Turkcell Shows Mobile Service Providers Are Not Afraid of Innovating

Turkcell, an MSP based in Turkey, aimed to become a digital service provider. To reach this goal, the MSP worked on turning toward creating digital experiences via best-in-class digital services, simplifying its organizational structure, deploying 4.5G, transforming its sales channel, and targeting new opportunities, such as fintech, payments, e-commerce, energy, and education. Turkcell also identified several areas to sustain its future growth: monetizing 4.5G, digital services, corporate business, and international business.

Monetizing 4.5G is the most traditional telco approach, with Turkcell targeting the expansion of the 4.5G customer base, which has a higher ARPU.Monetizing digital services is centered on the MSP aiming to provide digital services. Turkcell developed a wide array of digital services, including: Yaani, a web search engine with 0.9 million monthly active users (MAUs) as of March 2018; BiP, an instant messaging, voice, and video call OTT and life platform with 4.4 million MAUs; fizy, a music platform with 1.9 million MAUs; TV+, an OTT and IPTV app with 1.4 million MAUs; lifebox, a personal cloud storage app with 1.3 MAUs; and Dergilik, a digital magazine and newspaper reading app with 7.3 MAUs. In the corporate segment, Turkcell targets the expansion of corporate applications and platforms, as well as vertical industry solutions. For its international business, Turkcell wants to expand digital services across its footprint and beyond as a global digital service provider.

Turkcell’s efforts indicate that it is hungry for innovation and wants to target revenue beyond its core offerings. To do so, the company needs to fully exploit its strengths and opportunities, while remaining wary of the many challenges that lie ahead.

Turkcell is the second MSP that ABI Research has assessed in terms of innovation. (DT was already discussed in the ABI Insight, “DT's answer to telco innovation.”) Turkcell provides a good example of a MSP innovating and looking beyond connectivity offerings (i.e., the UnTelco strategy) and ABI Research believes that the MSP is on the right path with its strategy.

Turkcell’s in-house expertise is important and the MSP must continue to cultivate it, as it will enable the development of new solutions without depending on third parties and their agendas.In emerging markets, there is a window of opportunity for the expansion of many services, such as e-commerce and payments. Turkcell can count on a first-mover advantage, but must persist in developing its services to stay ahead of upcoming competition. It is important to thoroughly study the lessons learned from the failures and successes of other MSPs that have attempted to play a larger role in the digital world to avoid committing similar mistakes. Turkcell should also continue with a hybrid horizontal and vertical approach targeting horizontal (e.g. e-commerce) and vertical (e.g. mobility) market opportunities.

On the other hand, there are challenges ahead. Even with its Lifecell digital-only brand, which bundles data and OTT services, Turkcell remains dependent on the traditional, albeit enhanced, business model of data monetization. This is in sharp contrast with the business model of other digital players that often provide free services supported by indirect monetization (e.g. games or advertising). Bundling OTT services is a market strategy used by many, including Millicom, Vodafone, América Móvil, and Telefónica, but that will not be enough to lead a digital market. There is also a time constraint that Turkcell must keep in mind, as increasing smartphone penetration and data usage results in the increasing reach of OTT competitors and web-scale giants.  

Turkcell belongs to a group of companies, including Veon, Verizon, et al., which shows that MSPs are not afraid to innovate and transform themselves to target wider market revenue opportunities. The goal of becoming a digital player is nothing new; however, the means and attention to multiple segments and verticals to reach this goal make Turkcell an interesting example to follow.

Turkcell should continue building efficiencies to leverage the combination of traditional business expansion and new services. This should be supported by in house-development that fosters internal capabilities, as well as a culture of internal innovation and a fail fast/scale faster mindset needed to seize market opportunities. Turkcell uses local content and its understanding of local roadblocks, pain points, and market conditions as a competitive advantage against international players. ABI Research believes this is a key advantage that the company should continue to leverage. Besides Turkcell, many MSPs have developed their own OTT services, but they often failed to reach significant scale (exceptions include mobile money services, such as M-Pesa), which is something Turkcell should be wary of while expanding its digital service strategy. Bundling OTT services, such as music, video, and other services, with existing mobile offerings is an approach used by many, including Vodafone, Three UK, Telecom Italia, Orange, and Telia, just to name a few. This approach can fend off telco competition and increase ARPU, but that alone will not be enough to fend off OTT provider competition, resulting in the risk of losing that battle.

Based on Turkcell’s experience, other MSPs should learn not to be afraid to launch new products. They should be bold and ready to radically transform their structure and services to support their strategic goals. They also need to focus on the local market pain points, as well as on the local market’s limited time opportunities. This could be done, for instance, by identifying key growth areas and developing synergies, as Turkcell has done with e-commerce and payment opportunities in Turkey.

Connectivity is a limited long-term business that will increasingly come under pressure and, consequently, MSPs must develop an UnTelco approach as Turkcell and others have done, targeting digital services, verticals, and innovation beyond the traditional telco world. Each vertical and segment is different, so understanding and fine tuning the company’s role in each area is essential, as MSPs cannot play the same role and use the same strategies for each end market.