MTS Group’s Customer Lifetime Value 2.0 (CLV 2.0) strategy means that we strive to maximize the time during which the customer uses our services by creating and strengthening his/her emotional commitment to our brand, increasing his/her satisfaction and loyalty through offering him/her a personalized seamless customer experience across a wide range of digital products.
In our activities, we focus on tools for increasing the shareholder value, which are our main areas of attention:
- building an ecosystem of digital products,
- transformation into the Group with implementation of the sum of the parts principle,
- achieving excellence in digital technology and competencies.
Building an ecosystem of digital products
This is the key format of our market offer in the B2C segment. Our strong brand and deep customer knowledge, supported by advanced analytical tools based on AI and Big Data, allow us to provide customers with a seamless, deeply customized and personalized digital experience across a broad and ever-growing portfolio of services. Significant synergies between telecommunication, financial and media services allow us to effectively use our marketing capabilities and deep customer knowledge. The customers, who use several our services, generate greater value and demonstrate higher levels of brand loyalty and satisfaction with services.
We intend to build up a digital product portfolio based on our own developments, as well as by involving independent developers and service providers as partners. These mutually beneficial partnerships will allow us to bring more value to the lives of our customers by offering them more innovative, diverse and convenient services. The key priorities of our partnership program are: increasing the number of partnerships, expanding the opportunities of partnership programs and providing a value offer that will enable us to be the best possible choice for our potential partners.
Our key priorities in terms of ecosystem development over the next few years are: increasing the ecosystem customer base, developing high-quality digital products and expanding the pool of partner companies. We focus on developing innovative products in existing and promising business areas through our own R&D, partnerships and M&A transactions.
Transformation into the Group with implementation of the sum of the parts principle
In the process of building a full-scale digital ecosystem, some of our business areas have reached such a scale and level of maturity that they have the opportunity to become a driver of increasing the fundamental value of the MTS Group. Therefore, we launched the process of gradual spin-off of such areas into separate companies that in the future could independently operate in financial markets, raise external funding and become full-fledged market entities with significant value for the investment community in the long run.
This approach will provide high motivation for the teams in business areas, allow us to configure internal business processes in the best way, in accordance with the specific features for each area, as well as make it easier to raise additional financial resources. As a result, this will ensure high dynamics in product development and maintaining their quality at the level of market leaders. In terms of investor perception, we are striving to move away from the image of MTS as a single and indivisible entity to the image of the Group as “a sum of the parts”, where each part is valued fairly in accordance with the results of its activities and by the multipliers accepted by the market for each specific business area.
At the current development stage, we logically divide the businesses of our Group into several parts. The Core includes B2C and B2B telecom (historically our strongest competence), associated telecommunication and cloud infrastructure, as well as ecosystem digital products and infrastructure that ensures the unity and efficient interaction of ecosystem elements and connections. The Core is an indivisible whole that we intend to keep under our direct control in the long term. Satellites are well-developed businesses that demonstrate, in interaction with the Core, significant mutually reinforcing effects (examples of such businesses are FinTech and Media). Herewith, they have an independent value for investors, so we, for our part, potentially consider it possible to give up full control over them. Points of Growth are intensively developing business areas (for example, Smart Home and Travel), which cannot yet be separated from the Core due to their insufficient scale and level of maturity. Depending on their future prospects, they may be transformed into satellites or remain integrated into the Core. Non-Core Assets (for example, tower infrastructure) are slightly related to our core business, so we may consider the options for selling them to a third-party investor should the terms and conditions of such transaction be favorable to us.
We would like to emphasize that the formation of independent companies does not mean our transformation into a holding of slightly related businesses. We are still a Group and continue to cultivate ecosystem links between individual areas. Herewith, the main connecting forces, in our opinion, are: ecosystem marketing and brand management (not necessarily a single/umbrella brand); sharing knowledge about the customer and following the unified logic for CLV growth; centralized development and management of tools that are common to all areas. All of the above is supported by clear and detailed agreements on interaction between the companies and business areas included in the Group. We also intend to ensure efficient corporate governance across all businesses of MTS Group following the uniform standards consistent with the best global practices.
Achieving excellence in digital technology and competencies
It is a continuous process of introducing new technological competencies, tools and solutions into the Company’s business processes and products. We are focused on developing and enhancing cutting-edge digital platforms that provide flexibility and high speed of development and launch of a wide range of internal and external products. In order to improve the overall cost efficiency and reduce T2M1, we are committed to using AI tools across all platforms, products and business
1 Time to market.
Current Context
The Russian digital services market has been somewhat unique for a long time, due to the fact that in most segments local projects and players successfully competed with global giants. This situation was due to a number of fundamental reasons ranging from consumer preferences and language specific features to regulatory requirements and the debt capital market structure. This allowed large Russian business groups from the banking sector, retail, high-tech sector and telecom to actively develop new business ranges in the digital environment while basing their strategies on the ecosystem approach.
As a result of recent changes in the geopolitical situation, global digital players have significantly weakened their presence or left the Russian market altogether, actually turning it into a field of competition for local companies and business groups. Herewith, Russian consumers in the mass and corporate segments have already become accustomed to the availability of world-class digital services. The fact that foreign players left the market resulted in a sharp increase in demand for this type of services (especially in the corporate segment); we treat this situation as a window of opportunity. On the one hand, the severance of economic and technological relations with a number of countries also caused some difficulties in getting access to equipment and technology for the Russian market players. On the other hand, relations with the countries having rapidly growing economies, that are aimed at digitalization, intensive expansion of the technological base and development of high-tech industries, are being dynamically formed and strengthened.
We also note the active growth in demand for digital services in the B2B/B2B2X markets. The sources of this growth are the companies’ common commitment to technological transformation supported by the pandemic effect, as well as the reduced offer of such services in Russia due to the fact that global players left the market. This market is a critical source of growth for digital service providers and its importance will only increase in the future. In this regard, we are confident that our competencies, as well as existing and promising products for the B2B market, will become an additional source of value generation for us.
We are closely monitoring the dynamics of internal conditions (including economic, legal and regulatory ones) developing in our target markets in Russia, as well as the impact on our business of external factors related to access to technological equipment, provision of funding and debt servicing, as well as fulfillment of obligations to external and internal counterparties. In this context, we deem our strategy relevant to the current moment. We are ready to promptly take advantage of dynamically opening windows of opportunity along with paying increased attention to risk mitigation. It is worth noting that, given the current conditions, we see even more clearly the fundamental role of partnerships in the formation and development of the ecosystem product content, therefore ensuring the sustainability of partnerships is an important priority for us.
Overall, we react to the current historical context with cautious optimism, believe our strategy is relevant and our actions are balanced and appropriate. We see the opportunities ahead of us and are confident in the high growth potential.