mvno industry summit africa 2013
DESCRIPTION
TRANSCRIPT
!!
DETERMINING THE OPTIMAL MODEL FOR YOUR BRANDED AIRTIME BUSINESS
TAKING THE GUESSWORK OUT OF AN MVNO DECISION
M V N O A F R I C A S U M M I T • C A P E T O W N • 1 O C T O B E R ’ 1 3 • J I R I B A T E K
TODAY’S CONVERSATION
! Is there an opportunity? – Yes. The Market is out there…and growing…
– Established consumer brands are best positioned to take an advantage of it …
– … and it makes business sense for them to seriously consider it
! It should be a natural birth … – Branded mobile business should be an Evolution of, not Divergence from, your core business
! How to make it (relatively) painless: – What you should always look for: Key drivers behind a mobile business
– Impact of real life: Scenarios and Sensitivities
– The great juggle: Designing MVNO Strategic Framework to influence all key drivers
– Turning PowerPoint into reality: Deriving an optimal operating model
– Bird Rand in Hand vs Two in a Bush: Balancing commercial risk and profitability over time
! Briefly unpacking the benefits of an enablement model ! Concluding remarks
The individualization of Customer Requirements is leading to the fragmentation of the market into much smaller segments
THE MARKET IS OUT THERE… … AND GROWING
Small segment services are an opportunity for established brands, in partnership with MNOs
MNOs!are!not!geared!to!serve!smaller!segments!
• Tradi3onal!products!not!a7rac3ve!enough:!too!generic,!low!perceived!value!
• MNO!product!development!process!too!slow!and!costly!
• Segments!too!small!to!jus3fy!dedicated!MNO!products!
ESTABLISHED CONSUMER BRANDS ARE BEST POSITIONED TO ADDRESS SMALL SEGMENTS
EXISTING DISTRIBUTION
FOOTPRINT EXISTING LOYAL CUSTOMER BASE
EXISTING CREDIT RELATIONSHIP
EXISTING LOGISTICS & WAREHOUSING
EXISTING WELL-KNOWN
BRAND
Brands can bring – Existing credit relationship and brand loyalty
– Better understanding of customer requirements
– Own (non-telecom) products and services
– Lower customer acquisition costs
– Lower incremental operating costs
Partnership with MNO(s) is essential – MNO builds and operates the network
and provides Brand with wholesale
connectivity
– Brand develops, markets, distributes, sells
and supports the product(s)
COMPELLING REASONS EXIST FOR CONSUMER BRANDS TO PURSUE GREATER OWNERSHIP OF THE TELECOMS VALUE CHAIN
STAKEHOLDER
CUSTOMER
INTERNAL OPERATIONS
PEOPLE & CULTURE
IMPROVE SHAREHOLDER
VALUE REALIZATION
STRA
TEG
IC F
OC
US
ARE
AS
STRATEGIC OBJECTIVES
GREATER CUSTOMER
ENTANGLEMENT
LOWER INTERNAL
COSTS
GREATER KNOWLEDGE
MANAGEMENT & COMPLIANCE
NON TRADITIONAL
REVENUE GROWTH
INCREASED FOOT TRAFFIC
THROUGH TRADITIONAL
CHANNELS
LOWER THE COST TO SERVE
IMPROVED BENEFITS
CREATE A DEFENSIBLE
COMPETITIVE POSITION
EXPLOIT DIGITAL
CHANNELS TO DRIVE REVENUE
GROWTH
IMPROVE CUSTOMER
BEHAVIORAL UNDERSTANDING
REDUCE CUSTOMER
SERVICE OVERHEAD
MARGIN PROTECTION
IMPROVED CUSTOMER EXPERIENCE
BENEFIT CORE BUSINESS
THROUGH DATA
OWNERSHIP OF THE CUSTOMER
BASE
EVOLUTION, NOT DIVERGENCE A KEY DRIVING PRINCIPLE BEHIND MVNO STRATEGY
! MVNO Value Proposition should be an Evolution of Brand’s core proposition
– Clear synergies with current business
– Sales / Service Channel for existing products
– Enhancement/Extension of current products: location
awareness, use of phone camera, etc.
