Accelerating Fixed Mobile Substitution: detailed operator case studies. Alastair Brydon and Mark Heath with Katrina Bond Edited by Claire Varley

Transcription

1 Accelerating Fixed Mobile Substitution: detailed operator case studies Alastair Brydon and Mark Heath with Katrina Bond Edited by Claire Varley

2 Analysys Research Fixed Networks and Services Analysys Research Fixed Networks and Services online market intelligence service World Telecoms Marketplace online market intelligence service IPTV: a breakthrough for US telcos? Retail VoIP in Western Europe: forecasts Fixed Mobile Convergence: opportunities and strategies for the mass market VoIP versus Mobile: forecasts for the future of enterprise voice Fixed Mobile Substitution and VoIP: forecasts for the battle for mass-market voice The Telco Product Portfolio beyond 2010 The Telco Organisational Structure beyond 2010 The Business Case for Carrier Migration to VoIP Viable Business Models Point to Big Opportunities for Public WLAN Emerging Business Models in Voice: the impact of Skype and other private VoIP applications The Business Case for Broadband Entertainment Western European Fixed Telecoms Markets: forecasts Mobile Networks and Services Analysys Research Mobile Networks and Services online market intelligence service The US Mobile Market: trends and forecasts Delivering Strategic Benefits with IP Multimedia Subsystem (IMS) The Future of MVNOs in the 3G Era The Western European Mobile Market: trends and forecasts Product and Service Opportunities from Shortrange Wireless Technologies: WLAN, Bluetooth, UWB and NFC Wireless Voice over IP: technical and commercial prospects The World s Top Ten Wireless Services Retaining Customers and Minimising Churn: strategies for mobile markets Pushing Beyond the Limits of 3G with HSDPA and Other Enhancements The Role and Impact of WiMAX and Proprietary BWA Technologies Making a Success of the Mobile Content Value Chain TV and Video Services on a Mobile Phone: the killer application for 3G? Billing and OSS Analysys Research Billing and OSS Markets online market intelligence service Billing for Mobility: strategies for convergent charging Emerging Charging Architectures for New Mobile Services: understanding and evaluating the available technical solutions Making a Success of Mobile TV and Video Published by Analysys Research Limited St Giles Court 24 Castle Street Cambridge CB3 0AJ UK Tel: +44 (0) Fax: +44 (0) research@analysys.com Analysys Research Limited 2005 Printed in the UK by Victoire Press. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. ISBN

3 Contents 0 Summary ix 1 Fixed mobile substitution is a major opportunity Mobile voice telephony has substantial growth potential and fixed mobile substitution can be an attractive strategy Cultivation of mobile voice usage is a key factor in achieving fixed mobile substitution Six mobile operator case studies illustrate a variety of tactics to drive voice usage and achieve fixed substitution 4 2 TIM is driving mobile voice usage with prepaid tariffs TIM is the leading mobile operator in Italy and, until 2005, operated independently of fixed operator Telecom Italia TIM has achieved good levels of ARPU with its prepaid tariffs TIM applies a wide variety of techniques to encourage prepaid customers to make voice calls TIM is using value-added services to increase the appeal of mobile voice services compared to fixed TIM could achieve more by focusing explicitly on fixed mobile substitution and exploiting the capacity of 3G 14 3 Telefónica Móviles has migrated many prepaid customers to contracts to stimulate voice usage Telefónica Móviles is the mobile market leader in Spain, where substantial fixed mobile substitution has occurred Telefónica Móviles has been the most successful operator in migrating prepaid customers to contracts Migration has helped to achieve increases of 28% in ARPU and 44% in usage as fixed voice usage has fallen Contract tariffs have been redesigned to highlight their value for money compared with prepaid and to stimulate calls Enticing customers from prepaid to contract has required significant focus and promotional effort 23 Analysys Research Limited 2005 Contents

