Business consultancy project

BUSINESS CONSULTANCY PROJECT
Mobile Financial Services in Azerbaijan Implementation in “Azercell Telecom” LLC

Author Notes:

Instructor: Professor Mr. Elkin Nurmammadov, ADA University Associate Vice Rector, Institutional Planning and Assessment, Dean of EMBA faculty.

Student: Rashad N. Pirverdiyev, EMBA 2019, Intake 5, ADAU / MSM e-mail: [e-mail]; mobile: [phone]

Abstract
Mobile business has been transformed into the most pivotal source of the development of banking due to the ubiquitous nature of the mobile devices intensified by the strengthened importance of the mobile business. Moreover, mobile devices contribute to the facilitation of innovation that will lead to the quick transformation of retail banking across the world. Furthermore, banks and other financial institutions possess more vital resources to make investments in mobile novelties and for taking advantages of the strengthened development of the mobile banking. (Krishnan, 2014).
Azerbaijan finance and telecommunication markets are prone to constant changes due to fluctuations in the economy, changing legislation, increasing digitalization level of customers’ expectations, improving financial inclusion level and strengthening interest and support of the government to digital aspects of the economy. Strengthened rivalry on telecom market leading to challenges and problems, fosters telecommunication companies, including “Azercell Telecom” to consider new opportunities and revenue streams for attracting new customers and keeping the retention rate stable. Digitalization of all spheres of business requires the appropriate improvements in the processes, products, and services provided by telecom companies for enhancement of the competitive position in an imperfectly competitive business environment and ensuring its steady growth.
The purpose of this Business Consultancy Project (BCP) is the identification of advantages and disadvantages of MFS launching by “Azercell Telecom” in the current environment. Moreover, changes in legislation, increased attention and support of government to the growing share of electronic payments in the economy and general digitalization of payment industry leading to more transparent economy, might influence the development of telecommunication field positively.
This BCP analyzes the finance, telecommunication and MFS fields in Azerbaijan and around the globe, the position of “Azercell Telecom” in the market and opportunities of competitive edge, specifics of MFS, financial feasibility of launching new service and other related matters. To identify the factors influencing the process and outcome of the implementation of MFS, various analytical tools and academic frameworks were implemented, such as: SWOT Analysis, Porter’s Five Forces, PEST and seven-pillar MFS development measurement tool.
The conducted analysis including financial feasibility of the project resulted in the recommendation to implement MFS by “Azercell Telecom” through the cooperation with one of the most reliable and developed banks in Azerbaijan, “Pasha Bank”, due to favorable ongoing legal amendments, internal and external factors, evident financial and reputational benefits, investment analysis, high level of digital development and existing resources of the Partner and other aspects. The proposed changes in legislation, including strategic Roadmap reflecting various aspects involving the significance of electronic payments and development of telecom industry suppose the creation of the favorable environment for the MFS development in Azerbaijan.

Keywords: Telecommunication, MFS, “Azercell Telecom”, financial, development.

