The Digital Brands Opportunity

THE DIGITAL BRAND OPPORTUNITY

Contents 1

The rise of digital brands

2

The mobile operator challenge

3

The digital brand ecosystem

4

Beyond voice: lifestyle services

5

Platform best practices

6

Future outlook for digital brands

Introduction Mobile operators are now, more than ever, willing to undergo new ventures under a “wholesale-as-a-service” model. Digital brands align well with this, providing opportunities to deepen customer engagement and monetisation in a mobile world where brand affiliation is becoming more critical than ever before. Lifestyle services are the vehicle through which this revolution will occur.

These services cater to a customer base that demands more personalisation and attentiveness to their needs. To enable all of this, business support systems (BSS) must evolve to enable personalisation and an understanding of individual customer behaviours with the aim of winning the customer experience race.

In this paper, we identify the growth drivers of digital brands. We then highlight the industry challenges that digital brands can solve before we demonstrate real world applications of digital brand ecosystems.

Following on from this, we outline a selection of emerging lifestyle services whose success hinges on engagement with the digital brand and the best practices they should follow to create customer relevance.

Written by

, commissioned by Amdocs .

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The rise of digital brands Since Virgin Mobile launched the first large scale MVNO back in 1999, operators have gained traction with a digital brand strategy in the form of MVNOs, joint ventures and sub-brands. If we categorise these broadly under the umbrella of wholesale, we see digital brands now accounting for 6.4% of subscribers globally, although with significant regional differences. We anticipate the number to grow to 20-25% in the next decade, emulating experience with Europe and North America.

Digital brands have become more specialised than ever before, evolving from purely discount services to hyper-personalised offers with varying levels of complexity. A key enabler of digital brand success is the maturing of service delivery platforms, emerging from BSS providers, which enable new services and technologies. We explore key success factors for platforms further in subsequent chapters.

Figure 1. Personalisation of services in next twenty years will lead the growth of digital brands

IoT/M2M Ethnic International/roaming Retail

2021

2040

4% 6% 6%

12%

7%

4% 4% 5%

14%

11%

16%

18%

Multi-play Business

20%

26%

Discount Lifestyle/Youth

27%

~1,400 digital brands

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20%

4,200+ digital brands

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The rise of digital brands There are five growth drivers that we predict will advance the number of digital brands three-fold in the next two decades. We look at these in more detail below.

Figure 2. Drivers of digital brands

5G

Hyper personalisation

New wholesale opportunities

New distribution models

Regulatory developments

5G

Drivers of digital brands global expansion 1. Hyper-personalisation of products and services While many digital brands began as discount or no-frills services, today most are geared towards very specific segments and boast innovative business models, reaching customers that larger brands cannot.

UK-based MVNO IQ Mobile provides mobile services for seniors with a strong focus on personalised customer care. They also partner with product manufacturers to provide easy-to-use devices, with simplified menus and large icons.

2. Operators are more willing to offer airtime on a wholesale basis Operators’ strategies and business models have evolved as markets mature and mobile subscriber growth hits a plateau. This, combined with other factors, have made operators more open to the idea of partnering with others to launch digital brands, either as MVNOs, joint ventures or sub-brands.

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1

The rise of digital brands 3. New distribution models Moving on from brick and mortar shops towards e-commerce in the retail space has also had an impact on how operators interact with their customers. New ways of selling and customer service have emerged, from online-only, self-care and community distribution to rewards-based partnerships and digital brands as add-ons to other customer-facing industries.

Online only brands

Community-based distribution

Bundling with media and utilities

4. Regulatory openness towards MVNOs In the last few years, more countries have made strides to open their telecoms markets to MVNOs and encouraged the launch of sub-brands in order to promote competition and new services. In terms of favourable regulatory environments, Europe stands out with the most mature market, but other regions are catching up. For example, in MENA, Saudi Arabia approved two newcomers in 2021 and in LatAm, Colombia and Brazil have made strides to encourage more competition by simplifying the licensing process.

5. 5G leading to new opportunities in IoT and content services While not traditionally included under the colloquial definition of MVNOs, IoT providers most certainly rely on operators’ networks for connectivity. The 5G deployment will lead to new IoT applications thanks to increased capacity, lower latency, falling device cost and with new enablement technologies. As a result, IoT platforms are moving forward and deepening their relationships with operators, establishing digital brands that can serve the specific needs of millions of connected devices in the IoT space, including security and data analytics.

