaigns.

To have a clear view on what is happening in the segment is rather complicated, as the major market’s mobile connection providers – Omnitel, Bite and Tele2 – are joint stock ventures which, according to Lithuania’s laws, enable them not to disclose all financial reports. Therefore, the companies reporting their quarterly or annual accounts, juggle with data and highlight only the reports which are in their favor. The best example of such report juggling is Omnitel, which, according to the state-run agency, Telecommunications Regulatory Authority, TRA, in the long run has experienced a major loss of its customers. However, in public reports, the company ignores this fact and solely trumpets its last year’s increase in EBIDTA - earnings before interest, taxes, depreciation and amortization.

As TRA reports, in 2009, compared to the previous year, Tele2 and TeoLT, the largest Lithuanian broadband Internet access and voice telephony services operator, providing integrated telecommunications, IT and TV services to residents and businesses, increased their shares of the telecommunications market, by 0.6 percent and 2 percent, respectively. Meanwhile, Omnitel and Bite experienced a 4 percent and 1.5 percent drop in the same period. According to other TRA data, comparing 2009 and 2008, the overall number of Omnitel customers decreased, from 436,000 to 431,000; Bite reported 17,000 new customers, while Tele2 recorded a whopping 61,000 hike, up to 452,000 customers in 2009.

However, Bite and Omnitel representatives denied the data, engaging in denial and boasting. “We continue offering great prices and high quality. When customers select Bite, they do not have to settle for less just because they pay less. We are pleased with our own progress in 2009. The customers that came to us from other operators are very satisfied with the great rates we have and the quality they get in return. Our aspiration is to be very highly regarded by our existing customers. If we can continue to improve our business and our customers feel it, then we will be in a good place,” Frederick Hrenchuk, Bite CEO, answered The Baltic Times’ straightforward questions.

Omnitel spokeswoman, Daiva Salickaite, told The Baltic Times that the company has been entangled in a besmirching campaign spearheaded by its rivals. “Biased gossips are a strong means of competing in the modern society. The gossip about Omnitel customers switching from us to other mobile operators and high prices are idle rumors. Omnitel is a leader, according to all major indicators. According to TRA, Omnitel customers took up 39.9 percent of the whole mobile market in the first quarter of 2009, as Tele2 went second with 37.5 percent and Bite was third with 20.4 percent of the market,” Salickaite reported.

However, the market analysis and broader indicators show that recently Omnitel has lost its position as market leader. It has been overtaken by the newest player in the market, Tele2. According to TRA data published after the first quarter, Tele2 takes up 44 percent of the mobile customer market, while Omnitel connection users account for 29.4 percent, and Bite follows at third with 23 percent.

According to some other data, Omnitel still clings to the leader position. Nevertheless, the long-term trend is not in its favor, as Tele2 is scrambling up the major indicators. Until the downturn, all major mobile operators painstakingly cherished their nurtured images, which well reflected their actual division of the mobile market. Thus, Omnitel called itself a market leader to the whole market and investment in new technologies. Bite focused on and stressed the best customer care; meanwhile Tele2 always emphasized the lowest rates.

When the crisis hit, Tele2, a publicly acknowledged “cheapest chat” mobile provider, benefited most. During the crisis-hit year, it lured 61,000 new customers. Most of them came from Bite and, particularly, Omnitel. Omnitel’s misfortunes started in 2006, when the so-called portability service, enabling mobile connection customers to retain the same mobile phone number while switching to another operator, went into effect. Omnitel’s decline could also be related to the controversial “Personal plan” which tied Omnitel customers on the previous year’s average expenses. In crisis-hit Lithuania, the mobile operator’s intent generated a vociferous outcry, forcing Omnitel to forgo its highly publicized campaign. As a result, it triggered Omnitel clients’ exodus to the other operators. Meanwhile, all mobile operators stress their cheap rates; however, Tele2 keeps up its long time brandished image as the “cheapest rate” operator.

“We are proud of being widely acknowledged as the fastest growing mobile operator. We increased the number of new customers in 2009; however, it was done at the expense of our profit, which rose the least compared to other operators. In the short term, our thinking is focused not on profit, but on increasing the volume of our customers and their best satisfaction on the rate and quality ratio. All the latest surveys have shown that it has been the right direction. Our mobile customers feel our extremely personal approach to their needs and complaints. Differently from other mobile operators, we do not coax those determined to leave us into staying with us. Differently from our rivals, we do not offer better rates to our new customers than to old ones. The mobile connection rate is extremely important, but an honest, personalized approach to every and each customer is even more important,” said Petras Masiulis, Tele2 CEO, to The Baltic Times.