List of Acronyms.
AAGR -Average annual growth rate
ABA- Azerbaijan Commercial and Cooperative Banks Association APA-Aztelekom Production Association
BITRIB- Baku Telephone Communication Production Association CAGR-Compound Annual Growth Rate
CBA-Central Bank of Azerbaijan
CRM-Customer Retention Management system ERP- Enterprise Resource Planning
FCIS-Financial Capability and Inclusion Survey FIMSA- Financial Market Supervisory Authority FTTH-Fiber to the Home
GPP -Government Payment Portal
GSMA- Global System Mobile Association IBA -International Bank of Azerbaijan
ICT-Information Communication Technology IOT-Internet of Things
ISP-Independent Service Provider
ITU- International Telecommunication Union LPWAN- Low-power wide-area network
MCHT -Ministry of the Communications and High Technologies MFS-Mobile Financial Services
MNO- Mobile Network Operator MNP-Mobile Number Portability MPA-Mobile Payment Alliance MST-Magnetic secure transmission NFC-Near field Communication
NFV-Network Functions Virtualization NPS-National Payment System
NPS-Net promoter scores OTT- Over the Top
POS-Point of Sales Payment System
PSTN- Public Switched Telecommunication Network QR-Quick Response
TASIM-Trans-Eurasian Information Super Highway UMTS -Universal Mobile Telecommunications System VAS- Value-Added Services
Table of Figures
Fugure.1 PEST Analysis 7
Figure.2 Internet Users 11
Figure.3 Percentage of the population living in the area covered by cellular network 13
Figure.4The number of total Mobile Network subscribers in thousands 13
Figure.5 Mobile subscriber and Mobile tariff changes 14
Figure.6 OTT Communications 15
Figure.7 Mobile Operators Share change from Y 2001 20
Figure.8 Mobile Operators Share in Y 2019 20
Figure.9 Consumer and Enterprise Market Share 21
Figure.10 Mobile Broadband Share 21
Figure.11 Porter`s Five Forces 24
Figure.12 SWOT Analysis 25
Figure. 13 Assets of Banks 2018-2019 (Finance and credit, 2019) 29
Figure.14 Net Profits of Banks 2018-2019 (Finance and credit, 2019) 30
Figure.15 E-Commerce payment process 38
Figure.16. Mobile Financial Services 41
Figure.17. Mobile Banking vs Online Banking 45
Figure.17 Mobile Financial Service Model 48
Figure18. MFS Country Profile Evaluation 49
Figure.19 Knowledge and Usage of the Bank by Individual characteristic in Y 2015 51
Figure.20.SWOT Analysis 54
Figure.21 Total Global Revenue Growth. 59
Figure.22 The shift of Mobile broadband in CIS region (in percentage) 61
Figure.23. IOT Connections 63
Figure.24.The biggest opportunity from MVAS services 64
Figure.25. Collaboration Model 66
Figure.27 Operator Centric Model 67
Figure.28. Theoretical Framework 74
Figure.29 Smartphone users from survey respondents 76
Figure.30 The demographic profile of Azercell customers 83
Figure.31 The bank account availability and plastic card usage 84
Figure.32 The payment tools preference in mobile phone bills and utility consumptions 84
Figure.33 The possibility of payments from your mobile number balance directly 84
Figure.34 The willingness to pay for the service 85
Figure.35 The CAGR rate per service since 2016-2019 (Jan-June). 86
Figure.38 Data service metrics since 2016-2019 (Jan-Jun) 88
Figure 39.Correlation between Smartphone users and DATA and VAS Revenue. 90
Figure.40 Correlation between SMS and DATA /VAS Revenue. 90
Figure 41.Data revenue Time Series Forecast. 92
Figure.43 Azercell Growth Share Matrix 94
Figure.45 Advantages for the all Stakeholders 100
Figure.46 Evaluation Matrix 102
Figure.47 Share of Payment collection tools 2016-2019 (Jan-Jun) 103
Figure.48 Service Development Process 106
Figure 49.Project Development Process 112
Figure.50 Project Timeline 113
Table of Tables.
Table.1 Economic Metrics 9
Table.2 The share of mobile communication income from total communication services 14
Table.3 Position of Banks 30
Table 4. General Information on Financial Market Participants (Banks) FIMSA “Overview of Banking sector, 28.02.19. 33
Table.5. (Central Bank awards winners of its contest on development of cashless payments, 2019) 36
Table 6. Literature evaluation 56
Table.7. IOT Connections 63
Table.8 MFS in developing world 67
Table.9 Internal Interview 82
Table.10 Value-Added Service Overview 2017-2019 Jan-June period (in thousands) 87
Table.11 Data service metrics since 2016-2019 (Jan-Jun) 88
Table.12 Actual Growth and Market Penetration Metrics 89
Table.13 Actual/ Forecast Figures (2017-2020) 91
Table.14 Predicted Growth and Market Penetration Metrics 93
Table.15 Share of Mobile Value-Added Services 96
Table.16 Subscriber count of MVAS services 96
Table.17 Pasha Bank Financial Results 99
Table.18 Total Revenue and Gross Margin from Money collection (in thousands) 104
Table 21 The Short-Term Expected Value (in AZN) 108
Table.22 The Long-Term Expected Value (in AZN) 109
Table of Contents

