Theo Klein: Turning the Fortunes for Telecom Namibia

By Tiri Masawi
September 2016
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With emphasis being put on driving the Harambee Prosperity Plan and steering the economy to greater heights, State Owned Enterprise performance becomes paramount. To get a glimpse of what Telecom plans to do to remain relevant as a parastatal and a key player in the economy Prime Focus Managing Editor, Tiri Masawi (TM) sat down with Telecom Namibia’s Acting Managing Director, Theo Klein, to gain an understanding of his plans in turning the fortunes of the company around going forward.

TM: Please give us a brief overview set by the company to make sure your products are attractive and competitive in the Namibian market?

TK:
The ultimate and true differentiator in the ICT market will be service delivery and user experience. This calls for a systemic approach to address all aspects of the service value chain to optimally contribute to an excellent user experience. We are working on three areas in this regard:
1.    Operational efficiency in order to ensure an increased availability of our technical resources to do preventative maintenance, faster service delivery and service repair times.
2.    To improve the network quality in order to ensure service availability and user experience. Service parameters like latency, packet loss, jitter and bit error rate to be under control.
3.    To improve customer service at touch points, accuracy of bills and complaint turn-around time.

The product development team ensures to remain user centred, while exploiting available product features to be pushed out in the market. Through the function of product life cycle management we not only ensure product profitability but also ensuring a customer value proposition, like TN’s uncapped broadband service as a market differentiator and branded as “speedlink”.

TM: What are your short term plans in making Telecom Namibia a profitable or at least competitive entity in the next five years?

TK:
Telecom Namibia must turn bottom line profitable by September 2017. We will achieve this by focusing for now on the fixed line business in terms of investments. Absolute focus on the home market while exiting the foreign investments.

To strengthen our regional business and increasing our US dollar based income. This will also mitigate the risk of foreign exchange exposure.

An EBITDA margin of 20% is planned for 2017. This can become significantly better if the proceeds from NEOTEL and Mundo Startel do materialise, which will reduce debt levels and interest rates to acceptable low levels. This has not been factored in our 2017 annual operating plan.
 
Left to be done is the normal part of cost management, both operational cost and direct cost. Cost drivers are identified on an on-going basis with strict financial discipline of variance report analysis, reviewed on a monthly basis at our operational review meetings.

Technologies will be introduced that will allow indoor coverage where the customer will be given a “self-install” unit from our outlets and have immediate access to internet and voice services. This will reduce the many costly and time consuming components of our installation process in selected areas.

TM: What do you think are the major challenges faced by the company at the moment?

TK:
The left over level of debt to be paid off towards 2020 and not taking up any new form of debt but funding our planned capital projects out of own funds.
We still do have a large portion of legacy platforms in service. The biggest one is the EWSD platform, providing fixed voice services. We also do have still 1883 services on legacy access systems (Ultraphone, Rurtel & SOR-18). This is mainly in the //Kharas, Hardap, Kunene, Otjozondjupa and Omaheke regions.
 
Our billing platform is stabilised now but still lacks a lot of functionalities required to enrich the experience of our customers and flexibility to support the business on product offerings and a self-help portal for instance.

As all our equipment are sourced from overseas, it is paid in US$ and hence subjected to the unfavourable exchange rates of late. This increased the price of such goods and services to more than double the price over the last year, yet we are operating under strict price regulation by CRAN.

TM: Do you think Telecom as a company has managed to adjust to the fast moving world of ICT and remain relevant to the consumer needs?

TK:
As early as 2006, the company realised the possible waves of change coming our way. The dawn of the internet of things (IoTs) and convergence in an all-IP environment was anticipated as well as the decline of fixed voice was identified as a major threat.

The ICT value chain was crafted for TN and a reduction in the dependency on voice revenue was foreseen. In line with the above TN identified all products and services along the ICT value chain for development should the need arise and it be found viable to offer to the market.

Telecom Namibia realised that it cannot do everything to all by itself and some product offerings are done with strategic partnerships, in a joint to market approach.
 
TM: What has stopped the company from increasing its subscribers especially under the TN Mobile Brand?

TK:
Telecom Namibia is steadily growing in subscriber numbers, especially for fixed broadband services while mobile subscribers are approaching the level of 185,000 as a target for October 2016, after 3 years in operation. This will be further enhanced with the introduction of Mobile Virtual Network Operators (MVNO’s) on our network while developing our channel partners.

