Digital Spend

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Part
01

AT&T - Digital Spend

AT&T is currently investing in several digital areas, adding up to approximately $20-30 billion annually. These investments are primarily focused on entertainment, technology improvements and other areas. They also include a number of acquisitions, particularly in video streaming and video streaming support.
Most of AT&T’s investments are in capital expenditures and acquisitions. According to their 2016 annual report, $22.4 billion was spent on capital expenditures in that year alone. Much of their focus is in digital transformation projects, from streaming content and mobile access to even virtual reality and augmented reality.

Video streaming

AT&T seems to be putting the vast majority of their investments into video streaming. This is based on the number of video services that they have acquired in the last two years, as well as the money spent on those acquisitions.

DirectTV

One of the company’s recent major acquisitions was DirectTV. In addition to the standard options for DirectTV, AT&T added Data Free TV, which allows subscribers to watch on their mobile devices without data charges. They then launched DirectTV Now, a multi channel video streaming service, which garnered over 200,000 subscribers in the first month. DirectTV was purchased for $49 billion alone in 2015. This expenditure is more than the average given above, but is included due to its importance.

Otter Media

Otter Media is a digital holding service that is a $500 million joint investment between AT&T and The Chernin Group. Subscription services held by Otter Media include Crunchyroll (a very popular anime streaming service), Fullscreen, Gunpowder & Sky, and Hello Sunshine. These services with the help of more popular ones like Crunchyroll have a combined 2 million paid subscribers. Additionally, Fullscreen includes the digital studio Rooster Teeth, which “developed industry-respected and consumer-delighting IP, and has become 'the' benchmark of success for the video industry” By investing in these services, AT&T can ensure a steady revenue stream.

Infrastructure

AT&T is also investing heavily in their infrastructure, both to support the previous services and to provide faster speeds.

Quickplay Media

AT&T acquired Quickplay Media as the “underlying distribution infrastructure for its DirecTV over-the-top video offerings, like its upcoming Internet-based “DirecTV Now” subscription video app and its free, ad-supported “DirecTV Preview” service.” Having this underlying infrastructure will allow viewers to easily and quickly access their entertainment. AT&T did not disclose how much was spent on this acquisition, but Fortune estimates that it was around $157 million.

FiberTower Acquisition

Another way that AT&T is investing in infrastructure is the acquisition of FiberTower, a high speed network that offers millimeter wave spectrum, which will allow for 5G mobile services. As with Quickplay Media, this acquisition allows for extremely fast access for users.

Promotional offers

One of AT&T’s tougher competitors in the streaming video world is Sling TV. The streaming company has 1.2 million more subscribers than DirectTV Now. Some of this is due to Sling TV’s earlier appearance on the market. AT&T is offering Amazon Fire Sticks to anyone who signs up and prepays for a month. The intent seems to be to get more reluctant cord cutters who may not have a similar streaming device.

Customer data collection for predictive algorithms

Figuring out what customers want is a big part of AT&T’s business plans, and that means making a solid algorithm. According to AT&T’s Entertainment’s Chief Technology Officer, Eugene Rodriguez, the engineering teams are currently working on a good algorithm, using the data collected by DirectTV and Otter Media.

Digital Talent

There is little data for what kind of investments AT&T is making in terms of finding and nurturing talent. It is safe to assume that some talent was simply acquired when gaining DirectTV and Otter Media. The 2016 annual report also offers the following: “We’re using innovative training and building profiles of future job requirements to help our employees pivot their skills from hardware to software, from legacy wire line to mobile and entertainment, and from data recorders to data scientists.” From this, it is clear that AT&T is investing in talent, even if there is no clear data in terms of money.

Time Warner

Currently, AT&T is attempting to form a merger with Time Warner in the hopes of gaining premium content and more robust infrastructure. However, this is still being negotiated and there is no data for how much the merger would cost or what exactly AT&T would gain from it.

conclusion

AT&T is making many investments in digital transformation projects and digital engagement projects. The rough estimate of $20-30 billion annually is derived from the above numbers, though the DirectTV acquisition was much higher. Regardless, it is clear that AT&T is hoping to position themselves to benefit from the continued shift to streaming video and other digital entertainment.

