Mobile Data: Time For RationalityMcKinsey Telecom Extranet Webcast September 23, 2010 Objectives of today’s session Smartphones How to exploit How to exploit mobile data while mobile data while ensuring ensuring profitability? profitability? Objectives of today’s session ▪ What are the What are the optimal go-tooptimal go-tomarket strategies market strategies for dongles vs. for dongles vs. smartphones? smartphones? Which emerging Which emerging consumer trends consumer trends in pricing and in pricing and packaging? packaging? Provide transparency about mobile data costs and potential levers to reduce them as a key enabler to profitability Review innovative packaging schemes (pricing, branding, bundling, differentiation…) Discuss potential customer management and migration approaches to generate value ▪ ▪ Dongles 1 McKinsey 2 . m-commerce. 100% of industry growth in data Subscriber trajectory flat in the future Number of wireless subscribers EOY. Goldman Sachs. mobile advertising SOURCE: Yankee Group. only growth in data Industry revenue by category USD billions 144 16 155 22 159 27 31 37 44 52 27 09E 24 10E 21 11E 18 2012E 2008 165 33 171 38 179 44 103 3 101 115 6 109 129 10 119 +35% 128 133 132 132 133 135 Summary ▪ Future profitability of a carrier will largely depend on its ability to gain and defend mobile broadband market share ▪ EBITDA projection does not reflect ~ USD 80 billion investment for network upgrades and LTE deployment 2004 05 06 07 08 09E 10E 11E 2012E 1 Does not include M2M.Looking forward. millions +10% 263 249 231 205 180 +2% Mobile data Voice/messaging Profit will mostly be earned in mobile data domain Wireless industry EBITDA1 USD billions 267 273 278 283 59 6% 56 61 65 71 29 2004 05 06 07 08 09E 10E 11E 2012E 27 Voice revenues stagnating. Re-thinking mobile data offering and pricing: Key questions Mature markets Developing markets Data cards/ mobile BB 2 3 4 5 What is the best positioning strategy (substitution vs. complementarity)? What pricing schemes are being successful? Should I bundle Mobile and Fix Broadband? How? What are the best practices in migrating customers to more profitable pricing plans? Mobile data on handset 6 How to use Smartphone data pricing to sustain ARPU? 7 How to bundle VAS/Apps? 8 What is the potential of CLM? 1 What are the overall costs and how to manage them? 3 . McKinsey analysis 4 .5 2.0 0.5 -27% p. 1.6 2008 2009 2010 2011 2012 2013 SOURCE: Experts interviews.a.0 1.WHAT ARE THE OVERALL COSTS AND HOW TO MANAGE THEM? 1 Overall costs are not negligible Wireless Broadband 3G costs €Cts/MB Average cost/MB (static costing) of a mature operator ESTIMATES CAGR 3.5 1. McKinsey analysis 5 .WHAT ARE THE OVERALL COSTS AND HOW TO MANAGE THEM? 1 In fact. basis points 100 Variable network costs Basis points 70 30 Total costs Network costs Other costs Cost per MB Incremental 2G costs per MB Fully allocated 3G costs per MB Source: Client interviews. in particular for high usage offers Post paid high usage offers monthly costs Monthly cost per client. network costs are the most important profitability driver of mobile data offers. WHAT ARE THE OVERALL COSTS AND HOW TO MANAGE THEM? 1 Wi-Fi off-loading can make the difference… Operators have already introduced WiFi offloading in their offers … … and are planning for substantial increase in traffic offloaded to Wi-Fi Share of total data card traffic offloaded to WiFi Percent Offloaded to WiFi 100% 100% Western EU operator 40%-50% <5% 2009 2011 6 . 