4 iv Accelerating Fixed Mobile Substitution: detailed operator case studies 4 Sprint Nextel achieves the highest voice usage levels in the world Sprint Nextel is one of the leading US mobile operators and, despite plans for converged services, is driving mobile voice Sprint PCS has consistently led voice usage and ARPU in the heavy-usage US market Sprint Nextel s contract plans encourage high usage of mobile voice and lead to fixed mobile substitution Sprint Nextel has cultivated a broad spectrum of MVNOs, to help it grow voice usage across all segments Sprint Nextel push-to-talk services extend the gap between mobile and fixed voice services UK encourages voice usage with simple contract and prepaid bundles has the largest number of 3G customers in the UK, where fixed mobile substitution still has some way to go has exploited the capacity of its 3G network by encouraging high levels of voice usage focuses on simple any time, any network bundled tariffs replicates the structure of its contract bundles in its prepaid tariffs in order to attract high-value customers could enhance its voice revenue by putting more emphasis on opportunities for fixed mobile substitution 42 6 O2 was an early mover in fixed mobile substitution, using home zone services O2 is the smallest mobile operator in the German market, where fixed mobile substitution is very low Genion has been central to O2 achieving the highest ARPU of all German mobile operators Genion allows O2 to offer call prices similar to fixed rates The Surf@home service has been introduced to overcome a key weakness of Genion Service and device developments will further enhance Genion and Surf@home 52 7 Vodafone Germany is now aggressively targeting fixed mobile substitution Vodafone is a leading operator in Germany, where average mobile voice usage and ARPU are very low Vodafone is responding to low and declining mobile voice ARPU in Germany by focusing on fixed mobile substitution Vodafone introduced bundled minute plans in Vodafone s original home zone voice service did not operate outside the home zone An enhanced home zone voice was launched in October Vodafone has also launched a home zone Web service, based on its 3G datacard, but is taking a risk with the pricing 59 Contents Analysys Research Limited 2005

5 Accelerating Fixed Mobile Substitution: detailed operator case studies v 8 Mobile operators must take a position on fixed mobile substitution With a compelling case for fixed mobile substitution, mobile-only operators will lead the assault on fixed networks While integrated operators can offer fixed Internet access, a fixed mobile substitution strategy may be harder to define Beyond individual services, fixed mobile substitution will demand the right environment 65 Actions 66 Market intelligence services from Analysys Research 69 Reports from Analysys Research 70 Custom Research: meeting your information needs 71 Analysys Consulting: providing clarity in an increasingly complex and dynamic environment 72 List of Figures and Tables Figure 1.1: Split of outgoing voice minutes between fixed and mobile networks in selected countries in Figure 1.2: Relationship between mobile voice usage and the proportion of total voice traffic on mobile networks, Table 1.1: Case studies demonstrating a variety of approaches to the encouragement of fixed mobile substitution 6 Table 2.1: Statistics of Italian mobile operators at 31 March Table 2.2: Outgoing voice minutes and spend for fixed and mobile services in Italy, Table 2.3: Proportion of prepaid customers and annual ARPU for selected operators, June Figure 2.1: Annual ARPU and average monthly voice usage for TIM, Table 2.4: Prepaid tariffs offered by TIM in Italy, October Table 3.1: Statistics of Spanish mobile operators at 30 June Table 3.2: Table 3.3: Outgoing voice minutes and spend for fixed and mobile services in Spain, Proportion of prepaid customers for selected Western European operators, December 2001 to June Figure 3.1: Growth in voice ARPU and total ARPU for Telefónica Móviles (Spain), December 2002 to June Figure 3.2: Growth in average monthly voice usage for Telefónica Móviles (Spain), December 2002 to June Table 3.4: Contract tariffs from Telefónica Móviles in Spain, October Table 3.5: Prepaid tariffs from Telefónica Móviles in Spain, October Table 4.1: Statistics of the leading US mobile operators at 31 March Figure 4.1: Voice usage and ARPU of selected US and European operators, year to 30 June Figure 4.2: Average monthly voice usage per user for the leading US operators, first quarter 2003 to second quarter Analysys Research Limited 2005 Contents

