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Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
QATAR TELECOMS SUMMIT 2016
BUILDING BLOCKS FOR SUCCESSFUL OPERATOR
STRATEGIES
FIXED–MOBILE CONVERGENCE:
DRIVERS AND POTENTIAL IMPACT ON
MARKETS IN MENA
KEREM ARSAL
NOVEMBER 2016
EVENT SPONSOR
#AMTMT
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
FMC take-up has varied in European countries, due to
different market conditions and operator incentives
2
Percentage of fixed broadband households with fixed–mobile convergence (FMC) bundles, selected European
countries, 2012–2020
40-70%
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
Many factors act together as incentives and drivers for FMC
take-up
3
0Mobile market
share growth
Mobile
competition
Household
structure
Fixed broadband
churn
Strong declines in ARPU
Strong fixed broadband and
weak mobile; multi-SIMExposed fixed-only players; MVNO-
conducive wholesale regimes
Household size and
budget decision-makers
FTTx strategy
RoI acceleration; cross-selling
by mobile discounts
Pricing and affordability
Recognisable discounts or benefits;
acceptable margins
Market structure
Integrated operator prevalence; consolidation
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
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FMC is not always triggered by integrated incumbents but
symmetrical market leadership is key
Leaders in both fixed and mobile can
expose standalone competitors
Fixed challengers without mobile have
little to lose with an MVNO
Leading FMC
operator
Mobile market
share at launch
Fixed market
share at launch
Deutsche
Telekom34% 42%
KPN 46% 42%
MEO 47% 52%
Movistar 35% 49%
Orange 43% 46%
TIM 35% 49%
Virgin 4% 20%
Market structure
Challenge mobile operators with
limited fixed broadband assets
Improve retention (fixed and mobile)
Consolidate mobile SIMs in
households
Steal market share from mobile-only
This does not exist in the region
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
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1 Bundles launched: France – Orange Open; Germany – Telekom MagentaEins; Italy – Wind and Telecom Italia; Poland – Orange Open; Portugal – Meo M4O; Spain – Movistar Fusión.
Flagship FMC bundles were launched in most markets when
mobile ARPU was in sharp decline
Mobile competition
Mobile ARPU, selected European countries, 2008–2014
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
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Data allowances for FMC and standalone bundles, selected European countries, 2015
6
FMC is not the end of standalone mobile plans: operators
keep their high-end mobile tiers out in stable-ARPU markets
Mobile competition
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016 7
Percentage of contract SIMs that are part of an FMC bundle (excluding M2M),2012–2020
FMC SIMs can climb up to 40% of all postpaid SIMs
Mobile impact
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016 8
Prepaid-to-postpaid migration is a common consequence of
FMC bundling in many markets
Mobile impact
Postpaid percentage of subscribers before and after convergence, selected European countries
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
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Mobile NPS for standalone mobile and FMC bundles, selected operators, 2015
9
Mobile Net Promoter Scores are better for FMC than for
standalone mobile – fixed broadband acts as an anchor
US operators have
mediocre reputations for
fixed broadband
Mobile impact
Biggest change in score
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
Number of SIMs per FMC account is a key metric that relates
to mobile market share changes
10
Number of SIMs per FMC account, selected operators, 2015
Mobile impact
High potential in Qatar
(GCC) households
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
Multi-SIM initiatives are used to capture as many SIMs as
possible in a given household
11
US-like shared data pools
Explicitly multi-SIM
Head start with free SIM
Mobile impact
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
Discounts at the entry level vary widely and are about closing
gaps between operators’ offerings
12
FMC discounts for basic plans (compared to
standalone sum), selected European countries, 2016FMC prices (USD, PPP-adjusted) for basic plans,
selected European countries, 2016
Pricing
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
Incumbents want higher ARPU from high-end user segments,
where they have some room for differentiation
13
FMC prices for advanced plans (USD, PPP-adjusted), selected European countries, 2016
Pricing
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
FMC is not solely about discounting and price – customers
see other benefits
14
Respondents’ overall mobile service satisfaction
scores by bundle type, selected countries, 20151
Respondents’ mobile service satisfaction scores for
price by bundle type, selected countries, 20151
Pricing
1 Question: “Please rate on a scale of 1–7 your satisfaction with the following aspects of your mobile service”, n = 6847. Other service aspects included ‘data allowance’, ‘data speed’, ‘customer service’,
‘voice/SMS allowance’ and ‘coverage’.
Converged
Standalone
novelty of discounts decays, prices sometimes rise, discounts can be
difficult to see.
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
Bundling tactics go beyond pricing – they allow operators to
target segments, pursue upsell and play to their strengths
15
Highlight benefits instead of
discounts
Make standalone services less
attractive – MEO and NOS reserve top
fixed broadband tiers for 3- and 4-play
Reserve key services for FMC –pay-TV at Movistar Spain
Segmentation by selection of
mobile plans
Pricing
Talk Talk’s maximum
quota is 2GB
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
How important is pay-TV for take-up of FMC bundles?
16
Pay TV’s role in FMC take-up is
moderated by triple-play tradition
― France, the Netherlands and Portugal:
pay TV a near-must in FMC.
FMC can grow without telco pay-
TV tradition, too
― Italy, Spain and Turkey
― “Light” TV tactics used to compensate
― Pay TV as a new round of upsell and
churn protection
Percentage of fixed broadband subscribers with FMC
or pay TV, selected European countries, 2015
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016 17
What is the FMC case in the GCC?
Mobile markets are healthy, therefore
FMC pricing may be cautious at best.
Incumbents may use FMC to increase
their hold on customers as fixed
broadband markets open to competition.
Mobile challengers unlikely to initiate
competition in FMC, as they are weak in
fixed broadband.
Cautious (higher) pricing could mean low
consumer appeal and slow take-up.
Incumbents are favourably positioned in
market structures.
Loose bundles can be used to experiment
with different discount points.
FMC may not be urgently required,
especially in two-player markets.FMC can be done, but that does not mean
it should.
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
Key takeaways
18
1 The market structure is conducive to FMC, but the mobile
market appears too healthy for heavy discounting
2 FMC bundles are not just about discounts; bundling
tactics can be used for segmentation and upselling
3 FMC can be done, but that does not mean it should.
Experimenting with loose bundles is a low-risk scenario
Qatar Telecoms Summit 2016: Building blocks for successful operator strategies
© Analysys Mason Limited 2016
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