Managed services transform Vodacom Tanzania network operations and generate 30% in OPEX savings

With tariffs falling by more than 80% and network traffic growing seven fold, Vodacom Tanzania turned to outsourcing as a way to transform its business to enable it to compete more aggressively and raise profitability. As a long term partner, Nokia Siemens Networks built a managed services offer matching Vodacom Tanzania’s needs precisely and transforming its operations.

“We have to become a “smart cost” operator. We believe you can’t just cut costs to make sure your margins stay the same. In terms of Tanzania, part of our strategy was to partner and reduce costs and gain efficiency wherever possible. Nokia Siemens Networks has enabled us to achieve this transformation through managed services."

Dietlof Mare,
Managing Director,
Vodacom Tanzania

Vodacom Tanzania enjoys a market share of about 45% in a country with around 20 million mobile subscribers. In the past two years the competitive pressures on Vodacom have been severe. Tariffs have fallen by more than 80% while network traffic levels have grown seven fold. The company needed to take drastic measures to address these conflicting trends threatening to erode its competitiveness, so it called in Nokia Siemens Networks to investigate the potential of outsourcing to transform its business operations.

Nokia Siemens Networks was already a key supplier and had a good working relationship with Vodacom Tanzania. The two companies worked together to come up with a tailored solution to match Vodacom’s precise needs. After building a case based on the value and business benefits of transforming its existing organization, it was agreed that Nokia Siemens Networks would manage, operate, maintain and expand Vodacom’s network over the next five years. This is the first managed services project for Vodacom and the first major such deal in Africa.

A partner with global experience
Key to the success of managed services-based transformation is the experience and global capabilities of the outsourcing partner. “"People have to understand the partnership that they’re about to form. It’s not just a contract, it’s not just a cost reduction technique or whatever the drivers are for managed services, whether it’s a quality improvement or anything else. But to understand those drivers, selecting a partnership is a relationship that has to last for five or ten years going forward," comments Dana Bakker, Managing Executive Operations, Vodacom Tanzania.
Bakker continues: "Nokia Siemens Networks has global operations capabilities and understands how to improve a local process. That’s been the biggest eye opener for us: making sure that the partner you choose comes with a lot more than what you could have originally offered," says Bakker.

Nokia Siemens Networks will provide full network operations for Vodacom Tanzania, taking responsibility for the existing Network Management Center and operations across the radio, transmission and core networks. The scope encompasses not just network planning, operations and optimization, but first and second line field maintenance too.

Challenges

  • Falling tariffs and booming traffic volumes threatened the competitiveness of Vodacom Tanzani
  • Overall energy and other operational costs of running the network needed to be reduced
  • Network capacity needs to be expanded cost-effectively to meet growing demand

One of the main benefits of the deal for Vodacom is a guaranteed saving of 30% operational expenditure (OPEX) over the course of the contract, which amounts to an average annual saving of around USD 11 million.

Managing human resources
The agreement came into effect in March 2011, and included the immediate transfer of more than 120 Vodacom personnel to Nokia Siemens Networks. Successfully transferring these skilled and experienced personnel is a critical part of the project’s success.

Solutions

  • A comprehensive five-year managed services deal including cost and quality guarantees
  • Transfer of skilled Vodacom employees to Nokia Siemens Networks
  • Managed Energy Services to optimize energy usage at more than 300 network sites
  • A doubling of 3G capacity is included in the deal

Nokia Siemens Networks has developed a world-class process and has extensive experience of bringing transferring staff in house and making them feel part of its family. Prior to the changeover, Vodacom employees were kept informed through measures such as regular meetings and presentations on specific benefits. The practical aspects of taking the new people on board began well before their first day, setting up laptops and email addresses and putting all the administration in place so that the employees were part of the organization from the start.

“Nokia Siemens Networks was very open and honest with transferring staff members, making people feel very comfortable from day one until the transition date. They made sure all the questions were answered and making sure the answer fulfilled their need,” explains Charity Safford, Head of Department, Strategy and Integration, Vodacom Tanzania.

Efficiency raised by managed energy services
A significant chunk of the savings will come from the implementation of hybrid energy solutions at 338 of Vodacom’s network sites. In this managed energy services portion of the deal, Nokia Siemens Networks will implement a mix of energy solutions, ranging from free-air cooling to advanced battery back-up control, at the chosen sites. The use of power at each site will be managed by the Nokia Siemens Networks Green Energy Controller to achieve the highest efficiency. The controller uses algorithms to switch between the available power sources on site and provides remote monitoring capabilities to support more efficient site and network maintenance.

Benefits

  • Complete transformation of Vodacom Tanzania’s business operations, placing it on a solid foundation for growth
  • OPEX is guaranteed to fall by 30% in five years, enabling Vodacom to compete more aggressively in the fast expanding Tanzanian market
  • Reduced energy OPEX for the network by reducing generator runtimes for more than 300 sites
  • Predictable costs for network operations provides business stability
  • Fixed price for 3G network expansion, which eliminates cost uncertainty for Vodacom

The predictability of future costs is also a key advantage of the managed services approach. For example, Nokia Siemens Networks effectively takes on the risk of fluctuating energy prices by selling energy back to Vodacom at an agreed price. Vodacom will also enjoy predictable costs for any network expansion carried out during the five years of the contract. The plan is for Nokia Siemens Networks to double 3G capacity to meet rising demand.

"Nokia Siemens Networks meticulously developed a managed services solution to match our needs in terms of cost and quality. We now have a single supplier taking responsibility for our operations and energy strategy, which makes things far simpler and more transparent," Bakker concludes.