Annual Report 2007 - Company Description Market and Customers: Customer Trends
Customers are growing increasingly dependent on having constant access to electronic communication for work, entertainment and shopping in a market that is converging both in terms of services and devices, and where customers want to access the services using any device over different networks. Hence, network quality is of great importance. The number of services, devices and suppliers is increasing. Looking at the development over a longer period, this trend, coupled with more experienced consumers, will cause the demand for niched services to grow. Customers are likely to show less patience for non-performing offers. Therefore, in addition to quality, simplicity and convenience are becoming more important criteria.
Migration of voice
Communication is a basic human need and its means have changed over time. Over the past few years, the total time spent talking on a phone has remained fairly stable although the type of phone has changed. Now less than 30 percent of the Finnish voice call minutes come from the fixed network. In Sweden about 75 percent of the minutes still come from the fixed network. In all our markets, to varying degrees, there is a revenue growth potential, but also a risk of losing revenues and profits, in moving traffic over to the mobile networks where our customers can place and receive calls on their personal phone, wherever and whenever it suits them.
Need to be online - Internet overtakes TV
In an online society, we expect to be able to connect to the Internet anytime and anywhere. In 2007, a survey by the European Interactive Advertising Association, EIAA, shows that 57 percent of Europeans, or 169 million people, regularly accessed the Internet. Around 75 percent of all Internet users go online between five and seven days a week, an increase from 61 percent in 2004 compared with 86 percent that watch TV five to seven days a week. The average time spent online is almost 12 hours a week.
For the first time, Internet is overtaking TV as 16 to 24 year olds are accessing the Internet more frequently than they are watching TV. In Europe in 2007, 82 percent regularly accessed the Internet while 77 percent regularly watched TV.
Not only the younger generation is going online, the older population and the number of people aged 55 or older using the Internet each week rose 12 percent between 2006 and 2007, according to EIAA. Besides television, whether traditional broadcast, cable, satellite or Internet, customers are starting to view also the mobile as a means for watching TV. Since the screen is small, viewing patterns are somewhat different, but in Lithuania, one out of three under 35 years of age is planning to test mobile TV in the near future.
Online convergence - like the mobile, the computer becomes personal
The mobile phone has long been a personal device whose brand and style is as important as the brand of jeans, and now the PC also seems to be going down the same path. Portable PCs, or laptops, are being carried around to cafés and other places outside the home and office. Families are no longer satisfied with having just one computer, just as few families are satisfied with only one TV set. PC penetration is reaching levels of 70 to 85 percent in TeliaSonera's Nordic and Baltic markets and the share of families having more than one computer is close to 50 percent.
As the PC turns into a more personal item, rather than a "company" or a "family" item, the share of laptops sold is gaining ground at the expense of desktops. Laptop shipments as a share of total PC shipments has grown from 40 to 65 percent in the Nordic countries over the past three years, according to figures from 2007 by Strategy Analytics who foresee an increase to above 75 percent in 2011.
As the number of laptops in the market increases, so does the market for mobile broadband PC cards, which in turn is a main driver behind the growth of mobile data. PC card sales grew 70 percent a year in Western Europe in 2006 and 2005.
The computer is no longer seen only as a productivity tool, but also as a tool for viewing, downloading and storing music, TV, films and magazines and the PC and the Internet are becoming the personal hubs for media and entertainment. However, the fact that the computer and Internet are seen as a hub for all media does not necessarily imply that only the PC and the broadband connection will be used to access the services. Rather, the technological development opens for new possibilities to offer customers the online services they want whenever and wherever they want. As such, the Internet is moving into the mobile and the TV, TV is moving into the mobile and the Internet, and the mobile is moving into the Internet and the TV.
This opens for customers to not only access the Internet through their TV screen, but also to interact with the TV show and with friends while watching a wide screen TV. Simultaneously, the Internet is used for watching television and listening to the radio as customers choose to watch their favorite program at another time than the specific time it is broadcast. In TeliaSonera's Trend Report 2007, 37 percent of respondents cited this as the prime reason for using Internet TV or radio.
Not only the TV and the Internet are converging: the take-up of portable media players has reached significant penetration rates. Many of these players are today equipped with a wireless connection so that the customer can easily download music tracks directly to their music player, and not have to go via their PC. MP3 player household penetration in the Nordic markets ranged from 37 percent in Finland to 47 percent in Sweden in 2007, according to estimates by Jupiter analysts who predict an increase to 45 and 52 percent, respectively, in 2012.
Online socializing - sharing with friends and peers
In the early days of Internet, search was the main service. Search is still today the most popular online activity, said 87 percent of respondents across Europe in a survey by EIAA from 2007, which also showed e-mailing was the second most popular activity at 81 percent, followed by communicating via social networking sites at 42 percent and instant messaging at 37 percent. As the number of services aimed for socializing is increasing, customers aren't only socializing over the Internet using e-mail or messaging, but also via social networking sites and online forums or blogs, where user created content is shared. Also, socializing in the virtual world should not be forgotten. Both private individuals and companies are entering virtual worlds, such as Second Life and Entropia Universe as well as community sites such as Facebook.
This trend creates multiple opportunities and challenges for an operator. Firstly, socializing on the Internet means possibilities to socialize not only in your home, but also when you are on the move, implying that the possibility to connect via the mobile phone or a wireless PC connection is driving demand for capacity and bandwidth in the mobile networks. Socializing is growing not only on the Internet but also through the opportunities offered by mobile phones. Approximately 78 to 80 percent of mobile customers have sent digital images or film clips to family or friends and in some countries up to 25 percent of customers have used their mobiles for uploading images to YouTube or Flickr.
Online for work - anytime, anywhere
Working outside the office is becoming increasingly common. Wireless connection and access to the Internet and company intranet mean that the customer can be just as effective outside the office walls. Reasons for working away from the office include the opportunity to work more flexible hours and be able to work independent of location.
A large majority of companies expect wireless Internet access on trains, in hotel rooms, conference venues and at home. The trend is reflected in IT investments as most companies focus their investments on laptops, e-mail in mobiles or faster broadband.
Customers want a single point of contact and bundled solutions
A high-speed society with networked businesses and communities impacts our business customers' needs for reliable and time-saving solutions that enable them to focus on own core businesses. The industry is rapidly converging with more and more players offering integrated communications solutions including device bundles and data storage and transportation.
"We operate in one of the world's most rapidly changing industries."
Lars Nyberg, President and CEO, TeliaSonera
We are living in an all-communicating society. We spend more time communicating with friends, colleagues and customers at the same time as new technologies are gaining ground as means of carrying our communications.
The demand for being "always-on", and expectations on others, friends as well as companies, stores and government offices, to always be available is growing simultaneously. Demand for capacity is virtually unlimited now and in the future.
TeliaSonera believes that fixed lines will be the most efficient technology for many years to service fixed locations, i.e. homes and offices, in regions where fixed networks already exist. Complementary wireless technologies are being explored to support areas where economies are not supporting fixed network presence. In this context, an operator such as TeliaSonera is faced with both numerous opportunities and challenges.
The market is growing as more customers use a wider range of services, such as mobile Internet, TV over broadband, music downloading and online socializing. The increased usage generates a growing amount of data in the form of images, sound and data, to be transferred at higher and higher speeds. In parallel, customers are growing less content with being able to access the Internet just from the office or from home, but rather want to connect anytime, anywhere.