Managing COVID-19’s impact on the telecom industry Delta Partners journal

Issue #4: April 7th – April 13th 2020 THE DELTA PERSPECTIVE DELTA THE CONTEXT AND DISCLAIMER

COVID-19 is a global pandemic affecting countries and industries around the world at an unprecedented scale.

In this context, we continue to compile insights and experiences telecom operators are going through during these complex times1,so we can make them available to players around the globe with the hope that it can help them better prepare in their respective geographies.

In any event, telecom operators are advised that the situation is rapidly changing. While this report reflects the best available information and advice we can provide at this moment in time (13th April), operators should also continually assess and adjust their modus operandi and action plan based on the evolution of their local realities.

While the COVID-19 is certainly an enormous challenge for all communities, it is also an opportunity for telecom operators to genuinely help societies emerge stronger during this unprecedented situation.

The insights we share are sourced from interviews with client executives, primary research conducted with our network of 100+ contacts, proactive monitoring of daily developments by telecom operators worldwide by our Research Practice and other publicly available data.

Delta Partners remains at your disposal in any way that we can help successfully navigate these uncertain times.

Note: 1 As of the time of this publication COVID-19 STATUS DASHBOARD – April 13th, 2020

# of countries # of countries # of countries Total cases 2.0m+ 46 30+ 212 with 3k+ cases in lockdown affected

COVID-19 cases of top countries Focus: top 20 countries by cumulative confirmed cases (# COVID-19 confirmed cases, as of 13 Apr 2020) # cases Recovered New cases New cases Country Country (‘000) (%) 1 week ago today measures USA 587 6% 30,331 26,641 Lockdown 586,941 Spain 170 38% 5,029 3,268 Lockdown Italy 160 22% 3,599 3,153 Lockdown France 137 20% 5,171 4,188 Lockdown Germany 130 49% 3,252 2,218 Lockdown XX% UK 89 /a 3,802 4,342 Lockdown China 82 95% 39 108 Lockdown Iran 73 63% 2,274 1,617 Lockdown Turkey 61 6% 3,148 4,093 Lockdown 170,099 Belgium 31 22% 1,123 942 Lockdown Netherlands 27 1% 952 964 Lockdown Switzerland 27 53% 557 273 Lockdown 159,516 Canada 26 30% 1,155 1,297 Lockdown Brazil 23 1% 929 1,238 Lockdown 136,779 XX% Russia 18 8% 954 2,558 Lockdown 130,072 Portugal 17 2% 452 349 Lockdown Austria 14 52% 246 96 Lockdown Sweden 11 3% 376 465 Social dist. 1 11 21 31 41 51 Ireland 11 0% 370 992 Lockdown South Korea 11 71% 47 25 Social dist. # of days since reaching 40 cases : new country in top-20 vs. last week

The US is now the epicenter of the global pandemic (>7x cases vs. China), while Asia starts to regains its footing. Global growth in new cases should decelerate from next week, even as the next wave takes hold in LATAM and African markets.

Source: World Health Organisation, Worldometer, press clippings, Delta Partners analysis Telecom operators continue to adapt their service offerings, but are beginning to feel increasing pressure on their business operations

Areas of focus this week already highlighted last week New areas of focus identified this week

Main areas affected / expected to witness impact

A B C Customer Value proposition Customer data Retail and care engagement

D Macro Regulatory updates Economic trends environment

E Infrastructure Network Hardware / equipment Devices & hardware

Operating Organizational structure Workforce management processes

F G Financial P&L performance Financing CAPEX management

Source: Delta Partners analysis Summary of key developments observed over the past few weeks in countries that have been significantly hit for 4+ weeks

Week 1 Week 2 Week 3 Week 4 What’s next for operators?

Customer “Keeping the world connected”: tactical New tailored offers • Connectivity remains core, but engagement approach taken offering freebies, granting as per new normal operators are exploring new more data, waiving charges, etc. (gaming, e-learning, ways to differentiate e-commerce, etc.) • What is CX in the ‘new normal’?

Macro Additional spectrum First wave of opera- Initiative expanded • Will there be a ‘softened’ view environment released to existing tors in cooperating across markets to around data privacy? operators with gov’t, sharing cover EU, US, Asia, • More regulatory scrutiny as an cust. location data Australia and Africa ‘essential service’ potentially

Infrastructure Recent network traffic Proactive network Traffic levels start to • How might network capacity & hardware growth (voice, data) capacity mgmt. by normalize in some management change as remote comparable to annual operators – no major countries (supported working / learning become growth levels service outbreaks by actions taken) mainstream ‘options’?

