5. Summary of case organisations
5.4. Telecommunications
The review of the Telecommunications Company’s integrated annual reports indicates that the corporate strategy of the company from 2011 to 2017 (Figure 5.5) changed from focusing on achieving the vision for 2014 to the growth and development of the communications network in the quest to improve customer experience.
Figure 5:5: Corporate’s strategy evolution between 2011 and 2017
Organisation’s approach to executing strategy
Telecommunications Company has established a formal approach to the formulation and planning of the corporate strategy. The strategy formulation and planning process is informed by the review of the long term plan which covers a three (3) year horizon.
This would be reviewed in the middle of the year i.e. June /July with the Executive Committee (Exco) in preparation for strategy review with the Board of Directors in December. The midyear (June/July) review involves executives from the different business units (BU), including the research team. The corporate strategy is developed in consultation with key roles within the organisation such as BU executives, C-suit executives, Group strategy, Research team, Local shareholders. The Parent Group is accommodated and contributes through some of the C-suit executives that are part of the Parent Exco. The process is collaborative among the participating stakeholders.
Communication at operational level is done by the BU members of the Exco.
The process is facilitated by the Group Strategy unit. All work by the BU teams are done upfront and discussed at the Exco breakaway. The organisation uses the CEO get away session to shape, form and decide on the strategic thrusts. Each area will discuss the outcome in their business unit. The research team contributes the market intelligence which they have gathered given the trends in the market, regulatory requirements, issues of national importance, the requirements of the macroeconomic development plan, localisation requirements, and local listing. Each business unit will conduct their own preparatory work which will be presented and contributed at the two day planning session. The different business units would bring their proposal given key areas they would like to be considered and the performance of the previous year. The focus is on the review including the formulation of the strategy and assessment of the competitiveness of the organisation.
Chapter 5: Summary of case organisations
The corporate strategy is aligned with that of Parent and considers the Parent Group strategic objectives. The outcome of the two day planning session is the strategic thrusts (big bets) for the organisation i.e. Digital transformation, Internet of Things (IoT), etc. These will be prioritised and the selected ones will inform the strategy for the year. The budget cycle runs concurrently and is aligned to the outcome of the strategy formulation process (objectives and targets). The strategy includes the mission statement, strategic objectives, strategic thrusts, key performance indicators and key focus indicators (implementation and performance KPIs) together with the budget including the key financial indicators. Targets and KPIs drive the investment prioritisation for the next year. The company has a long term plan which is three years and an annual plan. Although developed, the five year plan is a bit vague but the three year plan is a bit clearer. The Board of Directors (BoD) approves the strategy in January/February.
Project Portfolios
Portfolios and projects are defined at the business unit (BU) level and aligned to the strategy. Each BU will prepare a list of priority areas and areas they will be focusing on, and a budget would be developed for the delivery of the business unit plan.
Competitive edge and variables that are considered may cover national priorities, network modernisation to improve efficiencies, technology push, and performance, social responsibility considerations such as bottom and top of the pyramid customers, rural coverage obligations, customer complaints, etc. These elements will be considered in the development of the BU plans and priority list. Since the organisation needs to obtain the best return on investment, BUs will collaborate with other BUs to maximise their efforts i.e. the network and infrastructure team will work closely with the Information Technology (IT), Consumer and Commercial teams. The collaboration between BUs enables individual BUs to rank their activities, since they cannot cover everything, in order to maximise the return on investment and fulfil of their obligations.
This would be the master plan which is an ongoing plan that will be revised as the year unfolds. There is a technology/commercial guidance document that is provided around November before the board meeting in December by Parent Group, to its group of companies, that stipulates the commercial priorities, level 1/2/3 KPIs and things which the group needs to focus on. These are classified for the European and the Middle East, Africa and Asia Pacific (MEAAP) markets considering their maturity.
There is no formally adopted framework nor Programme / Project Management Office (PMO) that drives strategy or a portfolio management function that is enterprise wide.
