Category Archives: Churn

The FMC hoax

Without subscription growth it’s difficult for mature market operators to report service revenue growth.

Some operators – anxious to still show growth – have thus begun to regularly highlight their fixed-mobile convergence base in quarterly results presentations. It’s most often a smoke screen. Here are seven examples – of which six aren’t growth stories.

From Telefónica’s Q3 2019 presentation (on Spain)
From Telenet’s (Liberty Global Belgium) Q3 2019 presentation
From Swisscom’s Q3 2019 presentation
From Orange’s Q3 2019 presentation – note the truncation where there’s growth (France, Poland) and lack of truncation where there’s a decline (Spain)
From KPN’s Q3 2019 presentation
From Proximus’ Q3 2019 presentation
From Orange Belgium’s Q3 2019 presentation

These examples are designed to look like growth, but it’s most often not. It’s simply migration from one plan to another.

Take a look at our graph below. It compares the y-o-y growth in the converged customer base to the y-o-y growth in the fixed broadband base.

Relation between the y-o-y growth in converged customer base (horisontal) and the growth in fixed broadband base (vertical) – Q3 2019 vs. Q3 2018

With few exceptions, the growth in the converged customer base is much faster than the growth in the fixed broadband base. The only operators in our European sample that could be seen to use convergence to grow its fixed broadband base, taking market share, are Orange in Belgium, Vodafone in the UK and Sunrise in Switzerland. (The position of Vodafone in Germany is heavily affected by the acquisition of Liberty Global’s Unitymedia in Q3 2019.)

The operators in the box highlighted in red are essentially just migrating existing fixed broadband customers to converged plans. There is no growth in the fixed broadband base and these operators are thus not taking any market share – even if the snippets from the investor presentations above speak about the growth in convergence base.

If we instead plot the y-o-y growth in mobile postpaid base vs. the y-o-y growth in converged base, it looks a bit better.

Relation between the y-o-y growth in converged customer base (horisontal) and the growth in mobile postpaid base excl. M2M (vertical) – Q3 2019 vs. Q3 2018

One reason to this is that there’s an underlying prepaid to postpaid migration trend in all markets; it elevates the dots a bit from the zero line. That trend has little to do with convergence.

In reality there are few operators that can turn their growth in converged customer base into any significant growth in mobile postpaid base. Virgin Media, Sunrise and Fastweb are the exceptions. Note that Virgin Media and Fastweb both are MVNOs – and that Sunrise is again identified as a positive exception.

In an industry looking for a growth formula, fixed-mobile convergence has, as shown, become a general way to try to demonstrate growth. This seems particularly true for incumbents such as Telefónica, Orange, KPN, Proximus and Swisscom. But a reported growth in FMC base is seldom relevant.

The proof for a successful FMC proposition is instead found in how the total revenue, EBITDA and churn develop.

Please don’t regard FMC as a universal solution for customer churn either. The graph below shows how Movistar Spain’s churn developed between 2014 and today.

Comparison between the reported Fusión (FMC) churn of Movistar in Spain to the overall fixed broadband churn vs. overall mobile postpaid churn. Telefónica is today only occasionally reporting fixed broadband and mobile postpaid churn.

When the FMC plan Fusión was new, customers on Fusión had a significantly lower churn than what the overall fixed broadband and mobile postpaid churn were.

Little by little as Fusión penetration grew, the difference shrunk. Today there’s no churn benefit of FMC vs. the overall churn levels for fixed broadband and mobile postpaid. When 89% of Movistar’s fixed broadband consumer customers are Fusión customers and 85% of Movistar’s mobile postpaid consumer customers are Fusión customers, there’s simply no reason why there should be a churn differential any longer. And there isn’t. FMC customers churn as often as any customer. But the FMC churn grew a lot from its lowest point in Q1 2015. From a churn point of view, Telefónica is back to where it started.

So when an operator reports lower churn for FMC customers while still expanding the FMC base: Don’t be fooled. It will not last for long when operators strive to push the FMC penetration level upwards. The reason is simple: Customers are loyal if they are satisfied. Only satisfied customers would consider buying more from the same operator. In the beginning, the FMC base will consequently consist of the most satisfied and loyal customers. No wonder churn goes down – it’s a club for happy, loyal and likely price indifferent customers; often on binding contracts.

The rest of the population don’t have those characteristics. The only way to get really high FMC penetration is then to say no to a significant part of the market. That’s also why FMC-embracing incumbents, as shown, have such a difficulty to grow total base. One size does not fit all.

But for challengers FMC seems to work as long as penetration levels are moderate.

If you are a customer to Tefficient, ask us for the scatter chart also for revenue.

How South Korea’s operators drive demand for 5G

Reference: Analysis and Go-to-market, 2019

Nowhere else in the world will you find as many 5G users as in South Korea. Nowhere else will you find as many 5G base stations up and running. If there ever was a race to 5G, the Korean government and industry won it.