Part
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Part
02

T-Mobile - Digital Spend

The past 4 years have seen T-Mobile prioritize digital transformation projects, specifically on network improvement, customer engagement and retention, and advanced technology. The goal of T-Mobile's strategy was to raise its presence in the United States and disrupt the accustomed mobile network provider industry. A key aspect of this strategy was the investment of $7.99 billion on 600 MHz spectrum licenses, resulting in 100% coast-to-coast coverage for their customers and additional services, like streaming television.
Below is our complete overview of T-Mobile's digital spend in recent years.

DIGITAL ENGAGEMENT

In their 2017 proxy statement, T-Mobile makes an overt effort at digital engagement. The presentation is characterized by bright colors, upbeat background music, and a generally positive tone. This is then combined with recorded statements by an assortment of board members discussing the company.
CEO John Legere's pitch to shareholders attempts to set T-Mobile apart, calling the company "the uncarrier." He explains T-Mobile's values and how they have changed to better serve their customers. Legere states, "As the world goes digital we're doubling down on an even bigger retail store network and a better experience for our customers."

NETWORK LEADERSHIP

Also in the 2017 Proxy Statement, Chief Technology Officer Neville Ray gloats about T-Mobile's advanced technology, which currently has been the network leader for 3 years. Ray explains, "Right now 70% spectrum is committed to LTE, that number will move north of the 80." According to the CTO, T-Mobile has expanded its geographic coverage from 500,000 square miles to approximately 1.5 million.
T-Mobile's CTO tells the viewer that all other mobile carriers are attempting to catch up with their technology and would continue to do so into the future. There is justification for this assertion. Several technologies were offered first by "the uncarrier", including 4x4 MIMO, 256 QAM, and LTE AWS-3 SPECTRUM.

2017 SPECTRUM AUCTION

On April 13, 2017, T-Mobile invested $7.99 billion on significant digital improvements for their brand. At auction that day, the wireless provider won 45% of all low-band spectrum sold for 600 MHz FCC as well as 31 MHz nationwide, with the digital investments resulting in 100% coverage of the United States and Puerto Rico and quadrupled low-band holdings.
In another video testimonial, John Legere makes plain the strategic goal of this company's massive investment. Their goal is to create real competition for what he labels a duopoly, industry giants AT&T and Verizon across the United States. He states, "If the Duopoly thought things were rough before well, just wait!
The CEO's confidence is understandable given the forward-thinking digital transformation T-Mobile had just accomplished. After all, 600 MHz chips are new technology, only rolling out in 2017. Their spectrum purchase is not shared by Verizon or AT&T, eliminating congestion. The wireless provider's purchase also provides the capability to roll out 5G in rural regions of the country, producing better coverage and high-quality wireless connections for their customers. It will even exceed current standards in urban areas, improving coverage inside buildings.

PURCHASE OF LAYER3 TV

Another investment by T-Mobile into new technologies is their purchase of Layer3 TV for approximately $325 million. Depending on their 17,000 retail stores and the 30 million smartphones shipped each year to help it take hold, the company intends to launch a low-cost streaming service in 2018.

2016 ANNUAL REPORT

The Annual Report released by T-Mobile in 2016 includes several examples of spending on digital transformation projects and digital initiatives. For investment examples, we have provided a list of these financial transactions, with each including the amount invested and the digital area involved. For digital initiatives, we have included a brief description of the initiative and any known results.
1. $3,968 million purchase of spectrum licenses and intangible assets, a technology area investment.
2. $1.2 billion increase, or 12%, in marketing and promotions spending, an investment in customer retention and employee commissions.
3. T-Mobile ONE plan unlimited plan - calls, text and LTE data at 4G. Results: 6,605,000 new customers and an improved churn rate (customers leaving T-Mobile) of 1.30% for postpaid and 3.88% prepaid, down on 2015 which was 1.39% postpaid and 4.45% prepaid.
4.$799 million spent on network equipment and services, projecting an additional $900 million in capital lease commitments in 2017. This is a technology investment, aimed at building out 700 MHz A-Block spectrum licenses.
5. $2.2 billion refundable deposit on what is listed as a potential asset. No other information is offered, but this demonstrates the active pursuit by T-Mobile of new digital technology.

