Thailand is one of the most competitive countries in the world for mobile phone operators. There are not many places in the world, where you have five operators of whom four have foreign partners. In Thailand you have AIS, DTAC, Orange, Hutch and Thai Mobile.
“Your reaction to competitors’ signals must be immediate. We change tactics daily in response to the other operators’ initiatives,” says Sigve Brekke, the Norwegian CEO of DTAC, which has Telenor as its main investment partner.
“To be able to react that fast, we have completely restructured the way, the organization works. The traditional Thai organizational structure is command driven: You have a tall pyramid and commands flow down from the top and are implemented on various levels on its way down to the bottom.”
“What we have done is eliminating a number of layers in the middle to flatten out the organization. The previous CEO had four people reporting directly to him. Now we have 20 people reporting to the two CEO’s. At the same time, we have empowered the middle levels to react to movements in the market on their own level and allowed for horizontal interaction within the organization.”
“Secondly, we focus on the different types of customers. We have five teams watching and adjusting our services to each their type of clients. One team works with corporate multinational clients, another team works with Thai corporate clients. The individual clients are also different. The young client group is where you see all the action and campaigns being rolled out. But in fact they “only” account for 40 percent of the revenue. The rest comes from the other types of customers.”
“The pressure is extremely high and your ability to react is what determines the outcome of each duel with the competitors. We have set up a rule, that if an offensive move is reported from the market, we don’t go home before we have decided and preferable executed our response.”
Moving from “pull” to “push”
“Dealers have become very important in this battle. A few years ago, you could rely on a pull strategy – that means we could create a demand with our public campaigns that would make the customers “pull” the products from the retailers. Today, we have a push market – that means we need to convince the dealers to “push” our products to the customers. There are more than ten thousand dealers all over Thailand and their only motivation is what they get out of recommending us over the competition.”
“We get information about market movements two – three times per day. Then we need to analyze it and react to these movements. The old organization couldn’t do this. The new organization puts a lot of pressure on the executives and there is a constant turmoil.”
As an example, Sigve Brekke mentions a big party for DTAC’s dealers held recently to launch the new Happy product. The party was held at 7 o’clock in the evening and Happy was introduced with an attractive retail profit. But already by midnight the same evening, the first reports started coming in of the competitors offering similar benefits to the dealers if they remained loyal to their products.
“Either you enjoy this kind of tough competition or you are soon out,” says Sigve Brekke.
“Personally, I really do enjoy it!”
Sigve Brekke spends only a limited amount of his time in DTAC’s head office on Viphavadee Road in Bangkok. At least one day every week he travels up country to visit local DTAC staff.
“I am very much a hands-on CEO. Anywhere I go I always visit local shops as an ordinary customer to see what goes on in the market in real life. These impressions I then compare to what information I gets from DTAC’s big dealers and from our internal intelligence gathering.”
Once a week, Sigve Brekke also holds a videoconference with DTAC’s five regional managing directors about the situation and what DTAC’s response should be. Today, DTAC has 750 people working in offices up country and these videoconferences typically centre on short term targets and quick market moves.
“Our two most valuable assets are our 6 mill subscribers and our network. If we can find partners who ads benefit to these assets, we are always willing to talk. Currently we have more than 150 partners offering a range of different add-on services, typically on a 50 – 50 percent profit sharing arrangement.
Sigve Brekke’s efforts are increasingly visible on DTAC’s bottom line.
“Our performance has been good this year,” he says.
“First quarter showed a growth in revenues of 11 percent. In second quarter we had a growth of 6 percent.”
“In terms of overall subscribers, last year was quite good as well, although many of our subscribers changed from post paid to prepaid subscribers.”
Post paying subscribers are the “ordinary” subscribers who receive a bill by the end of the months for the calls they have made. Pre-paid subscribers are the ones who buy a phone cards and use it until the amount is used up.
“Post paid subscribers are better in terms of revenue,” he explains.
“It takes roughly four pre-paid subscribers to equal one post paid subscriber. But we kept our 30 percent market share of the 20 mill mobile phone subscribers in Thailand,” he adds.
Replacing your TV?
“Talking about the future, there is a lot of wild imagination. One needs to focus on the limitations of mobile telecommunications.”
“This will never replace a computer or a TV,” he says, holding up his own mobile phone.
“The basic is voice. The addition is SMS and photos and reading of emails. With the limit of the network, where GSM offers 9,6 kb per second and the GPRS offers 30 kb per second, everything else is mostly wild imagination and you will not see DTAC marketing a lot of fancy applications.”
For the corporate market, some of the latest attractive developments are SMS to groups of up to one hundred receivers, for instance a company’s sales force, in one go as well as the virtual private network, where company’s can call an internal group of people with a 4 digit number.
“I don’t see much corruption in the Thai telecommunications sector. The sector is quite open and all the companies are listed and the media attention to transactions is quite high. What is lacking is an independent regulatory system to ensure a level playing field in the market. When you add up all the revenues sharing and access charges which DTAC and TA Orange has to pay it totals 36 percent of the revenue, whereas AIS only pays 25 percent to the government.”
“The new telecommunications law passed by the parliament one year ago needs to be implemented. It opened up for privatization of the TOT and CAT and the new minister for telecommunications is doing a good job. We are fully behind him.”
From politics to business
Sigve Brekke’s background is somewhat out of the ordinary for a businessman in his position. While prime minister Thaksin Shinawatr, who owns DTAC’s archrival, AIS, has moved from business into politics, Sigve Brekke has made the reverse move. He became a full time politician when he was 25 and Norway’s deputy minister for defence when he was 32 years old and held this position for three years. It was only at the age of 35 – and after eleven years as a full time politician – that Sigve Brekke decided that it was time for a change.
In 1997 he moved to the United States where in 1999. He graduated with a Master degree from Harvard University in marketing, specialised in finance and international trade with a focus on Asian economies.
Upon his return to Norway, Telenor was looking at ways to involve itself in the mobile telecommunications sector in Asia, and Sigve Brekke was asked to spearhead this move. Four and a half year ago, he was posted to Singapore to set up Telenor’s first office there and pave the way for Telenor’s purchase of 30 percent in the Malaysian company DiGi and half a year later the investment in DTAC as well as looking after an investment in Bangladesh.
“During those three years, Telenor invested 1,1 billion US dollars in Asia ,” Sigve Brekke reflects.
Explaining why Norwegian Telenor was an attractive partner to these Asian telecommunication companies, Sigve Brekke points to the technologically very advanced level of the Norwegian telecommunication sector – together with the Swedish and the Finnish sector – a few years ago. Telenor took advantage of this and moved first into other markets in Europe and when these markets became saturated moved further into Eastern Europe and onwards to Asia.”
When Telenor last year wrote off of a major part of these investments, many saw this as a failure of Telenor’s expansion in Asia. But according to Sigve Brekke, it simply reflected the drop in the value of the shares.
“By the end of 2002, DTAC shares, which are traded on the Singapore stock exchange, was down to 54 cent per share. But today, the value has bounced back and DTAC shares are currently traded at 1,50 dollars per share,” he explains.
When Telenor shifted its focus from identifying investment opportunities to operating the companies, in which they had already invested, Sigve Brekke was moved to Thailand, which in terms of subscribers is Telenor’s largest operation in South East Asia probably the most challenging as well.
Sigve Brekke’s family only recently followed him to live in Thailand. In the beginning, his wife remained in Singapore, where she has set up her own business, exporting working clothes and house hold linen. Their three sons of 10, 7 and 6 years were also comfortable with their international school there. But as Sigve Brekke’s current assignment is likely to last for some years to come, the family has decided to join their busy father in Thailand.