FIXED MOBILE CONVERGENCE: A RETAIL PERSPECTIVE

Transcription

1 THAILAND TELECOMS SUMMIT 2016: BUILDING BLOCKS FOR SUCCESSFUL OPERATOR STRATEGIES FIXED MOBILE CONVERGENCE: A RETAIL PERSPECTIVE OCTOBER 2016 STEPHEN WILSON

2 Different convergence-related strategies have been adopted across all regions Selected fixed mobile convergence transactions by region Region Action Date Central and Eastern Europe (CEE) Telemach buys Tušmobil Rostelecom and Tele2 Russia Developed Asia Pacific (DVAP) KDDI Corporation buys J:COM 2014 Emerging Asia Pacific (EMAP) Telekom Malaysia buys P1 (Packet One Networks) Vodafone buys YOU Broadband Latin America (LATAM) Digicel builds FTTH 2015 North America (NA) Shaw Communications buys Wind Mobile 2016 Western Europe (WE) BT buys EE Telenet buys BASE Vodafone buys Kabel Deutschland Vodafone-ESB FTTH build in Ireland ZON and Optimus (NOS) Vodafone and Ziggo Key Fixed player buys mobile business Mobile player buys or builds fixed network Merger or joint venture 2

3 An increasing number of CSPs believe that their future growth will be stronger if they provide both fixed and mobile services Drivers of fixed mobile convergence Year-on-year change in mobile service revenue by region, Peak mobile revenue In Europe, there was a sense that mobile revenue had peaked under existing business models. Competition CSPs need to compete with integrated players with high fixed mobile bundle take-up has led to fixed mobile consolidation. Traffic trends Increasing fixed-line traffic has secured the case for fixed broadband versus cellular. 3

4 Fixed service revenue has the potential to grow significantly over the next few years in emerging Asia Pacific Total fixed service revenue and fixed broadband retail revenue, emerging Asia Pacific,

5 Network-related drivers will act as a further spur towards convergence Cost and lifespan of operator s asset layers 5

6 Operators have various options for aggregating LTE and Wi-Fi and boosting Wi-Fi hotspot peak speeds and capacity Operators can boost the appeal of Wi- Fi hotspots by providing higher speeds and capacity through LTE/Wi-Fi aggregation. Korea Telecom GiGA LTE maximum theoretical download speeds by technology LWA has been standardised in 3GPP release 13 and Korean mobile network operators (MNOs) have used MP-TCP based systems. Korea Telecom brands its LTE/Wi-Fi aggregation service as GiGA LTE. GiGA LTE is only free to those subscribing to more expensive LTE packages with larger data quotas. Customers must physically activate the service on their device. An icon on the phone then shows that the service is active. 6

7 Korean LTE/Wi-Fi aggregation rollouts have coincided with an improvement in public Wi-Fi data traffic growth rates The downward trend in Korean public Wi-Fi data traffic growth reversed in 2Q This coincided with the launch of LTE/Wi-Fi aggregation by all three Korean MNOs in June Korean public Wi-Fi data traffic year-on-year growth rates, 1Q Q 2016 The growth rate also increased significantly year-on-year in May 2015, before these services were officially launched. Initial interest in LTE/Wi-Fi aggregation appears to have been strong in Korea subscribers were using KT s GiGA LTE service by October 2015, which is equivalent to 5% of the operator s total LTE subscriber base. 7

8 Hybrid LTE and fixed-line access could help differentiate converged operators Hybrid LTE and fixed-line access can differentiate converged operators. Deutsche Telekom s hybrid DSL LTE subscribers, Germany, 2Q Q 2016 Hybrid LTE and fixed-line packages can be differentiated from standalone LTE tariffs, because they can offer genuinely unlimited data allowances. Deutsche Telekom launched its hybrid DSL LTE packages in Germany in March 2015 and take-up is growing. Prices are the same as for non-hybrid packages, but Deutsche Telekom charges a monthly rental of EUR9.95 for the hybrid device.

9 Standalone fixed wireless access can compete with low speed wireline and can serve as a precursor to fibre rollout Globe Telecom in the Philippines is an example of a successful fixed wireless player in EMAP. It enjoys advantages that other EMAP MNOs may not possess. Globe Telecom and PLDT Philippines, fixed wireless subscribers and wireline subscriber net additions, 1Q Q 2016 Globe Telecom has grown its fixed wireless base without significantly undercutting incumbent PLDT s prices. Using LTE for home broadband in areas with fixed competition will be more difficult with strong growth in fixed-line data traffic. Deploying cellular routers that are also optical network terminals (ONTs) can remove the need to deploy two boxes and can decrease costs.

10 A very high percentage of fixed broadband subscriptions are attached to converged bundles in some markets Fixed mobile bundle subscribers as a percentage of total fixed broadband subscribers, end 2015 Proximus annualised churn by number of services, 2Q

11 Operators have successfully attached additional SIMs to converged bundles Impact on the mobile market of fixed mobile convergence offers 11

12 KPN in the Netherlands emphasises the benefits of bundling services beyond discounts in order to encourage convergence KPN Compleet s benefit structure,

13 Operators have added a wide range of services to converged bundles Features (beyond core services) that are added to converged bundles 13

14 Operators may raise prices and will aim to boost mobile data consumption in order to increase ARPU for converged bundles Ways to grow converged bundle ARPU Strategies for increasing converged bundle ARPU ARPU and quarterly churn for Movistar Fusion bundles, 1Q Q 2015 Boost mobile data consumption This strategy can be supported by offering pay TV in converged bundles, and by including a multiscreen component in the service. Increase prices Evidence from Movistar suggests that raising prices can be successful. Implementing price rises alongside an improvement in service features appears to be a sensible strategy. 14

15 Key takeaways 1 Fixed mobile convergence has been driven by a number of factors. These include evidence that mobile revenue in many markets has peaked, as well as network-related trends favouring ownership of both fixed and mobile assets. 2 Fixed and mobile networks could be used together to suit customers needs. Fixed wireless offers could be used to build up a customer base before making investments in FTTH. Hybrid fixed and mobile access could be a differentiator compared to standalone fixed broadband. 3 Fixed mobile bundles could be used to drive postpaid mobile penetration. Selling postpaid mobile subscriptions as part of integrated fixed mobile bundles will increase operators postpaid share of mobile subscribers, and thus revenue. 15

16 Contact details Stephen Wilson Principal Analyst Boston Tel: Cambridge Tel: +44 (0) Madrid Tel: Manchester Tel: +44 (0) Dubai Tel: +971 (0) Milan Tel: Dublin Tel: +353 (0) New Delhi Tel: Hong Kong Tel: Paris Tel: +33 (0) London Tel: +44 (0) Singapore Tel: linkedin.com/company/analysys-mason youtube.com/analysysmason analysysmason.com/rss 16