Beyond the industrial applications, consumers will benefit from 5G’s increased capacity for fixed wireless connectivity, as an alternative to fixed broadband, and data-heavy applications, such as video streaming and online gaming. © 2022 confidential

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2

The mobile operator challenge Digital brands offer a more personalised lifestyle experience The early 2010s saw operators accelerate their multi-brand strategies in order to target multiple consumer segments, offer differentiated services, and collaborate with other industries. This has helped mobile service providers improve engagement with customers in the face of increasing saturation and competition from brands which are not traditional mobile players. As such, digital brands improve the status of mobile players in various ways, as follows:

Re-establish engagement lost to OTT players Operators are caught between the growth in customer data use and falling data prices. At the same time, third-party over-the-top (OTT) providers have overtaken traditional operator’s services such as voice, messaging and pay-tv. This has reduced telco revenues yet results in the need for heavy investment on infrastructure to accommodate the increase in traffic.

Messaging and calling apps are replacing voice and SMS, although revenues remain in international calling and B2C messaging

Video streaming will be the most significant drive of mobile traffic

Zero-rating offerings through direct partnerships with OTTs is a proven strategy to share revenues while increasing some control over usage, such as is the case with no-frills Vodafone Germany’s WhatsApp SIM brand.

Digital brands provide an opportunity to engage customers at a more personal level and to collaborate with these OTTs, through simple bundling, revenue share models or sponsored data – where data usage is subsidised by the media companies for promotions, for example.

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2

The mobile operator challenge Strengthening ARPUs Despite strong increases in subscriptions and usage, average global ARPUs are declining due in no small part to fierce competition on price, many of which is coming from more nimble newcomers. Through digital brands, operators can offer differentiated services and pricing structures through secondary brands, diversifying revenue sources.

Figure 3. Blended ARPU from a selection of global operators (USD) $15 $10 $5 $0 2016

2017

2018

2019

2020

Source: MNOs in Brazil, Germany, Italy, Egypt, Thailand, Malaysia, Ghana, UK, South Africa, Taiwan and Turkey

VOXI is Vodafone UK’s attempt to reach the high-data youth segment.

With zero-rating and more casual marketing the key differentiators, the strategy is vastly different from the parent brand Vodafone.

Growing brand support Whilst large operators enjoy economies of scale, their brands become polarized and it becomes harder to segment as they get larger. New brands, owned by the same telco or a brand service provider, can provide a route to address niche segments which do not resonate with a parent operator brand.

In 2014, Orange Spain acquired established Jazztel, an MVNO and fixed-services provider. It currently serves as a secondary brand for Orange, offering very similar services and addressing the same consumer segment, but with a clear distance offering a buffer between them.

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2

The mobile operator challenge Revitalising subscriber growth Given current mobile penetration rates, which range from between 80% and 130% across geographies, there are limited greenfield opportunities for operators left.

Established brands may have a good reputation, but they can also be limited on their marketing strategy or distribution model, rendering them unable to pivot and catch up with competitors. Digital brands are open to more creative distribution channels such as social media, community networking, on-line and affiliate partnerships.

With the Visible sub-brand, Verizon openly aims to compete with lower-cost providers without diluting the parent brand. As an online-only service, it has a limited offer catalogue, focused on simplicity and no-frills services.

Reducing churn by increasing customer loyalty Across the industry, churn has remained fairly constant, but improving retention rates would have a profound impact on lifetime value. In simple terms, for an operator with 25% churn, this implies an average 4-year customer lifetime. By reducing this to 20%, the lifetime improves to 5-years, greatly reducing acquisition costs of new customers.

Being able to respond to churn triggers in real time, leveraging advanced AI tools to improve customer management and implement highly personalised offers is possible with nimble digital brands.

By their very nature, digital brands have greater flexibility to implement more tailored loyalty schemes based on a deeper affiliation with the customer and understanding of their needs.

Figure 4. High, stable churn rates from selected global operators 4%

2%

0% 2016

2017 20162017 2017

Blended

2018

2020 2018 2019 20192020 2020

Post-paid

Pre-paid

Source: operators in Germany, Italy, Spain, Turkey, Brazil, Taiwan, Thailand, UK

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The digital brand ecosystem There are a number of creative brand models Through multiple brands, operators can diversify their reach, catering to different audiences with differentiated products and marketing efforts. “Brand hoppers” can switch between brands but remain under the company’s umbrella, while synergy effects can result in lower costs overall. At the same time, this approach risks oversaturation of the market and loss of credibility if there is no sufficient differentiation between brands.

A well-thought out strategy will consider the relationship between brands to create a cohesive ecosystem through partnerships and stand-alone brands.

