Garrett Johnston, group director of strategic marketing for Russian operator MTS, talks openly about the threats to existing carrier business models and what needs to be done to overcome them.

There can’t be many outspoken Irishmen with a taste for flamboyant scarves at Senior management level in the Russian telecommunications industry. Garrett Johnston, group director of strategic marketing for MTS, which has over 100 million subscribers in Russia and the CIS, may well be the only one. And he’s not just candid by Russian standards, he is among the most forthright operator executives in the industry at large.

It’s never been fashionable for operators to openly admit to external threats, for example (they mostly prefer to speak in terms of challenges, opportunities and partnerships), but Johnston exhibits no such reticence. “It’s not just individual operators who are in danger,” he says, summing up a long discussion about the competitive perils of the mobile industry in 2010. “Really, as a species, our entire position in the value chain is threatened.” Johnston is speaking to telecoms.com in March, a few weeks after the Mobile World Congress.

The themes of the show, the reflection they gave of the industry’s current state, and his direct experiences of walking the exhibition floor are still fresh in his mind, and he has plenty of ideas for how the event could be enhanced. He’s careful to say that he applauds the work of the GSMA in bringing the show together, though, and that his suggestions are only for the improvement of what he identifies as an already valuable event. MTS won a GSMA award this year, in the customer care and billing category, which may or may not have something to do with the careful diplomacy of his critique. One of the standout moments from the show for Johnston, he says, was seeing that Steve Jobs won the Mobile Industry Personality of the Year award from the GSMA (although it was voted for by the media) but was not present to collect and acknowledge it.

Johnston says he’s no Apple fanboy, but that the sense he has received from “very regular contact with a whole range of application developers all over the world” is that Jobs’ latest product, the iPad, will be “an even bigger revolution, relatively speaking, than the iPhone.” That the man who has been judged by the industry as its Personality of the Year is not in attendance demonstrates for Johnston the show’s legacy as an event for the mobile industry, by the mobile industry. “If you look at the business model for the telecoms industry, up to now it has been focussed on the two per cent of the customer wallet that consumers spend on telecommunications access services,” he says.

“That is now changing fundamentally to a focus on the 98 per cent of the customer wallet that is not spent directly on telecoms. Most of the rest of that 98 per cent will be more than adequately represented by the arrival of all of these different applications that are becoming available. “But the show is too producer-centric, too mobile industry-centric. You don’t have stands there from Proctor and Gamble, you don’t have Coca Cola, or the big banks. It’s really important that a wide cross-section of every single consumer category within that 98 per cent is invited to the show to help the industry to become the kind of platform that will make everyone successful.”

Retreating to the areas of expertise that they can effectively exploit is essential for operators, Johnston says. “We don’t need to create the services and there is no chance that a department within an operator that’s also developing 16 other services is going to do a better job on a specific service than a very focused bunch of people in a garage somewhere. It’s just human nature; the guys in the garage, their whole future depends on getting it exactly right, whereas we can afford to make mistakes.”

The notion that the success of the mobile operator community relies on its performance as an enabler of success for other organisations is a theme to which Johnston returns. While Steve Jobs didn’t have the time or inclination to visit MWC this year, Google CEO Eric Schmidt (a future awards candidate if ever there was one) seized the opportunity to present an hour long keynote. Google represents one of the most serious threats there is to the mobile operator establishment and Schmidt’s presence at this year’s event was variously read by commentators as evidence of the industry’s doors beginning to open or an exercise in keeping your friends close but your enemies closer.

Johnston’s feeling, though, is that carriers’ approach to Google needs to be blunt. “The best thing to do is to say to Google: ‘Look, our cards are on the table. How can we make you more successful while still giving us enough return on investment for it to be interesting for us to build better and faster networks?’ I think that’s really the question that the mobile operators need to ask everybody,” he says. Because Google, as far as Johnston is concerned, is clearly eyeing up the kind of assets that operators have historically leveraged.