! Measurable Commercial Benefits for Core Business – Growth in core business revenues thanks to own branded
mobile offering: mobile drives foot-traffic to retail stores, etc.
– Cost savings in core business thanks to own branded mobile
offering: lower customer acquisition / service costs, workforce
management & mobile information access, …
CURRENT'VALUE'
PROPOSITION'
NEW'TELECOMS'SERVICES'VALUE'
PROPOSITION'
IMPACT'ON'COST'TO'SERVE,'
COST'TO'ACQUIRE'AND'OPERATIONS'
Mobile services (Voice/SMS/Data) must be profitable but cannot be the only element of the Branded Mobile Business
KEY BUSINESS DRIVERS BEHIND MVNO VIABILITY
Branded Telecoms Business Viability Drivers
1. Customer Value Proposition: Devices, In-Bundle Services, Out-of- Bundle Tarriffs, Non-Telco Services and Once-off and Recurring Charges
2. Customer Acqusition Marketing, Distribution and Sales Costs vs applicable Once-off Charges; Activation and Dormancy…
3. Customer Usage & Spend actual Voice, SMSs, Data usage vs Bundle Charges, Out-of-Bundle Spend
4. Indirect Revenue: Revenue not directly originating from Customer: Interconnect, Advertising, …
5. Customer Tenure: Length of a committed contractual relationship
6. Customer Retention: Percentage of Customers renewing at the end of their Tenure
7. Incremental Expenses: Incremental cost of setting-up and operating a Mobile Business within the Brand
8. Impact on Core Business: Cost & Revenue changes caused by Mobile Business to the existing (core) business, including savings & incremental costs.
Customer Usage &
Spend
Customer Value
Proposition
Customer Acquisition
Customer Tenure & Retention
Incremental Expenses
MNO Terms and
Relationship
Impact on Core
Business
Indirect Revenue
SCENARIOS AND SENSITIVITIES IMPACT OF KEY DRIVERS ON THE BUSINESS
Customer Usage &
Spend
Customer Value
Proposition
Customer Acquisition
Customer Tenure & Retention
Incremental Expenses
MNO Relationship & Terms, SLA
Impact on Core
Business
Indirect Revenue
!R#100.00M#
!R#50.00M#
R#0.00M#
R#50.00M#
R#100.00M#
R#150.00M#
R#200.00M#
M1# M3# M5# M7# M9#M11#M13#M15#M17#M19#M21#M23#M25#M27#M29#M31#M33#M35#
!R#100.00M#
!R#50.00M#
R#0.00M#
R#50.00M#
R#100.00M#
R#150.00M#
R#200.00M#
M1# M3# M5# M7# M9#M11#M13#M15#M17#M19#M21#M23#M25#M27#M29#M31#M33#M35#
!R#100.00M#
!R#50.00M#
R#0.00M#
R#50.00M#
R#100.00M#
R#150.00M#
R#200.00M#
M1# M3# M5# M7# M9#M11#M13#M15#M17#M19#M21#M23#M25#M27#M29#M31#M33#M35#
+10% ASPU
+10% SAC
+25% breakage
-10%
-0.5% churn
+R8.00/cust
-10% ASPU
-10% SAC
-25% breakage
+10%
+0.5% churn
-R4.00/cust
Customer Usage &
Spend
Customer Value
Proposition
Customer Acquisition
Customer Tenure & Retention
Incremental Expenses
MNO Terms and
Relationship
Impact on Core
Business
Indirect Revenue
A FRAMEWORK FOR A VIABLE AND SUSTAINABLE MVNO STRATEGY
Leverage'Exis,ng'Base'
Be'Original'and'Relevant'
Grow'Your'Core'Business'
Proac,vely'Manage'Risks'
Focus'on'Customers'
Stay'Agile'and'Efficient'
– Leverage Existing Base: Use the knowledge of
and access to your customers: historical data,
loyalty programme, credit relationship…
– Be Original and Relevant: Design CVP appealing
to your customer niche: relevancy and value
must compel your customers to switch their
mobile service to you
– Grow Your Core Business: Make sure your mobile business saves costs and/or grows revenues for
your core business