Coverage is also a key aspect and the decision to replace the Nokia Siemens Network (NSN) in 2013 further delayed us in gaining traction in this regard. TN will also have to focus on maintaining the best network quality and customer experience.   

TM: What are some of the products that Telecom has introduced or will introduce in the short term future for low income end of the Namibian market in terms of internet service delivery?

TK:
Since 2012 we had two double-up campaigns which effectively reduced the cost of internet access four fold. Another double-up campaign is currently under consideration.
TN Mobile also introduced the cheaper smartphone package at N$ 139 with a cell phone of N$ 99 for the same package, excluding the cell phone. Both packages offer the customers 200 calling minutes, 150 SMS’s and 150 MB of data for internet access, making it the most affordable package in Namibia.    

Various other packages with affordable data bundles were introduced, starting from N$ 5 for 20 MB of data and pre-paid weekly and monthly data plans starting from N$ 299 unlimited per week.

To further cater for the low income end of the market, our continuous product life cycle management resulted in a revitalised FlexiFixed Prepaid Service, a fixed line prepaid which enable customers to pay a once of installation fee and an annual re-activation fee for the service to remain active, while you pay as you go.

TM: In the past Telecom has been criticised for bad investments especially the Mundo Startel deal in Angola. Do you think the company has learnt from this?

TK:
The lessons learnt will not be repeated. As a matter of fact we are pursuing an aggressive exit strategy from both the Angolan and South-African Ventures. This does not mean, not doing business in neighbouring countries but no more direct investments.

Following good international marketing principles an entry market strategy should first be crafted, taking into consideration the psychic distance paradox that operations in psychically close countries are not necessarily easy to manage, because assumptions of similarity can prevent executives from learning about critical differences. The cultural difference and way of doing business, business ethics and corporate governance between Angola and Namibia was under estimated. The right partner selection is also critical.
 
TM: Do you think the Namibian ICT sector has opened up to have many players?

TK:
The market is open to any new entrant complying to the regulatory requirements in order to be issued with an operating license. Telecom Namibia and MTC however remains the two dominant players. The Namibian market is unique with a small and sparse population with limited room for scales of economy. This factor will naturally limit the number of players with a sustainable future.  
 
•    As a company what is your position to the notion that the country should open up for other players that are not government centred to create diversity for consumers?

As long as the playing field remains level we have no objection or issue with new entrants but they are normally over protected by the regulator, paying next to nothing for their operator’s licence, rights of access to infrastructure of dominant players like TN, and allowed to do business in selective targeted areas. The notion that they are growing the cake and that all of us stands to benefit is simply not true.  

The Namibian market lacks scale of economy, aggravated by a vast country (sparsely populated). With well-established operators like TN and MTC it will not be viable for further network development by investors. There is however room in the value added and cloud services space, but in partnership with the two dominant operators. An equity stake in TN can be considered in future.

TM: What do you think has held back telecom from increasing its subscriber base and also making it the mobile phone company of choice?

TK:
Sometimes one must refer to the far distant past. For TN as a late entrant in the market it was adversely jeopardised when our shareholder restricted the “SWITCH” services to a fixed wireless service. In three months after the Cabinet announcement, our monthly revenue dropped from N$ 5 million to about N$ 0.3 million per month.
Though we had the legal mandate to provide any telecommunications service as per our Companies Establishment Act, we have opted to respect our shareholder in this regard. Our customer value proposition dramatically changed and thus impacted our market entry goals at the time.
 
TM: What is your notion on infrastructure sharing?

TK:
Infrastructure sharing is good for the Namibian economy with not only a small market but also being sparsely populated. However it should be on free economic/business principle and not enforced by the regulator. New entrants in the market must realise that they gain quick access to the market by sharing and should not also want it for free. Such infrastructure was in the first place built for own use, based on investment principles.

Reserved capacity and space should be allowed for the owner to use as and when required. The regulatory requirements that the owner must publish its infrastructure available for sharing and that the owner must make it available if not used within a very short period of time, being six months is absolutely unreasonable and not practical. TN now has to make further investments in tower infrastructure due to space limitations caused by those co-locating on our towers.  
 
TM: Do you think the country has grown to such a point where different players in the ICT sector are willing to share infrastructure?

TK:
Industry players are already sharing tower infrastructure and co-location. It should be noted that no ICT player established itself to sell infrastructure, instead to sell services to the end customer. As a responsible corporate citizen, Telecom Namibia established a wholesale division to cater for other operators and new entrants into the market, much to the frustration of our own corporate and retail channels.

TM: What do you think needs to be done to make Telecom a completive company?