Operating Operators adapting to the new normal: Operators report an Extended lockdown • Will telecom operators undergo process physical retail outlets and (outsourced) increase in the use of compels operators to accelerated digital transforma- call centers closed due to lockdowns their digital channels drive channel digitiza- tion across the organization tion & automation (beyond channels)?

Financial Future CAPEX plans Operators anticipate • Need to manage larger scale of mgmt. (e.g. 5G) on revision degree of financial financial hardship for long term to ensure financial impact – mixed • Are telecom operators truly stability sentiments to-date ‘defensive stocks’?

Source: Delta Partners analysis Key trends spotted this week and recent operator developments (I of V) (April 2, 2020 – April 9, 2020)

Delta Partners tracks telecom operators’ reactions in affected areas by COVID-19 in over 50 countries. The below cases are a summarized representation of best practices/key activities

A • On top of subsidized connectivity, telecom operators are starting to tailor offers addressing the digital shift in consumer behaviour… - Gaming (e.g. O2 UK partnership with AirConsole) - E-commerce (e.g. du UAE) - E-learning (e.g. Globe, Ucom Armenia, Verizon, T-Mobile US), with dedicated connectivity support for education (e.g. SKT, LG Uplus) VALUE - Cybersecurity (e.g. SFR, UPC Switzerland) PROPOSITION • … and taking proactive steps to address customer financial hardship - Overall lowered prices (e.g. , Vodacom) - Temporary low-cost packages (e.g. Vodafone Australia) - Billing credits for the recently unemployed (e.g. ) - Waiver, postponement, instalments for bills (e.g. Optus, Claro, Oi) - No disconnection over 60 days (Keep Americans Connected)

B • More telecom operators are cooperating in sharing location data to manage the COVID-19 pandemic (e.g. Australia, Ghana, Mexico CUSTOMER announced initiatives this week) – see next slide DATA • Enhanced support via in-house big data / geolocation tools (e.g. SFR, (Zoom-in on next slide) , Telia Group, Telefonica Group)

• Development of apps to enhance contract tracing (e.g. Telkom SA)

Source: Interviews with telecom operators, press clippings, Delta Partners analysis B Zoom-in: Almost 50 countries around the globe have announced mobile customer data sharing initiatives to support public health

90%+ of public health initiatives to ‘track the virus’ have been, voluntary or mandated, using mobile operators’ customer location data. Apple & Google’s initiative in North America as the most notable alternative

Passed legislation mandating Aggregated / anonymized data telecom operators to share provided to monitor / visualize customer data with govt. entities population movements

Sharing big data / geolocation analysis tools and engaging in joint development with gov’t Enabling interoperability of public health apps across Operating Systems + built- in contact tracing on OS

Telecom operators obliged to provide geolocation data to government database for contact tracing

Note: Initiatives incl. customer telco data sharing with local governments and development of dedicated mobile apps or other tools; Google’s in-house initiative to develop community mobility reports not included since it is not done in collaboration with local governments. Source: Delta Partners analysis Key trends spotted this week and recent operator developments (II of V) (April 2, 2020 – April 9, 2020)

Delta Partners tracks telecom operators’ reactions in affected areas by COVID-19 in over 50 countries. The below cases are a summarized representation of best practices/key activities

C • Acceleration in digital channel adoption (both voluntary and involuntary) due to physical channel closures (see Weekly Feature) - Downloads of My T-Mobile app in Czech Republic increased by 89% in last 14 days in March vs. February

• Transition towards digital KYC / verification processes to enable activation of new mobile connections - E.g. Poland – Orange offers e-signing of contracts - E.g. India – exploring options for a ‘paperless activation process’

RETAIL AND • Enhancing remote customer support for traditional on-premise CARE technician support (e.g. Cox Communications, Verizon) - Customers can choose preferred mode of communication (call, text, and/or video chat) with technician - Easy setup for video chats: a smartphone is sufficient - Use of AR to guide customers through setups, common issues

• Other initiatives taken to boost customer support: - Increase number of customer care staff (e.g. Telstra, P4) - Re-purposing retail outlets as support centers (e.g. P4) - Pick-up/delivery directly to customer homes for device repairs (e.g. Telecom Slovenia)

