On the way to digital transformations (TOP 100)
Murat Cinar, CEO of Vega national telecom operator, talks about the company transformations, 4G-connection outlooks and explains why the future of telecom is in integrated solutions
You joined Vega 1.5 years ago and announced a major transformation within the company. Did you implement the initiative?
The transformation process can be divided into four focus areas. The first one is the change of the company architecture. Before 2016, Vega had six regional offices and each of them was more or less independent. We have changed the corporate structure from horizontal into vertical, which helped increase the synergy between the offices and abandon duplicate functions. We have become more efficient and outsourced some functions such as a contact centre.
Then we analysed our sources of income and expenses and set up a centralised procurement system. Thus, we bought more technical equipment than in 2015 and saved more than $30 million.
Another important thing is that we introduced the system of the data intellectual analysis, which helped us both plan our current operations and develop a five-year business development strategy. I hope we’ll share our plans in the near future.
The fourth focus area is probably the most important one – changes in Vega corporate culture covered by the so-called “CARE formula” where every letter has its meaning. C (connection and churn) stands for connecting new customers and cutting the outflow of existing subscribers. A (accountability) means being responsible not only for your work but also for the entire company. R (reliable network) is about reliability: we need a network we can rely on. E (efficiency) means that we strive to be efficient in everything we do. Every letter breaks down into business goals, which fall into KPIs for all employees.
I’d like to add that the transformation of Vega has not been completed yet and I hope that we’ll be able to surprise the market in a year or two.
How did the changes influence your financial performance?
Despite the economic challenges and termination of our operations in the Crimea, we achieved a strong financial performance in 2016. This is the first time that our annual income is higher year on year. It is 5% higher but it is a real success because our income used to decrease steadily every year. Also, we are going to grow our EBITDA by 50% compared with 2015.
Vega has increased its investments in modernisation and development by 42%, up by $110 million. We are focused on several areas such as the construction of our backbone network (we used to lease channels), development of optical channels from the trunk line to the subscriber and more investment in the construction of new Internet zones.
Is Vega going to play in the 4G-connection market? Can we expect a move to this standard in the near future?
Ukraine saw the transition to 3G quite late, therefore the 4G connection should come faster. The National Commission for Regulation of Communications and Informatisation has already prioritised the range of 2.5-2.6 MHz as these frequencies are used to launch 4G in most countries. It is common knowledge that MMDS, a group of companies operated by Vega, has an exclusive license to work in this range in Ukraine.
We understand that Ukraine needs opportunities for developing new technologies and effective competition in the telecoms market. To this end, we looked at the option to make some of the range available to develop the LTE technology and submitted the proposal to the National Commission for Regulation of Communications and Informatisation. We believe that the launch of 4G will take place in 2017. As to our participation, we are interested in the process but the final decision has not been made yet.
What are the other challenges faced by the telecoms market?
Digital transformation is a key trend today and it’s closely connected with the Internet. Over the next few years, the number of Internet-connected devices will quadruple or quintuple, therefore we believe that Internet connections account for the development of the Ukrainian telecoms market. We are going to focus on higher Internet connection speed and the quality of mobile connection will be just like fixed-line connection.
How is Vega going to respond to the digital transformation challenges?
We are going to cement our positions in the business segment as we have all prerequisites. Vega is player No. 1 among telecoms service suppliers for business. We account for 13% in the fixed-line telephony market and for 7% in broadband Internet provision. We have a lot of room to grow.
Secondly, Vega does have a strong expertise in cooperation with business. We are not afraid of seeking and offering something new. We are interested not only in selling standard services but also in offering solutions that fully meet the objectives of our customers and create additional value for their business. I mean we are not just a telephony and Internet service provider but a national telecoms operator that offers a full range of services.
To roll out our plans, the company makes huge investments in the construction and upgrade of the network.
What integrated projects have you already implemented?
TSUM Kyiv central shopping mall is a buzz example. Vega provides telephony, 10Gb/s Internet and Indoor Broadcast System services to the department store. Indoor Broadcast System is an antenna-based system for pure transmission of mobile signals at every floor, even in the underground parking. By the way, the system is ready to operate using 4G.
Let me give you another example. Today we cooperate with 80 Ukrainian banks, with each of them having its own telecom needs. We work to satisfy them all: telephony, high-speed Internet, data storage, data transmission channels between commercial banks and the National Bank of Ukraine, etc.
We are also witnessing a rise in demand for telecom outsourcing. It is a new business for Ukrainian market but it offers great potential. Very often IT directors of big companies are reluctant to look deeply into the fragmented telecom infrastructure. This is our business, so we know how to build and maintain the infrastructure in the most efficient manner.
What telecom innovations are most interesting for your clients?
Landline or Internet access point is not enough for a modern business. SIP is becoming more and more popular. For example, if you have the fixed-line telephony from Vega, you can download a mobile app on your smartphone and there it is – your landline is always in your pocket. The rates are the same: no matter if you are in Kiev or aboard, you can receive and initiate calls, with the signal going via Internet.
Virtual automatic telephone exchange, IР-РВХ, is also in great request among businesses. The system offers not only a quality voice transmission, but also helps reconfigure telephone connections, for example, when offices are relocated or expanded.
Cloud solutions are gaining momentum globally. We offer our clients data storage in our own data centre. Moreover, we are in talks with international players to develop this business.
I am confident that integrated solutions are the future of the telecommunications market.