2012 Telco Innovation Study South Africa This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from Innovation Agency. This material was produced by Innovation Agency based on client interaction; it is not a complete record of the discussion.

In the highly competitive market that organisations in South Africa find themselves, a means of differentiation is of paramount importance. Innovation is seen as one of the primary drivers in achieving this differentiation. This study investigates a number of aspects surrounding the level of innovation being achieved by organisations, as perceived from a localised end-user perspective. The study also looks at the level of customer satisfaction with their telecommunications provider (Telco); and what would entice a customer to switch from one Telco to another. The market research conducted highlights which Telcos are perceived to be the most innovative in the industry. Further analysis delves into why this is so. The study also serves to create a greater awareness around the concern that Telcos need to be responsive to customers’ emotional needs. The core purpose underpinning this initiative is a strategy for managing the information acquired and turning it into insights that empower customers in new ways.

This report provides insight on the study conducted during 2011 and 2012. This is an administered survey conducted during various programs and workshops offered by InnovationAgency. The survey was administered in a controlled manner. Survey questions were designed to be opened-ended in nature, and served to gauge individual perceptions around the level of innovation achieved by institutions from an end-user perspective. Respondents were not given information and/ or definitions of the survey questions. Data collected was grouped and analysed and keywords created as a means to graphically represent the results of study. The 2012 Innovation Study consisted of 388 respondees.

Innovation study questionnaire ���Which Telco is the most innovative? Why did you rate the Telco as the most innovative? What lessons can be learnt from innovative Telcos? Have you switched Telco in the last 12 – 18 months? Why did you switch Telcos? Why have you not switched Telcos?

§  Respondent demographics

Female 42% Male  

58%  

Gender split 0%

5%

10%

15%

20%

25%

30%

35%

20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59

Age distribution

0%

5%

10%

15%

20%

25% Income distribution

Asian 19%

Black 20%

Coloured 11%

White 50%

Population group

2012 Banking Innovation Study Results��� Most innovative Telco Reason for rating the Telco innovative Lessons from innovative Telcos Switched Telco in the last 12 – 18 months Reason for switching Telco Reason for not switching Telco

§  Most innovative telco

8ta entered the market with an aggressive pricing strategy to rival the bigger players, but has yet to gain significant market share.

Newcomers into the space will probably find it difficult gaining market share, in a market dominated by the Vodacom, MTN and Cell C.

Vodacom is perceived to be the clear leader in innovation followed by MTN and Cell C.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

8ta Redbull mobile iBurst Telkom Virgin Mobile Neotel Cell C MTN Vodacom

§  Reason for rating a telco innovative

Telco’s continue to widen their distribution network to also offer products outside of their core Telco offering such as store vouchers and furniture, together with the cellphone package

Mobile operators have been increasing their capex in technology and infrastructure to meet growing demand in mobile internet usage, which saw growth to 44%, from 27% in 2010 (WorldWideWorx, 2011 Cellphone Usage Report). “Products” are at the top of the list for rating a Telco innovative, ahead of “Customer service” and “Technology”.

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Reliable/ stable

Challenge the status quo

Partnership established

Perception

Offer more

Innovative

Targeted market

Tariffs/ charges

Flexible/ adapt to changes

Leaders

Mobile service

Time to market

Network

Technology

Growth of business

Customer service

Marketing

Products/ packages

§  Lessons from innovative telco

The prominence of customer centricity in the study implies that customers are looking for products and services to suit their specific needs. Customers are also signaling for more innovations from their Telco’s. This may be signal ing greater di f ferentiat ion by customers, from their Telco’s.

The top lesson that respondents gave suggests that company brand positioning and how well they are known clearly influences customer perception.

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Company strategy

Competitiveness

Consistency

Continuous improvement

Look for opportunities

Price strategy

Target market

Keeping it simple

Products

Challenge the status quo

Flexibilility/ adapt to changes

Technology improvement

Lead

Risk management

Growing the business

Encourage innovation

Customer service

Customer centricity

Marketing

§  Switched telco in the last 12–18 months

The introduction of number portability does not seem to have added to the number of customers switching Telco, suggesting that there may be more reasons for customers not switching.

Less than one eighth of the respondents had switched Telco, despite the introduction of number portability.

No 88%

Yes 12%

§  Reason for switching telco

Results indicate that there may be more than one reason that drives customers to switch.

The increase in price competition together with the decision by the communications regulator to force Telco's to lower their interconnect fees has resulted in greater choice for the customer not just in terms of products but prices too.

“Products” was the top reason for rating a Telco innovative, however “Customer service” was the top reason given for switching Telco's.

0% 5% 10% 15% 20% 25% 30% 35%

Convenient

Made errors

Needed the change

Network

Products/ packages

Appealing

Wanted to try something new

Contract ended

Technology

Cost issue

Better offer

Company controlled

Customer service

§  Reason for not switching telco

Results also indicate that customers may find it hard to differentiate the offerings from the different Telco’s.

The results of this question may be used as a gauge of customer satisfaction levels with their Telco's. The results also suggest that customers choose to stay with one provider for more than one reason, but service levels were the most important.

0% 5% 10% 15% 20% 25% 30% 35%

Lazy to switch

Loyal

Marketing

Network

Cost issue

Products/ packages

Convenient

With multiple Telcos

Too combersome

Locked in contract

No reason to

Company controlled

All the same

Customer service

Satisfied with Telco

Trends 2007 - 2012��� Most innovative Telco Reason for rating a bank innovative Switched Telco in the last 12 – 18 months Reason for switching Telco Reason for not switching Telco

§  Most innovative telco

Vodacom has seen the biggest drop from 2012 levels, whilst Cell C has risen since 2010 levels.

Telkom has not been recognised for innovation despite being the oldest provider within the group. Vodacom continues to hold the lead position in this category, despite dropping from 2010 levels.

Shifts in position were more apparent among the top 3 mobile operators – Vodacom, MTN and Cell C – with the rest of the group relatively stable in the 3 years.

0%

10%

20%

30%

40%

50%

60%

2010 2011 2012

Vodacom

MTN

Cell C

Neotel

Virgin Mobile

Telkom

iBurst

8ta

Redbull mobile

§  Reason for rating a telco innovative

“Products” as a reason for rating a Telco innovative has remained at the top position may be indicative of how innovation is viewed as a tangible commodity. “Customer service” looks to be steadily gaining ground, despite being a distant 3rd in this category.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2010 2011 2012

Products/ packages

Marketing

Customer service

Growth of business

Network

Technology

§  Switched telco’s in the last 18months

Number portability does not seem to have had a huge impact in customers switching Telco’s.

The number of respondents who had switched Telco’s remains relatively small from 2010 levels.

14%

86%

9%

91%

12%

88% Yes

No

§  Reason for switching telco’s

“Products/ packages” was the number one reason for rating a Telco innovative and “Customer service”, however, was the number one reason given for switching Telco’s.

Respondees switching Telco’s as a result of their employers has had a sharp increase during the 2011 to 2012 period.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2010 2011 2012

Customer service

Company controlled

Cost issue

Technology

Network

Products/ packages

§  Reason for not switching telco’s

“Products/ packages” was absent as a reason for not switching Telco’s, despite being the top reason for rating a Telco innovative. More and more customers indicated to being “Satisfied” with their respoective Telco’s.

0%

5%

10%

15%

20%

25%

30%

35%

40%

2010 2011 2012

Satisfied with Telco

Customer service

All the same

Company controlled

Locked in contract

Too cumbersome

Loyal

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