Schmidt’s presentation at MWC was conciliatory in tone and full of praise for the achievements of the mobile industry. From a development perspective, he said, Google’s new mantra is ‘mobile first’. And he showed deference to the leadership of the operator community in customer billing. “But less than an hour after Eric finished his speech,” says Johnston, “Google announced the recruitment of a very talented lady called Stephanie Tilenius from eBay to a new position in Google called global vice president for commerce. A hiring at that senior level is not being done so that Google can interface more successfully with operator billing systems,” he says. Operator billing models are, in Johnston’s view, dangerously crude and exposed (it’s interesting that it was in this category that MTS was recognised in the GSM Awards). “Operators need to wake up,” he says.

“Just look at prepay: You can walk into the flagship retail outlet of any major European or US mobile brand at the beginning of the second decade in the 21st century and those stores are still segmented based on whether you pay your bill in advance or in arrears. It’s just not relevant to anybody but the operator.

“When I walk into a supermarket to buy tomatoes, I’m not going to be offered a choice based on whether I pay now and eat them later or the other way around. It’s just an example of throwback thinking.

There are few more customer-centric aspects to an operator’s business than flagship retail stores and if they are still being designed based on how an operator’s billing system works, then we have some room for improvement; all of us,” he says.

He has a similar point to make about the way that the exhibition at MWC is laid out. “If you’re a CMO visiting the show for two days you may have just a few hours to look around the exhibition. You want it to be structured in such a way that there’s a section in one hall for all the products and services that can help an operator increase ARPU. There’s another section for anything that helps you improve on your customer retention. I’m not saying it’s bad, just that it could be better.” And Johnston probably has more direct experience of this than many others; He visited 117 different stands at the exhibition, looking for products that could help MTS improve its business.

When on these walkabouts, he says, he always asks the people manning the stands the same question; requesting a single sentence explanation of the benefit to the end user of the product or service they are promoting. Of the 117 stands he visited this year, he said, only six featured people who were able to answer his question. “The sales messages on a lot of these stands are geared towards technology buyers,” he says. “That’s a process step rather than a results step but a lot of marketing folks and sales and customer services people are walking round that exhibition with a direct responsibility for the customer experience. And that’s about results, not process. I saw so many interesting things but I had to dig to find out what they were all about. And I suspect that a lot of exhibitors don’t get the traffic they could be getting because they’re sending out a message that’s aimed at the wrong audience.”

Career history
Garett Johnston is the director of strategic marketing at MTS, which operates in russia and the CIS. He is responsible for the formulation of marketing strategy and innovative marketing solutions. Previously, he served as the chief marketing officer at Ukranian operator Kyivstar.
Johnston has international exposure to the mobile, fixed and internet telecommunications markets. He has a 15 year track record working on customer facing assignments with blue chip ICT employers.
He has lived and worked in 12 different countries around the world covering both emerging markets such as the former USSR, China, Middle east and Latin America as well as  advanced markets such as the UK/Ireland, Western Europe and North America.
Garrett is fluent in eight languages with intermediate capacity in several more.

“So far ‘coopetition’ between operators has been limited to handsets, standards alliances, procurements and network sharing, that kind of thing,” he says. “But it would make sense for operators to cooperate on things like payment systems and clearing houses for the same reason that it made sense in the beginning to have network interoperability on voice. It’s a logical extension of that thinking, and that’s an agenda that we’re going to push here in Russia very strongly in the next 24 months.” But as much as being driven by opportunity, it seems, Johnston is aware of the defensive benefits of adapting business models and working practices.

“We as operators have an inherent competitive advantage because of who we are and where we are today,” he says. “But we could easily be disintermediated if we don’t hurry up and get our act together.”It was impossible to miss the focus on embedded technology and the ‘internet of things’ at MWC and Johnston, like many within the industry, is alive to the opportunities that this movement presents. Specifically, he says, carriers can offer “incredible value” by enabling billing and charging for the multitude of devices that will become connected over the next decade. He references the Kindle model, through which the consumers don’t have a direct relationship with the organisation that provides the connectivity (AT&T) but the organisation that provides the service (Amazon) does. This could be a major opportunity, he says, and one that could be enhanced by carriers looking to cooperate in areas that have previously been key competitive differentiators.

Best in show
Garret Johnston visited 117 stands at this year’s mobile world congress. Of those companies, only six were able to tell him in simple terms how their product or service could improve the consumer experience and thereby the MTS offering. With a little more digging, though, Johnston was able to unearth a total of 46 companies which had products that excited him.