– Proactively Manage Risks: Balance profitability and commercial risk; Share/outsource non-core
operational activities
– Focus on Customers: sales and service are key; constant, proactive evolution of your offering
– Stay Agile and Efficient: Keep costs low and
decision-making swift
Brand’s Mobile Strategy must positively impact all Key Drivers
MVNO OPERATING MODEL TURNING A STRATEGY INTO REALITY
! A reliable and efficient blend of
– Business Processes
– Relationships
– Resources and
– Systems
which enables the Brand to optimally execute on its
strategy
! Derived from the Customer Value Proposition and
Customer Journey (lifecycle customer experience)
! Taking into account the Brand’s core business and the
related operating model
The diagram on the left indicates some of the aspects that an MVNO may
need to include in its operating model
BU
SIN
ESS
ELEM
ENTS
CUSTOMER SEGMENTS
CHANNELS & DEALERS
PRODUCTS & SERVICES
OPE
RATI
NG
ELE
MEN
TS
ORGANIZATIONAL DESIGN
BUSINESS PROCESS LAYER
SYSTEMS & TECHNOLOGY
INFORMATION MANAGEMENT
LOGISTICS
ENG
AG
EMEN
T &
CU
STO
MER
EX
PERI
ENC
E CUSTOMER AWARENESS
ACQUISITION
FIRST USE
RECHARGING & PAYMENT
CUSTOMER SERVICE
LEAVING
BALANCING RISK AND PROFITABILITY BLENDING OF TWO COMMERCIAL MODELS IN ONE PRODUCT
! As a lower-risk approach “retail-minus” commercial
terms can be applied to reduce the commercial risk
of products and services that are new to the
brand’s proposition in the early phases of the
business
! Once sufficient customer behavioral data has been
collected and business model assumptions
validated, a more profitable cost-plus commercial
terms can be blended into the model to improve
overall profitability and differentiation of the
customer value proposition
Usage&Revenue&curve&over&.me&&
Proposi.on&profitability&curve&
Blending!of!commercial!models!may!assist!in!mi3ga3on!of!commercial!risk!whilst!not!limi3ng!strategic!growth!&!posi3oning!
BRIEFLY UNPACKING THE BENEFITS OF AN ENABLEMENT MODEL
Aggrega3on!of!mul3ple!MVNOs!brings!economies!of!scale!faster!
O"
O"
Volume Discount Points
Marginal!CAPEX,!flat!OPEX!in!startup!phase,!greatly!reduced!risk!of!unpredictable!cost!base!
Predictable Cost Base
Apart from access to scarce telecommunications resources and skills, an enabler can also offer various operational and commercial benefits which aid the Brand in mitigating the
risks during its Mobile Business launch and evolution: – Best practices, processes and
procedures
– Predictable cost base
– Economies of scale
CONCLUDING REMARKS
In conclusion, I’ll leave you with the following thoughts with regards to determining the optimal model for your branded airtime business
– A mobile proposition should complement and enhance your
existing business
– The scale of a mobile business implies risk and therefore a clear
vision of the customer value proposition, go-to-market strategy,
key commercials and operating model are a pre-requisite
– On-going, accurate business intelligence and insight, and the
ability to act on these, are key prerequisites for growing your
business – always evolve
– A good plan is no substitute for experience, ensure your team
includes experts with local telecoms experience to guide your
business
Leverage!your!exis3ng!base,!distribu3on!footprint!and!credit!rela3onship!
Be!original!and!be!relevant!
Seek!to!benefit!your!core!business!
Proac3vely!manage!risks!
Stay!agile!and!efficient!
Always!evolve!
!!
THANK YOU