983.011 2.009 2.200 46.5G coverage 2.528 29.422 7.859 5.200 112.042.184 112.632.418.133.973.018.009 2.010 2.932.489.909.715 123.365.523.WHAT ARE THE OVERALL COSTS AND HOW TO MANAGE THEM? 1 …as well as smart network deployment Model inputs covering all key cost and revenue assumptions Business Model Demand ▪ Existing subscriber base ▪ Forecast of subscribers ▪ ARPU levels ▪ Market share Existing mobile infrastructure ▪ Number of 2G/3G base stations ▪ Percent of indoor coverage ▪ Copper coverage ▪ Number of COs Cost drivers – CST populated ▪ Topology (service area. provis.700.5G coverage 2.510.224.841.632.730 2.682. CPE.682 23.002 7.011 22. percent of high-rise buildings ▪ Operator-specific network parameters Cost-drivers – pre-populated ▪ Network dimensioning ▪ Network. costs ▪ Non-network costs (labor cost indexed) CLIENT EXAMPLE 3G network rollout plan optimizing CAPEX Outputs 1 Business case by region for each of the mobile BB technology options Region 3 Region 2 Region 1 e.500 83.956.755.5G only coverage Region 1 Source: McKinsey analysis 7 .832.973.110.233.445.640 2.380.5 G coverage Data Years Revenues OPEX SAC CAPEX NPV Total NPV Post-paid contracts only Pre-paid + Post-paid contracts 2.5G only coverage 2 Countrywide plan for mobile BB deployment/upgrade NPV Region 1 Region 2 Region 3 Region 4 Region 5 Region 6 Region 7 Region 8 Region 9 Full 3G coverage 3G/2.747.037 7.277.461 66. 3G/2..501 111.584.933.380.031.755.649.111.173.509 22.377.973.608 6.715 NPV (10 years) Billion X 182 123 17 Full 3G coverage 3G/2.376.010 2.480.294.382 88.843 27.493.977.010.262 123.778.047 31.g.788 6.467. even on CDMA In Tanzania. incumbent catching up in highspeed DSL diffusion.WHAT IS THE BEST POSITIONING STRATEGY (SUBSTITUTION VS COMPLEMENTARITY)? 2 MBB positioning will depend on the type of market and player CASE EXAMPLES Emerging “weak fixed” In South Africa..5 assets In Czech Rep.. aggressive MBB marketing by mobile only players leveraging 2. Vodacom and mobile players winning over fixed with MBB In Ukraine. low-speed fixed SOURCE: Interviews 8 . MBB as main internet access technology Market maturity + Mature Developing In Russia. substitution becoming more “selective” In all West Europe countries. operators launching aggressive USB offer for substitution. fixed BB high-speed only in some high-end areas: mobile in others/rural In Brazil. mobile BB growing but often complementary to fixed In Turkey. mobile players playing aggressive vs. offer sophistication for complementary usage: ▪ Bundles ▪ Pre-paid and low usage offers ▪ F/M integration for offloading capacity In Saudi Arabia. Apr 2 010. team analysi s McKin sey & Company | 1 0 13 14 Flat rate (time) 15 Group plans 16 Session based 17 Top-up bonus 18 Speed based 19 Flat rate/ usage based hybrid SOURCE: Tariff Consultancy. companies’ websites.WHAT PRICING SCHEMES ARE BEING SUCCESSFUL? 3 Our pricing benchmark reveals increasing innovation in mobile data pricing schemes Scheme 1 2 3 4 M I -2 4. companies’ websites.g.1 /1 3 . Facebook) ▪ Vodafone Broadband 5 GB (UK) ▪ H3G 3 Data Flat (Austria) ▪ TMN (Portugal) ▪ Vodafone (Spain) ▪ MTS Super Onliner (Russia) ▪ Orange (Spain) ▪ ▪ ▪ ▪ ▪ T mobile (Austria) O2 (Germany) Mobistar (Belgium) T-mobile (UK) Vodafone Internet Night (Italy) Pricing sophistication in most advanced markets Most sophi sticated co untri es Most frequent p ricing schemes Emergin g pricing schemes 5 6 7 8 9 10 11 12 Pricing schemes 1 F lat rates volume 2 Unlimited 3 F ixed/WiFi Bundle 4 Voice Bundle 5 Usage-based 6 QoS based 7 Pay as you go 8 Prepaid voucher 9 Off-peak 10 HW subsidy 11 Roaming 12 Daily/weekly rate 13 Service specific 14 F lat rates time 15 Group plans 16 Sessions 17 T op-up bonus 18 Speed based Austria Belgium France Italy Poland Portugal Russia Spain Sweden UK ▪ Orange (UK) ▪ Vodafone (across Europe) ▪ A1 Mobilkom (Austria) ▪ T-Mobile (UK) ▪ Orange (France) ▪ Wind (Italy) ▪ Vodafone (Greece) ▪ Orange (UK) ▪ Vodafone WebSessions National (Germany) ▪ O2 Pay and Go (UK) ▪ Telenor (Sweden) ▪ NTT docomo (Japan) SOURCE: Tariff Consul tancy.0 0 22 0 10 -67 7 94 B L 8 /A Dongles Smartphones Examples Flat rate (volume) Unlimited flat (volume/time) Fixed/WiFi bundle Voice bundle Usage-based QoS based Pay-as-you-go Prepaid voucher Off-peak HW subsidy Roaming plan Daily/weekly rate Service specific (e. McKinsey analysis 9 . Apr 2010.12. 000 77. 2008 x% Prepaid Postpaid Share of prepaid in total gross adds 120 24.5% 9.WHAT PRICING SCHEMES ARE BEING SUCCESSFUL? 