Each business unit has their Programme Managers. The programme managers in the BUs will be aware of the programme and reporting requirements. The PMOs are responsible for driving the achievement of the BU programme (BU plan and the
Chapter 5: Summary of case organisations
execution of the strategic projects in line with the strategic objectives, this is the business-as-usual).
It was noted during the review of Telecommunications Company’s annual reports that the company had executed projects to deliver on the themes reflected in Table 5.5 below over a range of years. It was further noted that these projects were central to the strategy of the organisation at the time.
Table 5:5: Strategic project portfolios between 2011 and 2017
Strategic portfolios ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 Network infrastructure
Customer service Operations efficiencies Expansion programme Parent Group Global CARE Digitalisation
It was reported during interviews that the organisation has not formally implemented a project portfolio structure despite using projects to drive the execution of its corporate strategy as evidenced by the themes reported in table 1 above. The lack of a formal project portfolio structure, as depicted in figure 14 below, has led to the organisation not defining a suitable criteria for use in the evaluation of the strategic fit and establish alignment of projects that are executed to deliver the corporate strategy. However it was noted that the other three case organisations that were evaluated had formalised the project portfolio structure as well as the criteria used to structure the portfolio as well as ensure its alignment and fit with the corporate strategy. It was reported that the organisation does use projects to execute on its strategic objectives as depicted in figure 14 and established through table 1. It was reported during interviews that the approach used to execute projects within the organisation is not formalised although it is structured with different business units using a project management office to oversee the execution, reporting and delivery of projects.
Key challenges and market factors experienced by Telecommunications Company The following market changes and internal factors were noted during the review of the organisation’s integrated reports in the quest to appreciate the dynamics that affected the performance and turn of events within Telecommunications Company:
Telecommunications Company reported for the first time in 2011 on the new strategy that replaced the four (4) pillars of strategy which are having the best network; getting a device into every customer’s hands; offering affordable value across all segments;
and providing more reason to consume data through the provision of content
Chapter 5: Summary of case organisations
(Telecommunications Company Group, 2011). The company continued to struggle as a result of the need for additional spectrum while planning the expansion of their network as well as its focus on growing the business in Africa through acquisition strategies through the Parent Group (Telecommunications Company Group, 2011).
The company took a knock in 2012 as a result of growing mobile termination rates (MTRs) in South Africa (Telecommunications Company Group, 2012) which continued to persist in 2013 (Telecommunications Company Group, 2013). However, Telecommunications Company maintaining good stakeholder relations which benefited the organisation, its operating licence and gained access to spectrum to deliver on its broadband 2020 goals (Telecommunications Company Group, 2013).
Furthermore, it made a concerted effort to secure people with the necessary competency to deliver on the strategy (Telecommunications Company Group, 2013).
Telecommunications Company in 2014 saw an improved coverage and penetration in its international operations and sought to launch mobile money sending facility in South Africa to mimic what was achieved it its international operations (Telecommunications Company Group, 2014).
In 2015 the macroeconomic conditions remained tough while competition intensified in all the company’s markets, while the need for additional spectrum continued with spectrum of 2.6GHz and 800MHz remaining unavailable (Telecommunications Company Group, 2015). It was reported in Telecommunications Company Group (2015) that although data was growing rapidly in all operations the weaker Rand affected margin on data devices. The focus was on investing in broader range of service offerings and differentiation of services by providing the best quality, coverage and capacity provides a competitive advantage (Telecommunications Company Group, 2015). Telecommunications Company saw that MTRs continued to decline in all of their markets with an expectation of negative impact on revenue, margins and profitability (Telecommunications Company Group, 2015).
Telecommunications Company decided to terminate the Business Expansion deal but continued to pursue a fixed-line business (Telecommunications Company Group, 2016) while in South Africa the company was able to add 2.1 million new customers to reach 61,3 million active subscribers with contract (post-paid) churn reduced to 8.5%.
