THE BUSINESS YEAR How would you describe Bakcell’s 2013 performance?
RICHARD SHEARER It was a year of strong performance that greatly exceeded 2012. Some of the major trends that we saw in the marketplace included, in the first half of the year, many business customers deciding they wanted to stay where they were in anticipation of mobile number portability (MNP). As it transpired, that didn’t occur, so in the second half of the year we saw a significant uptake of business customers. This confirmed that we have the best network, the best data services, and that we represent a strong brand as a communications and distribution network. We saw a major shift from mobile broadband to mobile internet, whereby a large part of our strategy focused on small screen data. Our research indicates that we are still the market leaders in dongles and in small screen data but, for us, the focus was on moving people onto using the internet on their handsets, rather than laptops. That strategy has paid off significantly for us. We are the only operator in the marketplace to have our own branded handsets, Bakcell smartphones, which has been a successful initiative for us. There are over 60,000 iPhones on our network. We have higher-end customers using more services and engaging with our brand. We have also moved up the value chain in terms of customer value, which has led to an uptake of higher-revenue customers. Many of our packages today are focused on higher-spending customers, although we still provide good value for our regular customers. We re-launched a product called “Klass” under the “New Klass” title during the year, which was a first for this market in terms of bundling voice minutes, SMS, and data capacity. This picked up significantly in terms of monthly sales volumes, and these are monthly recurring customers that are closely engaged with our brand and products. Through our network unification process, we formed a subsidiary into which we placed our radio assets that today operates as a large national network called AzerConnect.
Can you talk about your own brand smartphone? What informed the decision to launch this product?
It is an Android smartphone of high quality that features a 4.3-inch screen. Our strategy was to move from piling data via dongles onto our network to getting people to use their handsets to access and use the internet. The increasing sales of this terminal proved to be a key element of our 2013 strategy. The Bakcell smartphone was a means of achieving this quickly, and also of leveraging the trust invested in the Bakcell brand, especially in the area of mobile data and internet connectivity. The Sür@ (Bakcell 3G service) brand and the Bakcell brand are well known for providing the best mobile data and mobile internet services. Therefore, combining these with a handset of good quality and high functionality was an obvious step for us. Approximately 45% of the market uses Sür@. The key consideration with smartphones is to get people to use the internet on the go. We have seen a significant rise in the tablet segment in 2013 and are pushing smartphones and bigger screens in 2014, as well as devices that are somewhere between tablets and smartphones. What we see are more people using their phones to access the internet on a more ongoing basis. Dongles tend to be heavily oriented toward YouTube and Skype and similar programs. With handsets the array of uses is much broader.
What is Bakcell’s interest in mobile applications?
We don’t own an app store, as there are a number of challenges surrounding them in Azerbaijan. For many, you have to first register a credit card, the penetration of which is low in Azerbaijan. Thus, purchasing an application can be a challenging activity for many customers. Moreover, many applications are in the English language, not even in Russian, and certainly not Azerbaijani. That being said, our partner Manchester United has launched an app globally in five languages, one of which was Azerbaijani. That was an important indication of how important our relationship with the club is to them. Generally, many customers are still at the experimental stage. They are downloading free apps rather than paid-for ones. The challenge, then, is to encourage customers to move to paid apps.
What sort of developments did you see in the Azerbaijani telecoms sector in 2013?
We saw the trends shift from news and information to entertainment. Compared to the beginning of the year, the latter showed that people were accessing more social media, YouTube, videos, and similar websites. In the past, people limited their internet traffic because it was thought to be expensive. Yet having realized that it doesn’t cost that much, it has become an alternative medium of entertainment. This effectively marks the beginning of a cultural shift in this type of market.
To what extent have you grown your 3G and 4G networks?
We have increased our traffic by more than 100%, and our revenues have grown substantially as a result. I think the number of regular users has increased dramatically and it is that regular usage that counts in terms of changing the nature of how people use their devices. We still believe there is a long way to go in 3G, especially beyond the peninsula. We offer good coverage and its improvement will allow us to access even more customers. We are looking at technology to widen our coverage dramatically compared to the competition. The motive behind the launch of an LTE network is the availability of LTE-enabled devices. For example, Apple does not yet enable iPhones for LTE in Azerbaijan, despite the fact that they are compatible. We will build the LTE system, but it is a focus for somewhere further down the line. First of all we need to monetize our 3G segment.
How has your partnership with Manchester United been beneficial?
We have the highest brand potential index (BPI) of all three major operators. We have increased our BPI, which is a measure of various elements of the brand, more than our competitors. Manchester United has named us as their number one global partner in the mobile arena. A major challenge for us was to take what was clearly an international brand and make it relevant to people here in Azerbaijan. To do this we provided all-weather football pitches in local neighborhoods with coaches and partnered the local football federation here to provide grassroots training for children in many local neighborhoods. We sponsored these schemes in partnership with Manchester United, which brought football to the fore at the local level in Azerbaijan. We also organized the Manchester United Summer Soccer School in Baku and provided Azerbaijani children a wonderful opportunity. As a result, 32 children were selected via nationwide trials, who were then brought to Baku to attend football schools with professional coaching from Manchester United. One fortunate individual was then invited to train with Manchester United. We signed a five-year partnership with the Association of Football Federations of Azerbaijan (AFFA), and today support football development throughout Azerbaijan, as well as the national team. Having this link with a global brand has lent us recognition and boosted our own brand equity.
Can you talk about Bakcell's CSR platform?
We have two primary focal points regarding CSR. One is development through sport and the other is helping people become more comfortable and familiar with IT, predominately communications and the internet. To achieve this we work with a number of partners, including Manchester United and its global partner, UNICEF. We seek to leverage the relationships we have as well as pursuing individual projects.
What do you expect to be the main events for Bakcell in 2014?
I expect MNP to gain momentum throughout the year. It has been long awaited and I think foresee a period of momentum building. In other major developments we are seeing fixed-line broadband providers begin to move back into the market. They created a market opportunity for the mobile providers with their limited offering at the time, whereby we observed stronger growth in fixed line in the latter part of 2013. I in fact expect to see a stronger fixed-line performance this year, which will motivate us to present greater mobility proposition to our customers. Content will begin to play an increasingly important role in the offers that we all need to bring to our customers. We will have to consider more comprehensively the role of media and content in our offer. That is part of the flexibility of the mobile operators that others don’t have; we can provide tailored content to much smaller customer groups.