3 In UK. introduction of low priced prepaid offers increased net additions significantly In H1 2008.000 10.000 96.000 32.000 88.000 244.000 10.1% -59% -59% 10. UK operators reduced prepaid MBB price … British pounds … and number of prepaid gross adds more than tripled in 3 months Number of gross adds.2% 49 22.000 Before revision After revision Total base Mar (end of Feb) Apr May Jun Total base (beg of Jul) Recently launched prepaid offers from other operators across the world 10 .000 101.6% 28.000 685. WHAT PRICING SCHEMES ARE BEING SUCCESSFUL? 3 More sophisticated data pricing plans combine the advantages of usage-based and flatrate offers "Pake-hodai double" combines usage based and flatrate pricing EXAMPLE JAPAN ▪ ▪ ▪ Flatrate at low data usage at 3 EUR/month Usage based pricing above a certain threshold Flatrate at high data usage depending on access mode: – 34 EUR/month for provider's portal i-mode and i-mode mail – 47 EUR/month for i-mode Full Browser – 106 EUR/month for access via PC Providing advantages to both provider and subscriber ▪ ▪ ▪ Gives subscriber sense of cost control linked to flatrates Market insights indicate that “pay-as-you-go” rate less visible than the two flat rates Scheme stimulating elasticity by inciting subscribers to reach the “unlimited” threshold SOURCE: Company website Nov 2009 11 . they feel reassured when you talk about hours” “We introduced two hourbased packages and an unlimited with FUP2 for the heavy users“ “This was real product innovation in the market. April 2010 . interviews.5/ hour Semester fee: EUR 4 1 Counted at billing periods of 15 minutes 2 Speed slow-down after threshold SOURCE: Web sites. Head of mobile BB 12 9 - ▪ ▪ EUR 0. all other players rapidly followed” – Wind Italy.WHAT PRICING SCHEMES ARE BEING SUCCESSFUL? 3 Italy has experienced high consumer acceptance of data pricing “per hour” Mobile broadband offer Usage need Allowance “Mega unlimited” “Mega 100 ore” “Mega 50 ore” Wind “easy internet” Price EUR per month 20 ITALY + ▪ ▪ ▪ ▪ Unlimited (10 GB FUP)2 100 hours1 of usage 50 hours1 of usage Pay per use (per hour) 15 “People don’t understand the amount of data they need per week or month. 6 Mbps. the first 10 GB Voice: None Vodafone also has a 1GB package at 32 € / month with speed reduction down to 128kbps after 1 GB usage Source: Company Web site. the first 4 GB Voice: Flat Rate to landlines (1000min/month) Contigo Internet Gold Price: 49 € / month Traffic: Unlimited. the first 4 GB Voice: None Unlimited Internet Contigo+ Voice Price: 49 € / mont Traffic: Unlimited Speed: Maximum speed up to 21. including VoIP traffic Speed: Maximum speed up to 21.WHAT PRICING SCHEMES ARE BEING SUCCESSFUL? 3 Vodafone Spain offers unlimited mobile internet packages.6 Mbps. August 2010 13 .6 Mbps. which only slows down your connection in case of network congestion SPAIN Unlimited Internet Contigo Speed is reduced only in case of network congestion Price: 39 € / month Traffic: Unlimited Speed: Maximum speed up to 21. . goodie bags) to its young customers SOURCE: Web search. McKinsey analysis 14 .WHAT PRICING SCHEMES ARE BEING SUCCESSFUL? 3 Maxis in Malaysia follows a more targeted communication strategy for the heavy users of mobile broadband Maxis USB modems covered with “cool” sleeves targeting the youth in the country Maxis organizes music fests and distributes small gifts (e.g. 99 TL for the first six months) with a 24-month contract Free 10 hours Wi-Fi/ month Additional 500 MB data upto 2GB is at 7 TL/month Excess usage fee after 2GB is 0.SHOULD I BUNDLE MOBILE AND FIX BROADBAND? HOW? 4 Fixed line integrated offer in Turkey to slow down substitution TURK TELEKOM EXAMPLE ▪ ▪ ▪ ▪ ▪ 500 MB internet package at 9.05 TL/MB ADSL ownership required Mobile operators charge ~30 TL for 1 GB and 10 TL for 100 MB (mostly advertised for handsets) 15 .99TL (5. the incumbent bundles MBB to ADSL customers with a discount in the upfront fee ▪ ▪ ▪ Lower