At tefficient, we’ve built a comprehensive before/after analysis framework of the results operators have achieved when transforming their offers from single-service to quad-play.
There are many indications that quad-play is about to become the new European standard: Telekom will go quad-play in Germany during 2014; Vodafone has acquired Kabel Deutschland and Ono to go beyond mobile-only; TeliaSonera reorganised 1 April to converge fixed and mobile on a national basis.
Quad is propagating over Europe with south-westerly winds. The map above shows the wind direction: From Portugal, Spain and France towards Central and North Europe.
The first step towards true quad is often what we call light quad – a discount that a customer gets if he or she adds mobile to triple-play. In this case, it’s typically not very prominent in operator’s marketing, there’s typically no product brand name, and far from the straight-forward pitch of true quad operators.
The current position of European operators – who have quad capability – is seen in our quad pyramid above. The arrows indicate operators that are seen to take action to move upwards.
Through our before/after analysis, we’ve spotted several very interesting outcomes – best as well as worst practices. These can be used to either prepare your own journey into quad – or understand how to best defend against quad-capable competitors.
A1, the Austrian incumbent, today reports a year-on-year EBITDA decrease of 19.4% for 2013. In this situation, you have to highlight the positives. Telekom Austria group is e.g. saying: “A1 Premium Monthly Churn Rate at Historic Low“.
By now, our industry should have learned that churn figures never can be referred to without also referring to the subscriber retention cost (SRC). It’s simple to decrease postpaid churn – if you have deep pockets: Pay higher SRC to get more customers to stay.
So since Telekom Austria hasn’t done it – let us plot postpaid churn against SRC. It’s the graph below.
In 2013, A1 has been able to reduce postpaid churn to below 10% on annual basis which – internationally compared – is very low. But starting Q4 2012, A1’s SRC elevated from around 140 EUR to about 170 EUR. This happened at the same time as smartphone price points started to come down which, in other markets, was positive for SRC. The reason to A1’s increase must therefore be found in the local market: In January 2013, ‘3’ incorporated Orange to become a strong number 3 in Austria.
But how good is A1’s churn rate? If we plot the figures of T-Mobile and ‘3’ into the graph just above, we can see that competitors report as low churn as A1. (Prior to adding Orange, ‘3’ was even at annual churn levels below 3%). T-Mobile has followed A1’s SRC upwards, but from a lower level. In a local perspective, A1’s achievements seem in line or even substandard.
Note. T-Mobile and ‘3’ have not yet reported Q4/2H 2013. ‘3’ doesn’t report SRC.
2013 ended with over 1 billion smartphones sold – a new record. But mature market operators should look at Korea as a projection of what will come: It is the world’s most advanced LTE market based on penetration and usage levels.
The operators in Korea – SK Telecom, KT and LG Uplus – are continuing to sell a lot of LTE equipment to its customers, even though sales slowed somewhat during 2013. But whereas the sales of LTE equipment earlier led to a lift in overall smartphone penetration, it looks as if it’s not going to drive smartphone penetration very much longer: See how the three top curves in the graph slow down even though the LTE curves go up.
Note: LG Uplus hasn’t yet stated overall smartphone penetration for Q4 2013. Non-LTE smartphones are soon phased out of LG Uplus.
In the world’s most advanced LTE market, LTE seems to run out of fuel. Existing smartphone customers do upgrade to LTE smartphones, but the overall smartphone penetration in Korea doesn’t climb above 70% [SK Telecom holds 50% of market, KT 30% and Uplus 20%]. If we extrapolate, the LTE penetration will equal the smartphone penetration during 2014 – more or less.
For mature market operators believing in LTE’s ability to take smartphone penetration levels beyond the 70% level observed today in countries like e.g. Sweden, Norway, the Netherlands, Australia, the UK and France this is bad news. The Korean development indicates that LTE as such is not enough.
The situation resembles 2007 – before the arrival of the iPhone. Incremental improvements had made products from e.g. Nokia the best ever, but disruption was needed to create new growth. iPhone was the catalyst in 2007. The mobile world – including Apple – are back into incremental improvements and the current products are the best ever. From where will the innovation come that creates new growth in mature markets?
Remember Blyk? The high-profiled venture that targeted the young UK population with free calls and texts – if they agreed to received targeted advert texts on their mobiles. After launch in 2007, the UK service was shut down 2009. [The Blyk name still exists in e.g. the Netherlands where Vodafone uses the concept.]
The question is if Swedish ad-funded MVNO Wifog – launched yesterday – can make a similar concept fly. Wifog has realised that in 2013, people spend most of their device-interaction time connected to the Internet. Their proposition is therefore data-centric: Watch 2-5 minutes of video adverts a day (you can schedule these) and in return get unlimited data (on 3’s 3G network), 120 minutes of voice and 200 SMSs per month.
Wifog tells advertisers that they can reach the right audience – through targeting and analytics. It’s likely that Wifog’s users will be profiled based on what they use the Internet for – much more powerful than the orginal Blyk concept which was based on end-users selecting their “areas of interest”. The question is just how interesting this is for advertisers in a world where Google – without asking for our opt-in consent – already targets us with device-specific, location-specific and usage-based adverts.