TK:
No ICT player can depend on infrastructure and/or technology alone as a competitive advantage. Products and pricing is copied very quickly by competitors. Of that we have seen ample examples of just simply copying.

The only true differentiator will be that of customer service and experience. This will be done by systematically developing the following over the next three years:
Network Quality of Service, to instil an end to end service view of the network platforms by:
The deployment of Network Monitoring tools
To embed Configuration Management
To implement a trouble ticketing system
To implement a Central Managed Data Base
To migrate all the access technologies, ADSL, WiMAX and MSAN’s to the newly established Ethernet network for universal backhauling
Re-inforce capacity and performance management to proactively eliminate bottle necks in the network that may affect service quality and capacity for new services by implementing regular reports for action taking and improve reporting tools for status and trend monitoring (CACTI)
Improve the reliability of backhauling by monitoring its status with ICINGA tool
Implement user experience measurement agents to monitor latency, throughput, jitter, DNS query time and autonomous system hop count
DNS, DHCP and BRAS server upgrades
DUET upgrades to improve voice over IP quality
Currently, addressing network quality issues is gaining momentum and is high on our priority list in making capital funds available to address the above.

1.    Customer Service and Experience improvement is aiming at consistent services levels by:
Progressively populate Teleshops with matching soft skills and make-up, including targeted product knowledge training to shape up the engagement with customers at touch points
Utilising the media capability and monitoring performance KPI’s of the newly implemented call centre system, with empowering agents to improve service delivery and customer experience
To ensure consistent service levels
Improve installation time 90% < 7 days (Where infrastructure is available)
Improve fault repair time 90% < 2 days
Improve call queue time 90% < 20 seconds
Complaints resolved < 24 hours

TM: As a parastatal, do you also believe that all State Owned Enterprises should be able to operate without necessarily needing assistance from the Government?

TK:
For the mere fact that they are classified as “Enterprises” they all should operate on business principles. In case of Telecom Namibia, it’s establishment Act states:
The company shall exercise its powers with a view to enhance corporate profit and shareholder gain, taking into account the enhancement of corporate profit and shareholder gain by the company in the promotion of an economically prosperous and efficient telecommunication system conducted on sound business principles.
Proper governance and business/strategic planning will ensure a sustainable business model.  

TM: As a major player in the country’s ICT sector how do you deal with the challenge of scarce skills?

TK:
The ICT industry is undergoing revolutionary change at a rapid pace. This is mainly driven by the development of the Internet Protocol (IP) and the convergence between IP and the information technology (IT).
The implications for an ICT service provider like Telecom Namibia are mainly to cope with:
•    The one to many mapping of a service to technology platforms as one service depends on more than one technology – e.g. ADSL requires IP (Internet Upstream), Transport (SDH, Metro Ethernet, MPLS) Access (ADSL), IT (BRAS, Radius) etc.
•    New services give a lot of possibilities and variants to interconnect technologies – strong standards and extensive design is needed to create a service always in the same way.
•    New services are implemented with a lot of software, subjected to bugs and malfunction and cyber attacks

Against this background Telecom Namibia is having an Engineer’s in Training and a Technician in Training program to ensure the availability of the required IP and IT skills.

In-house training is also utilised to up-skill existing staff, including vendor based training with the implementation of new technologies.
 
TM: What are some of the initiatives that Telecom conducts to build corporate social responsibility?

TK:
Telecom Namibia established a vehicle called X-Net, through which Schoolnet was established. This arrangement makes provision for a subsidised model to provide internet to schools. To date we have close to 600 schools and other institutions of higher learning connected.

We believe that digital learning has the potential to provide all students with equal access to educational opportunity and that every school requires high-speed broadband to make that opportunity a reality.  
On the economic transformation front, the percentage share of BEE companies of the total procurement spent increased from a mere 18% in 2004 to 38% in 2009, and 57.4% in 2015.

TM: How much do you think Telecom needs in the interim to be able to drive its expansion drive and also improve its network coverage countrywide?

TK:
Room for geographical expansion is limited. TN will have to apportion its capital spent over the next 5 years to make room for network maintenance, replacements and capacity upgrades. Our 5 year plan makes provision for the following capital spent per category:
Growth (Including capacity upgrades)    N$ 313 million
Maintenance                    N$ 44 million
Replacements                N$ 401 million
Tools                        N$19 million
This will ensure that TN is positioned as an all-IP network operator and ICT service provider of choice. We need to diligently pursue all plans and strategies crafted in this regard.