cannibalization of ADSL ADSL market share increases Increase in MBB share ▪ In addition to the base case.SHOULD I BUNDLE MOBILE AND FIX BROADBAND? HOW? 4 Mobile Broadband + ADSL bundles can be analyzed under different scenarios Description Base case: No bundling Implications ▪ ▪ ▪ Independent selling of ADSL and MBB Today’s prices Scenario A: Bundle ADSL + MBB with a discount in the upfront fee Scenario B: Bundle ADSL + MBB with hard discount In addition to the offer in the base case. the incumbent bundles MBB to ADSL customers with a 20% discount in the bundle ▪ ▪ ▪ Much lower cannibalization of ADSL Increase in ADSL share Significant increase in the number of MBB customers. although at a smaller ARPU Higher ADSL cannibalization Larger MBB market but at a significant lower ARPU ▪ Scenario C: Discount in MBB (standalone) ▪ All operators reduce MBB prices to the implied level in scenario B No cross selling of ADSL+MBB ▪ ▪ 16 . 90€/m Multiaccess – €23 €35 €40 €61 48 57 86 Price evolution in line with other mobile operators Price evolution indexed to standalone fixed access (premium product of fixed access) 17 . easy to install and ready to navigate A top of the range equipment offer… … and standard monthly fee plans Multi-access offer Internet access that adapts to the needs of its user everywhere Everywhere Fixed access ▪ ▪ 1GB @ 29.SHOULD I BUNDLE MOBILE AND FIX BROADBAND? HOW? 4 Portugal Telecom offered mobile broadband services under two brands Standalone mobile offer Wireless internet access.90€/m 2GB @ 34. penalize by reducing speed Communicate to customers early and clearly Highlight benefits of UBP Offer open and transparent bandwidth usage reports Educate customers ▪ ▪ Make pricing transparent Demo customer best interest ▪ Offer rightsizing recommendations and proactive bill review Use events to introduce new prices ▪ Introduce pricing changes with other events such as new speed offering or new device launch SOURCE: McKinsey analysis 18 .e. but global examples from wireless and wireline suggest customers accept change if done right Guiding principles Description Wireless Austria Condition customers Wireline ▪ ▪ ▪ Start by introducing FUP/AUP Use soft caps not hard caps. i..WHAT ARE THE BEST PRACTICES IN MIGRATING CUSTOMERS TO MORE PROFITABLE PRICING PLANS? 5 Making switch to UBP is difficult. 000 web pages 500 pictures 200 minutes of streaming video Managing usage ▪ Customer text notification on data usage ▪ Data usage monitoring application on iphone and other devices ▪ Data calculator on AT&T website AT&T smartphone users SOURCE: AT&T press release 19 .500 e-mails with attachment 4.HOW TO USE SMARTPHONE DATA PRICING TO SUSTAIN ARPU? 6 Smartphone diffusion further stressing the network and putting an end to unlimited data pricing: the AT&T example 2% of smartphone customers use 40% of the overall data bandwidth Percent 2 Monthly usage Over 2GB/month and 40% of network capacity Between 200MB and 2GB Data Pro Data Plus … leading AT&T to introduce new tiered pricing… Price USD 15 (+15) DATA PLAN FOR SMARTPHONE USERS Capacity 200 MB (200 MB) Example of usage 33 25 (+10) 2 GB (+1 GB) …and to educate data users 65 Below 200MB/month ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ 1.000 e-mails 150 e-mails with attachment 400 web pages 50 pictures 20 minutes of streaming video 10.000 e-mails 1. 000 minutes (all networks) + 1GB mobile data @ €23 … €10 top-up: 250 minutes (all networks) + 500 MB mobile data €20 top-up: 500 minutes (all networks) + 1 GB mobile data … ▪ ▪ ▪ Pre-paid Bundle 2 Current MoU ▪ ▪ Bundle 1 Customer distribution MNO’s may preserve current price levels (or adjust for inflation) through adding more mobile data capacity (quota) Note: Assuming customers will have adequate handsets and will value using mobile data SOURCE: McKinsey analysis 20 .HOW TO USE SMARTPHONE DATA PRICING TO SUSTAIN ARPU? 6 Leveraging mobile data may offer MNOs opportunity to introduce flat rate bundles to increase/preserve