Seeing is believing: After having dug up, read and compiled all reporting and data on Korea’s mobile business there was no other way forward than to seeing it for ourselves and interview people involved in creating Korea’s ‘5G wonder’.

We spent eight busy days (11-18 July) in Seoul to finish a comprehensive 106-page analysis – full of graphs and photos – with recommendations for European operators.

Continue reading How South Korea’s operators drive demand for 5G

How to continue to improve mobile service revenue and customer loyalty

Reference: Analysis and Go-to-market, 2018

Quantitative and qualitative exploration and analysis project starting with a Nonstop Retention® benchmark for a specific country market.

Analysing a wide area of propositions and tactics from several different markets:

  • Multi-user and multi-device plans
  • Fixed-mobile convergent plans
  • Premium value plans and options
  • Flexible plans and sub-brands
  • Early upgrade plans for handsets
  • Loyalty programmes

Identifying best practice with regards to impact on revenue, take-up and customer loyalty. Applying it to the local market competitive context, resulting in a recommendation presented during interactive workshops.

Continue reading How to continue to improve mobile service revenue and customer loyalty

Five of your questions that Tefficient can answer – now

2019 will be a year with significant uncertainty for many operators. Will we get that frequency license? Will the merger in our market be approved? Will we be able to launch 5G? Will competing fixed wireless propositions steal our broadband customers and erode prices? Will our competitors begin producing original content?

Good then that there are questions that can be answered here and now. These are the ones we know many of you are busy with:

Continue reading Five of your questions that Tefficient can answer – now

International mobile switching and number porting analysis

Reference: Analysis, 2018

Capturing and summarising how the mobile switching and number porting processes are implemented in ten countries.

Capturing and presenting the mobile switching and porting volume trends – per country and/or per operator.

Example from Spain (public data)

Analysing how the stipulated process (and the way operators have implemented it in practice) affect these trends. Developing KPIs allowing countries to be compared. Identifying best practice.

Identifying the triggers for switching and porting – and the elasticity between factors like gross adds, churn, numbers ported and net adds. Using international examples to predict what a change in the switching and porting process might mean for another country. Continue reading International mobile switching and number porting analysis

Why is there a best before date on mobile data?

Fresh milk and mobile data seem to share the same bacteria problem. Even if treated carefully, it eventually goes sour. To protect consumers from a possibly unpleasant experience, dairy producers put a best before date on milk cartons. Mobile operators go further – they revoke unused mobile data before those gigabytes have become a health hazard.

But consumers have started to question if unused data really is unhealthy and deserve a similar down-the-drain treatment as sour milk. Clever mobile operators realised that they can offer rollover data. One of the pioneers globally is New Zealand’s 2degrees. In this video they ask what is happening to all that leftover data.

Continue reading Why is there a best before date on mobile data?

Six calls to action – directly from consumers

Ericsson ConsumerLab today published a new consumer and industry insight report titled Towards a 5G consumer future.

The research insights are based on a survey of 14000 Android and iOS smartphone users between 15 and 65 in fourteen countries: Argentina, Brazil, China, Egypt, Finland, France, Germany, Indonesia, Ireland, Japan, Mexico, South Korea, the UK and the US.

To prepare this consumer research, we worked with Ericsson ConsumerLab to analyse and benchmark the mobile data strategies of operators globally. When we had the research results, we jointly reviewed them.

The findings can be summarised in six calls to action – from consumers for operators: Continue reading Six calls to action – directly from consumers

Analysis and recommendations on mobile proposition refresh

Reference: Analysis and Go-to-market, 2017

Building and interactively presenting a comprehensive before/after analysis of international mobile propositions and their effects on customer intake, customer loyalty, revenue growth and data usage.

Emphasis on how to maximise the effect of e.g. unlimited data, zero-rated services, group & family plans and time-based offers in post- and prepaid propositions. Mapping the propositions to customers segments with a reward-for-wanted-behaviour logic balancing between general availability and segment exclusivity. Continue reading Analysis and recommendations on mobile proposition refresh

Carriers moved away from subsidizing handsets. Now they subsidize customers’ video consumption.

Mobile operators are abandoning the previously predominant model to subsidize handsets and to, in return, lock customers in on long contracts with elevated service fees.

The death of the model should be mourned by no one since end-users have been given choice and flexibility through a multitude of non-binding, cheaper and flexible service options with generous – or even unlimited – allowances. Operators have seen customer churn decrease as end-users hold onto their handsets longer. As a direct consequence, EBITDA margins have increased.

Investors might still complain about the revenue growth, but measured as percentage of revenue mobile carriers currently produce the best margins on record. Continue reading Carriers moved away from subsidizing handsets. Now they subsidize customers’ video consumption.

Bundles and churn: Nexterday North 2017

Also the 2017 version of Nexterday North was a true ‘anti-seminar’ with futuristic and insightful speakers in a great, sometimes quirky, mix. May Comptel‘s spirit thrive also now that it is a part of Nokia.

This year, tefficient held a keynote presentation focused on bundles and the effect on churn.

Continue reading Bundles and churn: Nexterday North 2017