Fragile balance in telco industry: Morten Lundal
By Karamjit Singh August 19, 2016
- Too much data will lead to structural challenge for next group of telco CEOs
- Claims Maxis today characterised by ‘quick decision-making, hyper collaborative spirit’
YOU would expect all telco chief executives to talk up the quality of their network, and Maxis Bhd chief executive officer (CEO) Morten Lundal (pic above) is no different.
Having recently come back from Europe, he likens his roaming experience on the continent as “going back 10 years” while his Malaysian experience is akin to having fibre on the phone.
“That’s what it feels like to be on Maxis,” he says, making sure to emphasise that his fibre-on-phone analogy is an exclusive Maxis network experience.
But it is the overall network quality in Malaysia that stands out, with the accompanying high usage of data.
And Lundal, like his peers in Malaysia, thinks there is a good balance in the market, with high usage leading to high revenues and solid profits for operators which are then able to keep reinvesting in better networks.
But he admits to being nervous now over this balance being shaken by what he characterises as “this one-dimensional scream of endless data over endless low prices. That, I think, is bad for everybody.”
Commenting on the prepaid market in Malaysia, Lundal describes it as a marketing game with price seekers “who swim around and divide their wallets.”
But Maxis cannot, over time, be relying on a fluctuating customer base that “will leave you if you are not cheap enough,” he says.
And he repeats a point he has been making recently about Maxis being comfortable with its overall customer base: “The quality of our customer base is improving and we are also gaining in the high end with lower churn overall.”
[See DNA’s recent drilldown on Maxis’Q2 2016 results.]
That comfort aside, taking a step back and looking at the picture from an industry perspective, he feels that the larger data buckets consumers have been getting from service providers over the past few months will come back and bite the industry, especially the next group of CEOs who will come in and face a structural challenge over the next decade.
Click on the video below to hear his thoughts on this:
But the impact goes beyond the next group of incoming CEOs.
“It’s unfortunate for everybody as those who offer high data and low prices are not going to earn enough revenue, and that is bad for their investors,” says Lundal.
“At the same time, these players are also dragging down the entire industry profit level, which affects investments and which in turn is bad for both consumers and government.
“So I don’t think hyper competitiveness is good for anyone,” he says.
Be that as it may, those cards have been dealt and the industry has to deal with a situation where there is too much data.
From a Maxis standpoint however, the response from its postpaid customers has been tremendous, with data usage more than doubling from its three million customers as of end-June. Average usage went from between 0.5GB and 2GB to between 1.7GB and 2.5GB within three months.
“Looking back now, I am okay with what happened,” Lundal says.
What happened was a social media firestorm over how Maxis initially handled a situation where its customers were unhappy with its selective filter of increasing its data buckets to them in response to market competition.
Explaining why it took a crisis for Maxis to reward its postpaid customers, Lundal says that at that point (early March), most of its postpaid customers were using between 0.5GB and 2GB of data per month.
What happened then was that competition suddenly ratcheted up, launching so many different products at low price points.
“As a result, our customers felt unhappy that they could have gotten more data (from other telcos) even though they did not use it – but that’s understandable,” he says.
In response, Maxis did offer its customers more data. “Much more data,” Lundal emphasises, adding “We actually upgraded over one million postpaid customers to our latest offer, whereas the competition only offered their higher data buckets to new customers only.”
Noting that this move by Maxis has gone unnoticed, Lundal says he is “still waiting for a positive social media storm over this action.”
Balancing agility and stability
Despite being a company with RM8-billion (about US$2 billion) revenue in 2015 and a headcount of 4,000, having undergone something of an internal revolution over the past three years, Maxis is in something of a sweet spot today, Lundal feels.
“We are big enough to matter but small enough to change easily,” he says.
Watch the video where Lundal talks about how Maxis balances agility and stability to compete:
Where in the past Maxis has been accused of breaking down into a silo-based organisation with slow decision-making and little initiative from employees, Lundal now feels he is running a battleship characterised by quick decision-making and a hyper-collaborative spirit, and ruled by pragmatism.
All of which “sets us up to be reasonably agile in a world which demands new thinking from organisations,” he adds.
Previous Instalment: Maxis CEO: Google and FB should be sending us flowers!
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