current ARPU levels Tiered bundle offers New MoU Bundle 4 (given mins) Bundle 3 New ARPU Bundle 3 Increase in ARPU possible due to increase in voice minutes and addition of mobile data Current ARPU Example offers ILLUSTRATIVE ARPU MoU Potential revenue gain Average MoU / ARPU ▪ Post-paid 2.000 minutes (all networks) + 2GB mobile data @ €29 1. bundle with data packages If possible. incumbents successfully applied smart pricing techniques to react to value erosion … Launching “flat” voice offers Possible implications for mobile data pricing: ▪ ▪ ▪ ▪ Give discount today to protect ARPU tomorrow and stop erosion Defend from F/M substitution Use data as lever to protect voice “Obfuscate” voice and data through a unique flat bundle (where possible) ▪ ▪ ▪ Avoid “visible give-away of data access value for smartphone users Where voice bundles are already a market standard. pricing experience in fixed could suggest a possible way forward for smartphone pricing strategy In fixed.HOW TO USE SMARTPHONE DATA PRICING TO SUSTAIN ARPU? 6 Looking forward. avoid transparency of the voice vs. aggressive players Bundling flat voice with flat DSL Depending on regulation SOURCE: Interviews to McKinsey’s industry experts 21 . data components to protect value of data from comparability vs. fair-use cap1 at 500 MB Free content to be chosen from either mobile TV. fair-use cap1 at 1 GB Unlimited mobile TV Free content to be chosen from either navigation. music or mobile cinema Discount for web subscription to reduce acquisition costs linked to other channels Origami Jet for high value customers ▪ ▪ ▪ ▪ ▪ 1 The operator has the right to limit the access when monthly usage exceeds the cap Source: Company Web site. football. unlimited SMS Unlimited mobile browsing. football. music. football.HOW TO BUNDLE VAS/APPS? 7 Orange France offers service specific bundles: TV. e-mail and access to WiFi hotspots. music or mobile cinema Highest service level with yearly new handset and device insurance 22 . and mobile cinema FRANCE Origami Star for leisure users ▪ ▪ ▪ ▪ Voice advantage in the evening and on week-ends. August 2010 Flat fee including unlimited national and international calls and SMS Unlimited mobile internet. however email usage not included. traffic per user in MB/month 20 MB to 200 MB 100 kB to 2.WHAT IS THE POTENTIAL OF CLM? 8 Small number of customers. driving significant share of traffic.5 MB to 20 MB Subs.5 MB Monthly data usage per subscriber: >200 MB 2. 1 Wireless subscribers with more than 100kB monthly mobile data traffic 23 . already destroying value for MNOs DISGUISED CLIENT EXAMPLE 5% of data users generating 80% traffic … Distribution of data users1 and traffic Mobile B2C data users and traffic Sep 2009 1. >500MB monthly All data subs. w. w. <500MB monthly Subs.280 67 9 (100%) 5% 18% 74 …can destroy ~25% of total value Life time value of data plan subs EUR millions 100 (100%) -26% 23% 82% 0.6 54% 16% 3% Data users (million) Data traffic (TB) xx Av. Inbound.) 24 ▪ Increased redemption of factor 10x to 100x through – Better targeting – Channels improvement through direct call to action – Fit between offer and channel ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ . IVR outbound. to capture the full potential a full turnaround of CRM and campaigning capability is required From… Targeted push campaigns can be a powerful drivers of revenues… To… ▪ “Flat” contact policy without differentiation among cluster of users Limited number of campaigns (~20 per month) with poor possibility to test-and-learn” on small targets and new products No monitoring of campaigns results and manual management of reporting 2-month lead-time from design of campaign to results monitoring Only SMS-push campaigns ▪ Contact policy differentiated for users (animation) and non-users (recruiting) 50-100 campaigns per month. etc.WHAT IS THE POTENTIAL OF CLM? 8 Step-changing CRM and campaign capabilities …However. with possibility to select micro-targets