Figure 5. brand ecosystem by RDC

THE DIGITAL BRAND ECOSYSTEM

3

Corporate brand

The corporate brand identifies a group of brands and adds financial credibility, but may not be recognised by all consumers or in other countries

Master brand

Subscribers recognise the master brand as the classic, more established service provider and expect premium services and perks

Offer brands

Having multiple offer brands helps to easily identify and differentiate between tariffs, products and services

Sub-brands

Joint-venture sub-brands

MVNO brands

Sub-brands target specific customer segments, often at different price points, without diluting the master brand An MNO may partner with a third-party to launch a joint-venture sub-brand that has established sales channels and is easily recognized by the public MVNOs own the customer relationship and have greater control over service creation depending on whether they are ‘light’ or ‘full’ MVNOs (i.e. own core network elements)

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The digital brand ecosystem

Corporate brand

Telefónica is the global, easily recognised brand with a long track record. However, its entry in the German market was through an acquisition and decided to maintain the already established, consumer facing brand O2

Master brand

O2 is Telefónica Deutschland's core brand. O2 is also used to promote their “premium” non-telco solutions, including O2 banking, O2 TV, and O2 Cloud, creating a complete ecosystem

Offer brands

O2 Free Unlimited offers unlimited data tariffs at various speeds O2 Business does specialised offers, combined with other enterprise geared services such as cybersecurity and data storage O2 My Prepaid provides a separate offer that clearly differentiates pre-paid services from their other plans

Sub-brands

AY YILDIZ is focused on the Turkish community in Germany, with international calling rates and customer services in German and Turkish. With Netzclub, Telefonica offers an ad-sponsored freemium service with 200 MB for free and free data at slower speeds. Customers also receive special offers from various brands through email and SMS. Blau and FONIC are low cost, no-frills brands. Ortel Mobile focuses on international calling

Jointventure

The digital brand ecosystem in action: Telefonica Deutschland

Tchibo is a chain of cafés that also sells a range of non-coffee products that change weekly, plus travel and insurance services

MVNO brands

3

O2 Germany is host to a variety of MVNOs, allowing to indirectly target multiple segments. htp and Helinet act as add-ons for regional fixed-services providers, while voiceworks focuses on VoIP for businesses. AldiTalk leverages its retail stores and ethnic-geared Lebara and Lycamobile serve ethnic segments with long-distance call needs. O2 also has MVNOs with a niche focus, such as Goood, a charity focused MVNO.

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4

Beyond voice: lifestyle services Beyond Voice: Lifestyle Services There is a vast range of emerging mobile lifestyle services that digital brands can consider in order to enhance monetisation and overtake OTT competitors. BSS platforms have an important role to play in enabling these services, which is discussed in the following chapter.

1.

Mobile commerce and FinTech Digital brands that participate in the mobile payments boom can capture a greater share of wallet by focusing on two areas of innovation: Payments & security: • • • • •

Mobile payments Payment gateways Fraud management Blockchain E-Wallets

• • • • •

Direct Carrier Billing (DCB) Settlement between parties P2P transfers & lending Authentication Insurance

Customer experience: • Robo-advisers • User-friendly design • Customer analytics

2.

• Social media integration • Artificial intelligence

Loyalty Points based loyalty schemes where customers earn points based on behaviour to the use in exchange of products or services does little to foster customer relationships and grow trust. The key to long-term brand loyalty lies in creating brand advocacy, which in turn reduces churn, enhances upselling and increases customer lifetime value. This is achieved through focusing on:

Pre-empting customer dissatisfaction

Understanding customer journeys

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Creating relevancy to the customer

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4

Beyond voice: lifestyle services 3.

HealthTech and EdTech

HealthTech and EdTech have recently exploded and will continue to do so, spurred on by wider acceptance for users and traditional providers. Digital brands can provide specialized services to meet the needs of healthcare and education services or products. For example, in healthcare, specialized, dedicated platforms can better ensure the security of personal information between healthcare professional and devices.

Digital brands will be able to compete most effectively when considering innovations in the following areas:

Security

4.

Customer Analytics

Gamification

Accessibility

Reliability

IoT

The potential use cases across consumer and enterprise markets, from wearables to smart cities, is driving the current explosion of IoT. Digital brands that cater to the specific needs of IoT application will be the most successful.

Five key areas of innovation will be at the forefront of this:

Security

Scalability

Open APIs

Interoperability

Reliability

There is a lot of hype around the Metaverse, and this has the potential lead to a new tsunami of new immersive lifestyle services combining multi-media content, rich analytics data hungry applications. The orchestration of this in a mobile world will require fresh thinking suited to innovative digital brands.

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Platform best practices The operational infrastructure of digital brands If new digital brands are to regain engagement from mega media brands like Meta, Amazon and Google, they need flexibility to develop lifestyle services. We need to wrap our arms around the entire operator ecosystem to enable brands to pick and choose from a tailored suite of, and develop bespoke, lifestyle services.