The enterprise business performed well with demand growing for cloud, hosting and virtual private network (VPN) services (Telecommunications Company Group, 2016) while the company’s collaboration with an international technology company, extensive fixed and mobile infrastructure, the pan-African and global footprint, as well as its investment in data centre infrastructure provided the ideal platform and environment to deliver cloud services to large and multinational enterprises.
Telecommunications Company continued to increase investment in new services, including insurance, Internet of Things (IoT), previously machine-to-machine (M2M)),
Chapter 5: Summary of case organisations
fibre and content, with dedicated ‘acceleration units’ established to drive further uptake in these areas in order to maintain long-term growth (Telecommunications Company Group, 2016). Furthermore, the company made excellent progress in driving the uptake of data which is its key engine for growth as predicated the four pillars strategy:
having the best network; getting a device into every customer’s hands; offering affordable value across all segments; and providing more reason to consume data through the provision of content (Telecommunications Company Group, 2016). Harsh operating conditions such as inflation, currency volatility, an increase in number of sites, and rising electricity and other input costs, required the company to place a strong focus on driving operational efficiencies across the Group (Telecommunications Company Group, 2016).
The first report on Telecommunications Company’s Vision 2020 strategy which seeks to reposition the company as an overtly digital organisation was reported on for the first time in 2017 (Telecommunications Company Group, 2017). The company acknowledged that digitalisation offers valuable opportunities for its ability to extend revenue streams beyond connectivity, and requires rethinking the networks and technology of the future, redefining customer engagement and developing a company culture that attracts the best digital talent (Telecommunications Company Group, 2017). In its quest to expand across the African continent, Telecommunications Company Group agreed terms with Parent to buy an interest of 34.94% in Kenya’s market leading telecommunications company which is a high growth, high margin, high cash generating business that operates in a high growth market with 28.1 million customers (Telecommunications Company Group, 2017). It was noted by the company that the sovereign debt rating downgrade, the continuing political uncertainty and weak levels of job growth, have placed a strain on the economy also negatively affecting the levels of business and consumer confidence (Telecommunications Company Group, 2017). Furthermore, it was reported that international operations had a challenging year feeling the impact of high exchange rate volatility and changing regulatory reforms in most of its markets (Telecommunications Company Group, 2017). The company noted that its strong overall performance was achieved through the successful execution of its strategy that mandated investing significantly in network infrastructure, providing segmented and personalised pricing plans, as well as targeting revenue growth in data, electronic money transfer method and enterprise, underpinned by continuing drive in cost-efficiency (Telecommunications Company Group, 2017). The company continued to see an extended 3G and 4G population coverage to 99.2% and 75.8% respectively, expanded high-speed transmission to 92.1% of their sites, and made good progress in fibre deployment by entering into strategic wholesale agreements with other network providers (Telecommunications Company Group, 2017). The company reported that it is set in the pursuit of its digitalisation strategy that aims to drive enterprise growth as it focuses on three principal investment areas:
building market leadership in IoT; realising growth opportunities for digitalisation in the
Chapter 5: Summary of case organisations
SME sector; and scaling converged services through their targeted investment in fibre, fixed wireless capillarity and next generation networks (Telecommunications Company Group, 2017).
The following top 10 business and strategic risks were noted (Telecommunications Company Group, 2017):
1. “Electronic communications amendment bill (ECABill)/Spectrum”
2. “Spectrum / Licence renewal”
3. “Adverse regulatory pressures with regards to data pricing”
4. “Market disruption”
5. “Adverse political measures and regulatory pressures”
6. “Failure to deliver on strategic projects in regards to fibre and convergence”
7. “Technology failure”
8. “Cyber-threat”
9. “Unstable economic and market conditions”
10. “Non-compliance with laws and regulations”
It was observed from the Telecommunications Company’s annual reports that the organisation evolved its strategy in line with market trends, which enabled the company to grow commercially through focusing on providing offerings that are relevant to its customers. Furthermore, the company is aware of the challenges that exist in the environment which it operates in which are reflected in the list of its top ten business and strategic risks so that they do not erode the benefits and value expected from the corporate strategy.
Chapter 6: Results