6 vi Accelerating Fixed Mobile Substitution: detailed operator case studies Table 4.2: Sprint PCS Fair & Flexible Plans, October Table 4.3: Sprint PCS Fair & Flexible America Plans for voice, October Table 4.4: Examples of MVNOs offering prepaid services hosted by Sprint Nextel 33 Table 4.5: High-usage prepaid voice plans from Liberty Wireless, October Table 5.1: Statistics of UK mobile operators at 30 June Table 5.2: Outgoing voice minutes and spend for fixed and mobile services in the UK, Figure 5.1: Growth in customers of 3 UK, Table 5.3: Contract tariffs offered by 3 UK, October Figure 5.2: Comparison of any time, any network voice minutes bundled into contract tariffs by UK mobile operators, October Table 5.4: ThreePay prepaid tariffs offered by 3 UK, October Table 6.1: Statistics of German mobile operators at 30 June Table 6.2: Outgoing voice minutes and spend for fixed and mobile services in Germany, Figure 6.1: Growth in O2 and Genion customer bases, Table 6.3: Comparison of ARPU for German mobile operators, year to June Table 6.4: Pricing of O2 Germany s Genion service, October 2005 Table 6.5: Surf@home tariffs, October Table 6.6: Cost to users and revenue per Mbyte of O2 Surf@home 52 Table 7.1: Statistics of German mobile operators at 30 June Table 7.2: Outgoing voice minutes and spend for fixed and mobile services in Germany, Figure 7.1: ARPU for Vodafone operators in Western Europe and Japan, year to June Table 7.3: Statistics for Vodafone Germany, December 2003 to June Table 7.4: Zuhause Web tariff, October Figure 7.2: Comparison of prices for Vodafone s Zuhause Web and O2 s Surf@home services 60 Contents Analysys Research Limited 2005

7 Accelerating Fixed Mobile Substitution: detailed operator case studies vii Authors Dr Alastair Brydon and Dr Mark Heath are founders of Sound Partners Ltd and authors of 15 reports from Analysys Research, including Making a Success of Mobile TV and Video, Delivering Strategic Benefits with IP Multimedia Subsystem (IMS), The Future of MVNOs in the 3G Era, Wireless Voice over IP: technical and commercial prospects, The World s Top Ten Wireless Services, The Role and Impact of WiMAX and Proprietary BWA Technologies and The Road to Fixed Mobile Substitution Starts with 3G. Alastair is CEO of Sound Partners Ltd. Prior to joining Sound Partners, Alastair reported to Nokia s European management team and worked with many of Nokia s customers to implement market firsts ranging from the introduction of prepaid mobile tariffs to new mass-market content services. Previously, Alastair worked in a number of roles for the BT Group, focusing on the evolution of wireless services, networks and technologies. He also contributed to international research and standardisation of GSM, DECT and 3G. Alastair holds BSc and PhD degrees from UMIST, where he was awarded the IEE Prize for top student. Mark is Director of Research at Sound Partners Ltd. Mark has held a number of marketing and business development roles in Nokia, ultimately becoming responsible for strategy and business development across Europe. Previously, Mark was responsible for business planning at BT Cellnet in the UK, after spending six years at BT in wireless systems research and development. Mark holds BSc and PhD degrees from the University of Leeds, winning the University prize for his research in telecommunications. Mark also holds an MBA, graduating as top student from Henley Management College. Katrina Bond (Principal Analyst, Analysys Research) specialises in mobile telecoms, and has written reports for Analysys Research on fixed mobile substitution and VoIP, the mobile content and entertainment market, Western European mobile forecasts, mobile data solutions for businesses, GPRS roaming, pricing of GPRS services, GPRS billing, mobile portals and ASPs and m-commerce. She is a regular contributor to Analysys Research s Mobile Networks and Services online market intelligence service. Before joining Analysys in 1998, Katrina worked as a consultant in Australia. Acknowledgements The authors would like to thank all those who assisted in the preparation of this report, particularly those organisations and individuals who contributed interviews and supporting material, including Bettina Fornari (TIM), Edward Holland (Telefónica Móviles), Edward Brewster (3), Dennis Hampe (O2), Roland Kuntze (O2) and Ute Schack (Vodafone). The authors would also like to thank Ross Pow, Rupert Wood and Catherine Viola for their comments and suggestions and Claire Varley for editorial support. Analysys Research Limited 2005 Contents