ARTIFICIAL INTELLIGENCE AND ANALYTICS

Scott Tweedy, Vice President of Strategic Transformation discussed the use of AI by T-Mobile, explaining the technology is initiated in company staff, allowing for a bug-free roll out to customers. Current examples of AI that have been released to the public are bots on Facebook that gather feedback and provide accessories to purchase. In the future, the wireless company intends to expand the use of AI, perhaps into Robotic Process Automation to enhance supply chain management.
T-Mobile has contracted Ericsson Expert Analytics to provide insights into methods of improving customer experience. The analytics experts have been deployed throughout the network, analyzing every aspect of the network to allow for improved speeds and better connectivity.

CONCLUSION

T-Mobile has prioritized digital technology in their investing, resulting in their status as the network leader. Through technological development, strategic digital investment, and creative leadership, T-Mobile has produced a digital transformation in their technology and customer engagement and retention.
Part
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Part
03

Sprint - Digital Spend

Despite the lack of pre-compiled statistics denoting Sprint's digital transformation spend, a number of figures point to the likelihood that the company's yearly spending on digital transformation initiatives ranges from USD 377 million to USD 415 million. Since 2015 when it started its digital transformation journey, Sprint has already implemented several digital transformation initiatives. Among these initiatives are the hiring of people to spearhead digital transformation projects, the implementation of solutions from Synchronoss, Pegasystems, and Lithium, and the creation of programs that promote agility.

AMOUNT SPENT ON DIGITAL TRANSFORMATION

In answering this request, I assumed that digital transformation encompasses, among other things, the adoption of digital engagement technologies and the hiring of digital talent. According to CIO.com article published last year, digital transformation is the "application of digital capabilities to processes, products, and assets to improve efficiency, enhance customer value, manage risk, and uncover new monetization opportunities."

After an extensive search, I found that while Sprint's digital transformation journey has considerable press coverage, the amount the company spent, is spending, or will spend on its digital transformation projects, individually and as a whole, is not readily available in the public domain. There is no detailed breakdown of operating expenses and capital expenditure in the company's Form 10-K. The amount spent could not be located as well in the company's other publications such as investor updates, presentations, transcripts, and press releases. Also, my searches through news articles, telecommunications industry reports, and case studies did not produce any relevant amounts.

Nevertheless, I was able to gather data that enabled me to triangulate the total amount spent in each of the years 2015, 2016, and 2017. From page 31 of the World Economic Forum's report "Digital Transformation Initiative — Telecommunications Industry," which was published in January 2017, I learned that telecommunication companies worldwide spend, on average, 3.9% of their revenue on information technology, and they allot around 30% of their information technology spend to growing and transforming their businesses.

With the assumption that these percentages hold true for the United States and using the revenues indicated on page F-4 of the company's latest Form 10-K, I was able to estimate Sprint's yearly digital transformation spend. My computations in the attached spreadsheet reveal that there is a good chance that the company's digital transformation spend in years 2015, 2016, and 2016 is as follows:

2015 — USD 404,024,000
2016 — USD 376,506,000
2017 — USD 390,159,900

It appears from these figures that Sprint's yearly digital transformation spend ranges from USD 377 million to USD 415 million.

In Sprint's earnings call for the fourth quarter of 2016, Chief Financial Officer Tarek Robbiati reported that the company intends to reinvest a portion of its cost savings in growth platforms, including "digitalization of sales and care and prepaid growth initiatives."

DIGITAL TRANSFORMATION INITIATIVES

Listed below are Sprint's digital transformation initiatives in the past two years.

1. Hiring of people to spearhead digital transformation projects

On December 5, 2016, the company announced the appointment of Rob Roy, formerly Comcast's Senior Vice President for Digital Revenue, as Sprint's Chief Digital Officer. Customer experience improvement through the smart use of online and mobile technology is his number one responsibility. As described by the company, "Roy will focus on leveraging multi-touch personalization and marketing automation to build an end-to-end digital customer journey across all device types to deliver a seamless, omnichannel approach for acquiring the always connected customer, driving sales and providing support."