Source: Interviews with telecom operators, press clippings, Delta Partners analysis Key trends spotted this week and recent operator developments (III of V) (April 2, 2020 – April 9, 2020)

Delta Partners tracks telecom operators’ reactions in affected areas by COVID-19 in over 50 countries. The below cases are a summarized representation of best practices/key activities

D • Belgium officially designated telecom services as “essential services” - Operators have full discretion over scope of store re-openings - Store operations must adhere to social distancing requirements - No new sales allowed – shops can only serve existing customers - Operators are also required to first assess feasibility of remote repair (by staff or customer) vs. in-store appointment

• Other regulatory initiatives to ensure consumers stay connected incl.: - Mandated launch of remote work/learning offers with minimum REGULATORY bandwidth requirement and price ceiling (e.g. Pakistan) UPDATES - Mandated zero-rating of select websites with COVID-19 information (e.g. South Africa) - Lower service pricing / VAT (e.g. Cameroon, Vietnam, Kenya) - Prioritization of traffic for remote working, e-education, e-health / priority call routing for individuals/entities combating COVID-19 - Approval of active mobile infrastructure sharing (e.g. Peru)

• Regulators continue to release additional spectrum and/or frequency bands to expand network capacities (e.g. South Africa), while 5G spectrum auctions remain on the backburner (e.g. India)

Source: Interviews with telecom operators, press clippings, Delta Partners analysis Key trends spotted this week and recent operator developments (IV of V) (April 2, 2020 – April 9, 2020)

Delta Partners tracks telecom operators’ reactions in affected areas by COVID-19 in over 50 countries. The below cases are a summarized representation of best practices/key activities

E • Network traffic growth continues as stay-home periods prolong - Higher traffic levels become the ‘new normal’ (vs. one-off spike) - Management of high-bandwidth applications such as video have NETWORK helped reduce traffic load (e.g. by ~4% reduction in Australia)

• More operators are looking into improving network capabilities through temporary deployments (e.g. cellsites on wheels), bandwidth expansion

F • Telecom operators are bracing themselves for a dent in revenues due to constrained growth in gross adds and delayed payments P&L - E.g. Reliance Jio, Bharti Airtel, and added ~0.5m PERFORMANCE subs cumulatively in March 2020 vs. typical avg. (2.5m – 3.0m)

(Zoom-in on next slide) • US telecom operator share prices have fallen in line with the market at ~15%. Other asset classes (InfraCos or tech players) have managed to protect their value with lower decreases – see next slide

G • Analysts expect telecom operators to demonstrate financial resilience, with the option to rebalance financial priorities in terms of cutbacks on FINANCING CAPEX and/or shareholder remuneration - AT&T has committed to dividend/pension payouts - XL Axiata has committed to IDR 500 bn share buyback program

Source: Interviews with telecom operators, press clippings, Delta Partners analysis While telecom operators have been impacted largely in line with market, InfraCos and FAANG have outperformed the market, demonstrating their resilience and relevance in the new normal

% change in US stock prices during COVID-19 sell-off Reference companies (%, February 19 2020 – March 27 2020) Category Company % change 7.2% Crown Castle (1.2%) SBA 3.7% InfraCo Equinix 5.5% Digital Realty 11.3% Cogent 16.5% Facebook (18.2%) Amazon 4.1% Tech & Media Apple (30.7%) (FAANG) Netflix 5.4% Google (18.0%) -11.5% T-Mobile (13.5%) Telecoms AT&T (19.8%) -15.8% -16.4% Verizon (14.2%) Market average S&P 500 (16.4%) InfraCos FAANG Telecoms S&P 500

Source: Capital IQ, Delta Partners analysis Key trends spotted this week and recent operator developments (V of V) (April 2, 2020 – April 9, 2020)

Delta Partners tracks telecom operators’ reactions in affected areas by COVID-19 in over 50 countries. The below cases are a summarized representation of best practices/key activities

• CAPEX initiatives to cope with increased network demand - Singaporean operators will receive support from the government through ‘immediate investments’ to upgrade networks and increase national capacity - Thai operator AIS will deploy dedicated CAPEX to the healthcare sector to support OTHER AREAS efforts combating COVID-19: this includes 5G network installation at hospitals and OF FOCUS robot deployment for telemedicine

• Workforce management initiatives by some telecom operators - Increased wages for frontline staff (e.g. Charter, BT) - Digital / virtual check-ins with workforce to ensure physical wellbeing (e.g. Globe)