and a broad range of products to optimize ROI Structured monitoring on campaigns redemptions with automatic monitoring tools to build ROI ranking of campaigns Flexible and just-in-time process (2-3 weeks ?) Exploit all channels (Teleselling. peak . or (5) I use this service regularly (e. e. 2008 45 Aggregation Content and applications are offered through the mobile portal The portals. Up-To-Data panelJune 2009 McKinsey & Company | 21 Double down on datacard penetration ▪ Over 60% of mobile broadband share of total broadband SPO.g.For each of the following mobile serv ic es. improved cross-sell and upsell... e. cheap off. Team analysis 56 25 . innovative pricing models) ▪ ▪ 3-6% market share gain 1-2% EBITDA increase 97 97 97 95 95 92 89 87 93 93 88 79 82 83 72 69 59 54 49 42 36 48 44 36 31 29 77 62 57 42 39 29 24 19 27 22 18 14 13 59 48 43 20 20 13 13 12 10 9 8 7 6 ▪ For pre-paid users usage is lower than for post-paid users. news.g..) Low penetration of entertainment content (e. calendar) “Young socials” “Mobilitydriven” “Utility-driven” 13 ▪ Young ▪ Female ▪ Low utilization of fixed/home devices 12 P rinted 07/05/ 2010 17:09: 06 11 ▪ Slightly older than average ▪ Somehow biased toward fixed ▪ Mostly female ▪ Mostly male “Housewives” 11 ▪ Rejection of “professional ” services (e▪ “Neutral ” about other content/services ▪ Appetite for gambling and ▪ Very low interest for Web social networking and professional services ringtones/logos “Frivolous” 5 * France. IM.000 P rinted 07/05/ 2010 17:09: 06 0 0 3:00 6:00 9:00 12:00 15:00 18:00 21:00 0 24:00 SOURCE: Client interv iews. few times a month) on my phone SOURCE: LatAm mobile panel 2010 McKinsey & Company | 6 ▪ ▪ ▪ ▪ Expand usage aggressively 2-3x expansion of intense users YoY Growth of intense users to 40-50% of user base Double Internet penetration on 2nd SIM 10-20% of all data revenue from apps Handsets The consumer market can be segmented based on the appetite for different content/services Segment “Web socials” Share of co nsumers* % Attitude toward content/services 28 CASE STUDY. targeted pricing and channel strategies Identify specific opportunities for fixed-mobile convergence and create partnerships to address them Identify opportunities to reduce network congestion based on analysis of traffic (incl. number of apps by category. promotions and sales rep tactics Cross-sell/up-sell Highlight data VAS...K. pay-TV) driven” Work ing Draf t -Last Modified 08/ 05/2010 07: 36:11 “Conservative professionals” 20 ▪ Utilizing mostly e-mails/calend ars ▪ Adverse to web social networking ▪ Keen about Web social networking ▪ Appetite for music..500 Important difference also between week and week-end days 3G voice traffic Minutes 100.Last Modified 24/ 03/ 2010 12: 17: 09 PM P rinted 11/02/ 2010 13:00: 29 ▪ Q72 .La st Mo d ified 06 /02 /20 0 9 0 9:0 2:0 0 Usage per month Contr ol & upsell Upsel l to retai n D rive for profitability Seek out & pr omote P in te d 7 /2 /2 0 09 01 : 46 :3 3 r L ow L ow Hig h Sp en d per month ? ? Pus h dif ferentiated pricing (e. etc. please choose one of the following statements: (1) I have not heard of this serv ice. interviews. photo sharing. Spain Sources: Segmentation deriv ed from Telecom Customer Insight Survey. incl.sel l v oice and WLAN t o maxi mi se ov erall li fecycle val ue Target f or VAS W ork ing Dr aft .… ▪ More “techies” and “fashion▪ Younger than average ▪ Traditional usage of devices (TV. pricing and yield management Address opportunities to maximize Internet penetration for 2nd SIM cards Define clear business model and role in the ecosystem Analyze quality & breadth of apps portfolio (e.Applying these levers in a throughout manner can yield significant impact Description Improve customer lifecycle management Best-in-class EXAMPLES Sample analysis 2 Adoption of “true” digital content services still trailing messaging % of respondents. seni or managers. with peak hour happening later at night DISGUISED CLIENT EXAMPLE 3G