Tele2’s success story included some other factors as well. As other operators tend to impose so-called hidden taxes in the bills, the company never does that. In order to please its elderly customers, Tele2 recently started printing its bills in large type. The operator’s attitude has significantly changed in dealing with its fierce rivals. In the beginning of its growth, back in 2001-2003, Tele2 was swamped with abundant lawsuits filed not only by unhappy customers, but by other mobile operators as well.

As Masiulis admitted, “We were so earnestly engaged in the court battles that we were deservedly dubbed as ‘a hooligan operator,’ trying to fend off any attack on us by legal means.” However, over the years, the growing operator changed its approach to the nags, both coming from its rivals and customers. “Litigation would take up a bulk of our and my personal time. It was, to put it simply, a waste of time and money. I started thinking that all the mass media reports about our court battles would put us in a very bad light. Therefore, I told my employees and myself to quench our dissatisfaction and dismay, and to focus on our customer care. I dare to say that Tele2 has always been a step ahead of its rivals. While other operators arrange marketing campaigns of their new services for weeks and months, we do that in a few days, sometimes snatching the leaked-out ideas of our rivals. Other operators are overstaffed. In Tele2 we employ fewer people, but they are very skilled,” Masiulis shared his company’s success story.

Having started its activity latest, in 2000, in three years Tele2 outran Bite in the number of mobile customers, and in 2007 it overtook Omnitel. The operator keeps up its lowest rate, setting it at an average 9 cents per minute, as Omnitel’s average rate is 15 cents and Bite’s 13 cents, respectively.
However, some rebuke the operator for still lagging quality. Some mobile connection users complain that Tele2 connection is poor, or absent in extreme conditions, for example in making a call from a rural village or a dense forest. Others grumble over being unable to make a call from abroad, especially from Egypt.

“Well, honestly speaking, our mobile antenna network scattered throughout Lithuania has long been lagging behind Omnitel’s network when it came to its density and, therefore, quality. However, we have put lots of our resources and efforts to catch up to our closest rival. We may be still slightly behind, but our connection quality has improved a lot. I am not bragging, as all major surveys show, quality-wise, putting us at the same level with our rivals. The roaming services also sometimes were unsatisfactory, but we managed to strike a deal with additional roaming service providers in Egypt. Thus, we receive much less complaints regarding roaming now,” Masiulis said.

While focusing on mobile operators, TEO, the largest Lithuanian broadband Internet access and voice telephony services operator, providing integrated telecommunication, IT and TV services to residents and business, should not be disregarded when talking about Lithuania‘s telecommunication market. TeliaSonera owns 64.9 percent of the company’s shares directly and indirectly. TeliaSonera is one of the largest telecommunications operators in the Nordic and Baltic countries. TEO shares are traded on the Vilnius and London Stock Exchanges.

Total consolidated revenue of TEO during the first quarter of 2010 amounted to 192 million litas, and net profit for the period amounted to 43 million litas. The Company’s EBITDA for the first three months of 2010 was 81.4 million litas.  Last year, TEO revenue for the first three months amounted to 205.2 million litas.

“Despite the general telecommunications market contraction, TEO produced strong results this year. Although revenue for the first quarter was down by 6.4 percent as compared to the first quarter of 2009, the company secured similar net profitability,” noted Arunas Siksta, General Manager of TEO, in a press release. According to him, the company’s continued investments in the next generation fiber-optic communication network have enabled it to offer the fastest Internet access services in the country and to increase the number of customers using them. “The company is planning even higher investments in FTTH (Fiber to the Home) technology than in 2009,” Siksta said.

The company’s share of revenue from Internet and data communications services from the total amount of revenue for the first three months of 2010 amounted to 33.8 percent, voice telephony services – 54.9 percent.
During the first three months of 2010, the company allocated 19.1 million litas for investments. The majority of investments went to expansion of the core network and development of the next generation fiber-optic access network. The remaining part was invested in the development of IT systems and in the renovation of premises.

Speaking of the prospect for Lithuania’s telecommunications industry, it could be concluded that despite the downturn and severe competition, it will keep generating big income and profit. Only those operators who simultaneously focus on their investments in new facilities and technologies, as well as on aggressive marketing and, most importantly, the lowest rate policy, can expect success in this prospect.