The ecosystem relies on comprehensive BSS systems extending from billing and customer care to rich content management and integration into 3rd parties such as social media, financial services and CRM. We have identified six areas in the framework below and picked out some best practices to ensure a first-rate customer experience.

Figure 6. Framework for successfully enabling digital brands

Enterprise

1 Customer segments

Consumer Intl. roaming

Slice Based

Business

Data Intensive

Youth/media

Discount Retail

Bundled Ethnic

FinTech

HealthTech Automotive

EdTech

Social Media Merchants Communities ERP+Logistics Applications

2 3rd Party Integrations

Entertainment

Payment Gateways

Portal and interfaces

3

M-commerce

Services

Open APIs

4

Emerging Tech

CRM/CEM

Dev. Ops.

Technology

Artificial Intelligence

Loyalty

Machine learning

Customer Management

5 Operations

6

Real time charging

Tariffs

Provisioning

Channel revenue assurance

Radio access & core network

Network

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Platform best practices

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Overview of best practices for successful digital brands 1

Customer segments

• Develop an emotional affiliation with the brand through personalization • Understand specific segment needs through rich data analytics • Create graphic under interfaces for a simplified frictionless customer experience

2

Third party integrations

• Integrate with a spectrum of digital, retail and media players to create an immersive experience • Enable settlement between partners to help the digital brand take more control over transactions, capturing a greater wallet share

3

Services

• Implement a cloud-as-a-service model for flexibility in deployment and to switch integrated parties • Deploy efficient CRM using AI to improve retention and lifetime value • Integrate frictionless and secure payment mechanisms to increase share of wallet • Integrate rich product catalogues to improve m-commerce revenue • Embed loyalty schemes incentivising broad behaviours with tailored rewards

4

Technology

• Deploy AI helps to lower customer care costs, predict churn and augment decision making • Create standardized open APIs for ease of cloud based third party on-boarding • Cater for IoT with device management tools, advanced analytics, e-SIM, multi-IMSI and roaming solutions

5 • • • • •

Operations

Deploy real time ‘on-line’ charging capabilities for billing accuracy and instant analytics Develop omnichannel capabilities for a consistent customer experience Develop robust revenue and fraud management systems to prevent leakage Facilitate rapid tariff changes to respond to fast changing market dynamics Create a multi-tenancy stack to launch separate brands including network-slicing facilities

6

Networks

• Ensure connectivity between the brand and the cellular network delivers fair margins • Avoid service restrictions for wholesale players relative to the host network’s retail customers • Combine cellular with satellite, WiFi and low power connectivity for seamless connectivity

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Future outlook for digital brands Wireless digital brands will enhance our lifestyle By embracing digital brands, operators have a chance to give more to customers whilst overcoming the greatest challenges the industry has faced in recent years.

The success of digital brands will continue to boom with markets opening and operators understanding benefits to wholesale more every day. New enabling technologies, distribution models, and device sophistication are pushing forward innovative value-added services that is helping brands enhance customer loyalty and compete with OTT players in m-commerce and FinTech. All of this is underpinned by top of the range BSS provisions that provide options and flexibility of choice to each brand they touch.

Anyone planning to launch or grow a digital brand should place greater focus on customer experiences and lifestyle to deepen engagement and unlock greater monetisation. Emotional connectedness to brands must be fostered with top tier CRM, tailoring, loyalty programs and 3rd party integrations to achieve the greatest success.

About Amdocs Amdocs helps those who build the future to make it amazing. With our market leading portfolio of software products and services, we unlock our customers’ innovative potential, empowering them to provide next-generation communication and media experiences for both the individual end user and enterprise customers.

Our 27,000 employees around the globe are here to accelerate service providers’ migration to the cloud, enable them to differentiate in the 5G era, and digitalize and automate their operations. Listed on the NASDAQ Global Select Market, Amdocs had revenue of $4.2 billion in fiscal 2020.

To learn more on Amdocs offering for digital brands visit: digitalbrandexperience.amdocs.com

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Copyright disclaimer: The content in this publication has been prepared for general information purposes only. We do not accept liability for any loss resulting from actions taken based on any material in this publication.

The contents of this document shall not be copied or distributed for commercial purposes. When copied or distributed for non-commercial purposes, it shall include Red Dawn Consulting copyright notice.

Red Dawn Consulting has provided rigorous market analysis and winning strategies to deliver growth for +100 companies in the Telecom, Media and Technology industry. Our strategies are grounded with an intimate understanding of competition, customers and emerging innovations from around the world.

Contact us for more information on how we can support your strategy Arun Dehiri arun@reddawnconsulting.com www.reddawnconsulting.com | +44 (0) 333 301 3450 Level 1, Devonshire House, One Mayfair Place, | London, UK | W1J 8AJ