1. 
   Introduction 1
   
   1. 
      Mobile Telecom Industry Outlook 1
      
   2. 
      Research Background. 1
      
   3. 
      Problem Statement 3
      
   4. 
      Research Objective and Research Questions 3
      
   5. 
      Research design and Research Approach 4
      
   6. 
      Scope of the Limitation 5
      
   7. 
      Thesis Outline 5
      

2. 
   Azerbaijan Telecommunication Industry 6
   
   1. 
      Background 6
      
   2. 
      PEST Analyses 7
      

3. 
   Mobile Network Operator Market 12
   
4. 
   Bakcell LLC 16
   
5. 
   Azerfon LLC (Nar Mobile) 17
   
6. 
   Naxtel LLC 17
   

3. 
   Azercell Telecom LLC 18
   
   1. 
      About the company 18
      
   2. 
      Position on the Market 19
      
   3. 
      Azercell products scope 22
      

4. 
   Porter’s five forces. 23
   
5. 
   SWOT- Analysis 25
   

3. 
   Financial Market in Azerbaijan 27
   
   1. 
      Background 27
      

2. 
   Banking System in Azerbaijan 28
   
   1. 
      International Bank of Azerbaijan 30
      
   2. 
      Kapital Bank 31
      

3. 
   Pasha Bank 32
   
4. 
   Financial local authorities 34
   

2. 
   Non-Cash Payments and E-commerce in Azerbaijan 35
   

4. 
   Payment Systems in Azerbaijan 36
   
   1. 
      Azericard 36
      
   2. 
      Millikart 37
      
   3. 
      “Goldenpay” 38
      
   4. 
      Azerpost 39
      
   5. 
      Government Payment Portal (HÖP) 40
      

5. 
   Mobile Financial Services Background 40
   
   1. 
      Introduction 40
      
   2. 
      Mobile Payment 41
      
   3. 
      Mobile Payment Technology 42
      

4. 
   Mobile Banking 44
   
5. 
   Mobile Financial Service Stakeholders 45
   
   1. 
      Mobile Network Operators. 46
      
   2. 
      Bank and Financial Institutions 46
      
   3. 
      Smartphone Companies 47
      

5.5.6 Online Payment tools 47

4. 
   Mobile Financial Services Model 47
   

7. 
   Mobile Financial Services in Azerbaijan 48
   
   1. 
      Mobile Financial Services Country Profile Evaluation. 49
      
   2. 
      MFS Participants in Azerbaijan 53
      
   3. 
      SWOT Analysis 54
      

6. 
   Literature review 55
   
   1. 
      Introduction 55
      

2. 
   The Modification in the MNO revenue outlook 56
   
   1. 
      External factors 56
      

6.2.2. Internal Factors 58

3. 
   New Revenue Streams in MNO Portfolio 62
   
   1. 
      Mobile Internet of Things (IOT) 62
      
   2. 
      Mobile Value-Added Services (MVAS) 64
      
   3. 
      Mobile Financial Services 65
      

6. 
   Methodology 69
   
   1. 
      Research Methodology and Research approach. 69
      
   2. 
      Research Instruments and Tools. Data Collection. 70
      
      1. 
         Qualitative Data Analysis 71
         
      2. 
         Quantitative Data Analysis 71
         

7.2.3. Data collection process 72

6. 
   Theoretical Framework 74
   
   1. 
      Correlation between Independent and Dependent Variables. 74
      
   2. 
      Influencing Factors 75
      
   3. 
      New revenue excellence for Mobile Operators 77
      
7. 
   Findings 77
   
   1. 
      Introduction 77
      
   2. 
      Qualitative Data Analysis 77
      
      1. 
         External Interviews 78
         

9.2.2. Internal Interviews 81

3. 
   Quantitative Data Analysis 82
   
   1. 
      Questionnaires 82
      

9.3.2.The Questionnaires Outcome. 82

3. 
   The internal data analysis. 85
   
4. 
   Descriptive analysis 85
   
5. 
   Diagnostic analysis. 87
   
6. 
   Prediction analysis. 91
   

3. 
   Outcome of the Findings 93
   

5. 
   Recommendation 94
   
   1. 
      Internet of Things 95
      
   2. 
      Mobile Value-Added Services. 96
      

6. 
   Implementation 97
   

1. 
   Introduction 97