In a push for sales growth, One of Finland's most successful mobile operators is now reinventing itself as a vendor of automation tools and expertise.

Iain Morris, International Editor

March 12, 2018

7 Min Read
Finland's Elisa is selling its automation smarts to other telcos

Manning the stands at this year's Mobile World Congress (MWC), most vendors wore that caffeine-induced look of manic desperation that accompanies a market downturn and falling sales. But at least one European company did not fit the typical profile. Finland's Elisa saw its revenues grow more than 9% last year, with earnings up nearly 8%. Like the big boys of the equipment industry, it was scouting for service provider business -- only with more spring in its step.

That's because Elisa Corp. is not really a vendor. In Finland and Estonia, it operates telecom networks, buying its gear from the same equipment giants that serve more internationally recognizable telco brands. And despite its diminutive stature on the European stage, Elisa has been a major hit with consumers. It vies with TeliaSonera for leadership in Finland, and last year boasted the number-two spot in Estonia. Most interestingly of all, its network is one of the busiest in Europe: In 2017, it claimed to rank fifth in the region for levels of mobile data traffic.

Figure 1: Elisa's Sales & Earnings ( euro M) (Source: Elisa) (Source: Elisa)

This partly explains what Elisa was doing at MWC in the guise of technology supplier. A pioneer in the mobile data market, it began scrapping 4G usage restrictions as far back as 2008, and has stuck to its "unlimited" guns ever since. The concomitant spike in traffic forced Elisa to get smart about network management. Years before automation became an industry buzzword, Elisa was using software tools to reduce manual intervention. So highly does it think of its automation capabilities that it has now packaged them up and started selling them to other telcos. Last month, RCS & RDS, a cable operator in Romania, was unveiled as its first customer.

In touting its wares, Elisa can demonstrate that internal automation efforts have paid off handsomely, says Kirsi Valtari, a senior vice president of Elisa's telco efficiency business. Besides eliminating manual processes at its network operations centers, Elisa has also been automating some of its radio systems, including basestation integration, configuration and testing. "The impact has been huge," Valtari tells Light Reading. "In the past six years mobile data volumes have grown 20-fold and yet we are still running Elisa networks with the same manpower we had in 2007."

Figure 2: Automation as a Sales Opportunity Kirsi Valtari, senior vice president at Elisa's telco efficiency business, is steering the Finnish operator in a new direction. Kirsi Valtari, senior vice president at Elisa's telco efficiency business, is steering the Finnish operator in a new direction.

That has kept the lid on spending. Besides preventing any surge in operating expenditure, automation also appears to have had a restraining effect on capital investments. "Our CEO was really strict that capex remained at 12% [of revenues] and that is a level we were at for years," says Valtari. "We've been able to maximize use of the infrastructure we have." While capital intensity nudged 14% in 2017, it is expected to fall back to around 12% this year as automation delivers improvements. Through the clever application of algorithms, optimization and load-balancing tools, Elisa already claims to have increased the busy hour throughput -- essentially, the traffic load the network can bear at peak times -- by 40%.

Automation has not been hassle-free for Elisa. Instilling a software culture throughout the organization has been a challenge, acknowledges Valtari. Rather than recruiting software expertise, Elisa concentrated on retraining the people it already had. During internal training courses, network engineers have been taught to code in Python, a popular programming language, and to write algorithms for a self-optimizing network (or SON). "The idea was to get engineers who were previously doing manual optimization to think about automating it," says Valtari. "These people understand network problems and so it is a win-win outcome to go down this route."

Despite the effort involved, Elisa was arguably better positioned for software-based automation than many other telcos. In a Finnish market that enjoyed some reputation for software expertise, it already had a sizeable software operation. When Elisa launched an Internet Protocol TV (IPTV) service, it decided to build its own system, instead of buying one from a technology vendor. "We have a long software tradition and that gave us the background," says Valtari.

Next page: No longer just a telco

No longer just a telco
About a year ago, Elisa decided it would start selling its automation tools and expertise to other telcos. Facing a slowdown at its mainstream business, it hopes the move into a vendor role will drive sales growth in future. Although revenues last year were up 9.3%, to nearly €1.9 billion ($2.34 billion), the increase was fueled largely by takeover activity, including the buyout of an Estonian broadband provider called Starman. This year, it expects only a slight increase in sales.

"We were looking for growth from a bigger international market, but not in the role of a telco," says Valtari. "Once we realized we had some interesting, in-house innovation, we decided we could become a provider of services and innovation to other telcos."

The diversification will not come easily. In setting itself up as a vendor of automation tools and services, Elisa may be going up against some of its own suppliers -- including the behemoths of the equipment industry -- in one of the most hyped parts of the market. Using artificial intelligence, Sweden's Ericsson AB (Nasdaq: ERIC), for instance, has been developing a load-balancing tool that can shift network resources between basestations to suit traffic levels and user needs. The technology is already in trials with Vodafone España S.A. (See Humans Beware: Ericsson Readies Machines to Run the Network.)

Elisa quite obviously lacks Ericsson's muscle. The Swedish company finished last year with about 100,000 workers and has an annual R&D budget of about $4.1 billion. Elisa has around 4,600 employees and spent just €246 million ($303 million) in capex in 2017. The number of staff at its new-look Elisa Automate business, the unit selling to other telcos, is likely to be small (Elisa will not disclose the actual figure).

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But there have been signs of operator frustration with traditional suppliers. Years after virtualization was conceived as a way of releasing operators from a single-vendor prison, telcos continue to fret about the interoperability of supplier technologies. Seeking to address this pain point, Elisa insists all of its algorithms are "multi-vendor compliant." Coming from a telco, that promise may carry more weight than the usual vendor assurance. (See DT Demands Automation, Cloud Tech From Pan-Net Suppliers.)

Indeed, Elisa's telco identity, and experience of using automation tools successfully at its own business, could chime with prospective customers, and especially the ones that have a similar profile. Like Elisa, RCS & RDS is a big fish in a relatively small pond, with a fiber-based network that covers about 62% of Romanian homes. Under the deal announced, it plans to use Elisa's SON software in its Romanian mobile network, which uses products from multiple vendors and reportedly serves about 3.2 million customers. "Elisa SON is built by an operator… and is based on hands-on understanding of what needs to be in the networks, from the customers' perspective," said Valentin Popoviciu, vice president at RCS & RDS, in a published statement. (See Is Orange's New Deputy CEO the NFV Champion It Needs?, DT Demands Automation, Cloud Tech From Pan-Net Suppliers and vRAN Tech Hits Resistance at SK Telecom.)

The limiting factor, potentially, could be the in-house activities of the telcos Elisa is targeting. "There are many operators actively building tools for internal use," acknowledges Valtari. For some, and especially the heavyweights, the alternative to an inflexible, mainstream vendor may well be a do-it-yourself strategy. But for those with resource constraints, lying behind the automation curve, Elisa could seem like an option worth exploring.

— Iain Morris, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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