In an interview with McKinsey & Company, Rob Roy explained that, with respect to digital transformation, their top hires were the following: head of business intelligence (BI), head of artificial intelligence (AI), business lead for digital adoption, and digital data management platform (DMP) owner. Both the BI and AI heads are responsible for analyzing huge blocks of data and for interpreting them in a way that other people will understand. The business lead for digital adoption and the digital DMP owner, on the other hand, are tasked to promote digital adoption across the different units of the company and to find opportunities for the application of traditional data to digital initiatives, respectively.

Sprint also strengthened its digital marketing team and built a product management unit, according to an article published by CMO.com early this year. It reinforced its digital marketing arm by hiring people who could run different marketing channels in-house.

2. Selection of Synchronoss as provider of digital platform for business clients

Sprint announced on February 25, 2018 its decision to avail of the services of Synchronoss Technologies, Inc., a supplier of innovative messaging, cloud, and digital products. The company enlisted Synchronoss' help in streamlining its online order management process for its business customers. According to Kim Green Kerr, Senior Vice President of Sprint Business Solutions: "our relationship with Synchronoss will help us dramatically simplify our online environment for our business customers, giving them control of their order management and customer care requirements."

3. Streamlining of communications, upgrades, and sales

Consulting firm Capgemini reported in 2017 that in a period of four months, Sprint was able to record a 150% increase in digital sales and a 180% growth in digital sales call volume. According to Capgemini, Sprint was able to accomplish this through concentrated digital customer experience initiatives and efforts to simplify processes for its customers. At the time, it was Renato Derraik who was the head of the company's digital transformation program. His goal was "to provide digital sales that match Amazon, create customer engagement that rivals Candy Crush, and provide digital care at the same level as Apple."

4. Development of the company's data architecture

Based on the CMO.com article, Sprint made several technology investments immediately after it began its digital transformation journey in 2015. Most of these investments were made with the intention to enhance the company's data architecture. Analytics, data management, targeting, and web management were the first areas the company invested in. According to Rob Roy, these investments enabled Sprint to understand its customers better.

5. Holding of programs that promote agility

These programs include the "lunch and learns" that are held every month, the "Level Up" program, and a basic agile methodology training, according to the CMO.com article. In the monthly "lunch and learns," a certain team or unit discusses their current digital transformation initiatives and explains how they are achieving their objectives. The monthly program provides an opportunity for other units of the company to listen and learn. In the "Level Up" event, on the other hand, an invited technology-first company (e.g., Amazon) shares its digital transformation best practices.

6. Availment of a Pegasystems data solution

As a result of its desire to move away from relying on the judgment of customer experience agents when it comes to real-time decisions, Sprint invested in a data solution from customer engagement software provider Pegasystems. This is as reported in a Forbes article published last December. According to this article, through this data solution that uses self-learning and predictive analytics, Sprint was able to do the following: identify which customers are at risk of attrition or churn, provide customized retention offers, see a 10% decrease in customer churn, a 40% boost in its net promoter score, and an eight-fold increase in customer upgrades, and enhance satisfaction of customer service agents.

7. Implementation of the Lithium engagement platform, which consists of Social Media Management and Communities

In 2017, Lithium reported that Sprint has achieved several successes since it implemented the former's engagement platform. Sprint was able to see its call deflection volume grow by 32%, its number of conversations increase by 163%, and its average agent response time drop by 25%. The engagement platform helps in the management of the different digital touchpoints.

8. Use of Elastic Stack open-source software and of a Hadoop-based data lake

Based on an article published by Computerworld last year, the Elastic Stack open-source software enables Sprint's IT people to identify "where glitches are impeding Sprint's ability to facilitate transactions, ranging from basic browsing, to phone purchases, to upgrades consumers are trying to complete online." The Hadoop-based data lake, on the other hand, helps in the analysis of customer data. Sprint built the data lake in the hope of making its product recommendations to customers better.

CONCLUSION

Even though statistics indicating Sprint's digital transformation spend are not readily available in the public domain, there is information that indicates there is a good chance the company's annual spending on digital transformation initiatives varies from USD 377 million to USD 415 million. From the time it began its digital transformation journey in 2015, Sprint has already carried out numerous digital transformation initiatives. These initiatives include the hiring of people to lead digital transformation projects, the installation of solutions from Synchronoss, Pegasystems, and Lithium, and the development of programs that foster agility.
Sources
Sources

From Part 03