Source: Interviews with telecom operators, press clippings, Delta Partners analysis Delta Partners has developed tailored products to address some of the key NON-EXHAUSTIVE challenges that operators are facing

DELTA PARTNERS COVID-19 REACTION PACK

Govt support initiatives: Overarching commercial Network capacity management COVID-19 geo based mgmt. response to COVID-19 and augmentation

Population mobility index 1 First containment Support society amid the crisis measures 2 Serve our clients Second containment measures and manage channel disruption 3 Avoid mid-term financial damage Network resource Traffic 4 prioritization management Time Adapt to new normal

Consumer and SMB Customer based management bad debt prediction model (CBM) approach adjustments

Targeting Campaigns

Comms. Time of channels the day 1&2 3 4 5 6 7 8 & 9 & style COVID-19 at risk probability (score-1-9) Weekly deep dive COVID-19 has accelerated digital channels adoption – are telecom operators ready? Driven by the #StayAtHome situation, online interactions across operators have skyrocketed in Q1, and expectations is to lead to a sustainable trend – a ‘new normal’

Adoption of Telcos digital care and e-commerce channels (% of telco subscriber base) DIGITAL CHANNELS BECOME MORE IMPORTANT THAN EVER

Meet new set of customer needs Adoption growth

Decrease dependency on assisted channels (retail/call center)

Time

PRE-COVID-19 COVID-19 POST-COVID-19 Optimize cost to serve (amid a slower topline) Low/moderate ‘Forced’ adoption as stores ‘New norm’ with digital adoption of digital close and call centers as default care / e- channels in status quo become overloaded comm. option While every operator today has a digital channel proposition, the reality is that the experience is not where it should be

Recent customer feedback1 on Telcos’ apps XX : app rating 2

• App loads too slowly • Virtual assistant unable to help beyond • Problem with bill payments basic questions • Chatbot is a search tool vs. an interactive • Inaccurate usage data 3.9 care channel 3.9 • Too many notifications

• Login authentication problems (e.g. • Faulty credential storage, login multiple login failure, faulty OTP) authentication failure • Slow app processing / frequent crashes • Easy to make bill payments 3.9 • Errors in prepaid recharges 3.8 • Slow app loading at times

• Login credentials do not sync across web • Difficulty in accessing info. on plans and and app usage • Failure to process payments • Slow / faulty top-up process 3.8 • Frozen screens, broken links 3.5 • Difficulty in adding devices

• Faulty basic features (e.g. log-in, check • Login authentication failure usage) • Frequent app crashes • Removal of well-received features (e.g. • Failure to process payments 2.8 cost to switch) 2.3

vs. average rating of leading tech apps 4.5

Note:: 1 Based on customer feedback submitted between February 2020 to present; 2 As of 13 Apr 2020. Source: Google Play Store, Delta Partners analysis Why is this happening? Five key themes observed from experience

Customer Lack of customer • Inside out development whiteout involving the customer focus • One-size fits all rather than persona driven approach

• Attempt to “achieve it all” vs. focus on most critical Too broad scope journeys, simplifying the experience for the customer

• Organizational separation across individual digital Lack of coordinated channels and offline channels resulting in a fragmented, strategy inconsistent proposition

• Once built, the propositions carved in stone Static development • No testing, no innovation, no evolution

• Separation between front-end and back-end limits Siloed tech front/ innovation, slows down time to market and creates poor Back-end back-end performance So what? Two main levers for operators to act on

AI AI assistants Chat assistants A

Streamline the experience, Web/App focusing on what really matters & Social bringing the customer at the centre Online sales E-care

Align org Measure Embrace true Agilize Tech structure and experience & digital way of architecture & governance performance in working & increase model to a structural mindset to capacity to ensure manner to fast-track ensure solid consistency / rapidly identify execution performance proper focus gaps

Adjust enablers and build new capabilities B Delta Partners can help you accelerate digital channels readiness to address immediate needs and prepare for the future

Delta Partners advantage A Tools & frameworks to assess current experience across apps / chatbots Streamline the experience, focusing on what Digital channels evolution blueprint and library of best practices within the Telecom really matters & industry and beyond bringing the customer at the centre Proven customer experience journey design methodology

B Future proof digital channels Tech architecture blueprint

Deep understanding digital channels org issues and proven ways to address them Adjust enablers and build new capabilities Proven business + technology operating model leveraging agile playbook

Deep analytical approach at measure customer experience #StayAtHome

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