data traffic 3G voice traffic 3G data traffic Mbps 1.g.000 50. li mited hours per day) Enc ourage hi gher use on profitable products ? ? Seek out more users (e. best effort speeds. tailored to specific device Migrate customers from lower to higher yield devices/data plans Show customers actual usage to avoid downgrading to lower data plan Highlight benefits of data VAS Perform microsegmentation based on usage patterns and demographic/behavioral analysis Increase penetration through a variety of targeted levers. (4) I have tried this service on my phone but rarely use it. U. roaming) Cross.are not perceived as attractive Key take-aways Usage of the mobile p ortal Percent of mobile data users1 A B ▪ Partnership with xx for vast majority of content and ▪ The company gets x% of revenue share from the partner ▪ Billing is done through a company billing system Portal content applications ▪ TBD Raise the game in Apps ▪ Startpage: – News – Weather – Traffic update – Links to sites and applications May Aug Nov 2008 2008 2008 Feb May 2009 2009 ▪ Download section: – Applications – Wallpapers – Music – Ringtones Would you recommend the portal? % of mobile portal users1 . (N = 980) Mobile data service SMS Take pictures Listen to music MMS Buy ringtones.. games ▪ Low utilization of fixed/home services ▪ High usage of Web search. integration with social networks) Identify opportunities to enhance current portfolio through partnerships and better monetization models Create microsegmented offers to rapidly drive penetration in geographic areas underserved by fixed broadband.000 500 25.000 1. second card while roami ng) Cros s-sel l v oic e and W LAN to maximi se overall lifecycl e value McKinsey & Company | 34 Manage data traffic proactively ▪ 3-5x average yield improvement Short-term Data traffic can also be peakier than voice. off-peak downloads. exclusive games.. only 1 prepaid user in 10 has tried to use the mobile internet Work ing Draft ..g. however conversion rates are quite similar Despite high awareness.. ▪ e-commerce Low interest for entertainment mail.TF N386-20090206 This requires a mo re CLM type approach for data cards sales ? ? ? Tighten data l imits and f ai r use policy Restrict vi deo and mus ic appli cati on us ages Upsell to higher ARPU data products Hi gh ? ? ? Promote higher ARPU products (e.. post -paid users only.g.g. (2) I am aware of this serv ice but have nev er considered using it. trial rates continue to be very low across the board.. video.000 Work ing Draf t -Last Modified 08/ 05/2010 07: 27:47 75. WESTERN EUROPE Other key characteristics ▪ Strong usage of “Web social networking”. ▪ fixed phone. geographic distribution) Apply best practices to reduce network congestion (e.g. (3) I have considere d using this service on my phone but have not yet tried it. .May 2009 Very likely Very unlikely Neutral ▪ Email section with links ▪ Personal space with to emailing and instant messaging billing and price plan informations 1 Based on surveys among x-y subscribers using internet on their mobile SOURCE: Company website. games MSN Watch video Watch TV Search / browse internet Send emails Social Networking Maps Shopping Aware Considered Tried Use 76% 77% 75% 47% 51% 46% 53% 64% 38% 41% 47% 52% 48% XX% PRE-PAID Conversion rate ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ Perform promotions on high yield devices Drive yield through efficient devices and high APRU data plans through subsidies. caching of content.g. Germany.g. com Yavuz Demirci Associate Partner in the Istanbul office Telephone: +90 (212) 339 4925 E-mail: [email protected] Gloria Macias-Lizaso Miranda Partner in the Madrid office Telephone: +34 (91) 346 58 35 E-mail: [email protected] 26 .com Piero Trivellato Associate Partner in the Milan office Telephone: +39 (02) 72406-469 E-mail: Piero_Trivellato@mckinsey. Have a question for the presenters? Type it by pressing the “Submit question” button – We will answer as many as time permits 27 .