8 viii Accelerating Fixed Mobile Substitution: detailed operator case studies Disclaimer Figures and projections contained in this report are based on publicly available information only and are produced by Analysys Research Limited independently of any client-specific work within the Analysys Mason Group. The opinions expressed are those of the stated authors only. Analysys Research Limited recognises that many terms appearing in this report are proprietary; all such trademarks are acknowledged and every effort has been made to indicate them by the normal UK publishing practice of capitalisation. However, the presence of a term, in whatever form, does not affect its legal status as a trademark. Analysys Research Limited maintains that all reasonable care and skill has been used in the compilation of this publication. However, Analysys Research Limited shall not be under any liability for loss or damage (including consequential loss) whatsoever or howsoever arising as a result of the use of this publication by the customer, his servants, agents or any third party. Glossary of terms 2G 3G ARPU CDMA DSL EV-DO GSM HSDPA IMS IP ISDN LAN MMS MOU MVNE MVNO PDA PSTN RTT SMS TV UMA UMTS USB VoIP W-CDMA WEP WiMAX WLAN WPA xdsl Second Generation Third Generation Average Revenue Per User Code Division Multiple Access Digital Subscriber Line Evolution Data Only Global System for Mobile High-Speed Downlink Packet Access IP Multimedia Subsystem Internet Protocol Integrated Services Digital Network Local Area Network Multimedia Messaging Service Minutes Of Usage Mobile Virtual Network Enabler Mobile Virtual Network Operator Personal Digital Assistant Public Switched Telephone Network Radio Transmission Technology Short Message Service Television Unlicensed Mobile Access Universal Mobile Telecommunications Systems Universal Series Bus Voice over IP Wideband Code Division Multiple Access Wired Equivalent Privacy Worldwide Interoperability for Microwave Access Wireless Local Area Network Wireless Protected Access Family of DSL technologies Contents Analysys Research Limited 2005

9 Reports from Analysys Research Analysys Research s reports are designed to keep you up to date with industry developments and how they affect players in the telecoms value chain from fixed and mobile network operators, to software and equipment vendors, and content providers and distributors. Our reports will help you: explore the factors that are driving market evolution understand how industry trends will affect your business define and evaluate your strategic options using decision frameworks and scenarios identify where opportunities lie for future growth find out which players are being successful and why. Our publication programme offers over 20 reports a year, covering all the key issues affecting the telecoms industry and the latest hot topics. Recent reports have provided expert analysis of topics such as fixed mobile substitution and convergence, voice over IP, enterprise voice, carrier migration to VoIP, broadband home entertainment, telco product portfolios, emerging wireless technologies, IMS, MVNOs and mobile content services. Each report is accompanied by an Excel spreadsheet containing forecasts and other key data discussed in the report, presented in an easy-to-use format. All reports are offered with Analyst Support, allowing you direct consultation with the author. Shop online at or, for information about our report subscription packages, contact our Sales and Customer Service team on +44 (0) or by on research@analysys.com. Reports from Analysys Research Analysys Research Limited 2005

10 Custom Research: meeting your information needs Analysys Research has developed its portfolio of Custom Research services in response to customer demand for bespoke market intelligence, when more data is needed than is found in an off-the-shelf report or database, when there are complex questions about specific companies or markets that need to be answered, or when analysis needs to be tailored. Custom Research can deliver real value when an organisation needs to answer specific questions about how it is positioned in the market, and how to optimise performance at various stages of the product or service life cycle. Market opportunities? Match to customer needs? Effective procurement? Suppliers Costs? New idea generation Competitive landscape? Regulatory regime? Pricing? Competitors and partners Company internal processes Regulators/ government/ legislatures Market and technology trends? Strategy Product or service Launch Marketing strategy? Channel strategy? Optimum efficiency? Market analysis? Optimisation Customers Customer satisfaction? Competitive positioning? Understand how your company is positioned Optimise performance in the product or service life cycle In answering our clients questions, we bring a wealth of understanding of markets, and of techniques and services including: desk research, data collection and interpretation benchmarking services quantitative and qualitative surveys market sizing and forecasting competitor and partner profiling white papers, presentations and workshop facilitation event and trend analysis procurement assistance. For more information on Custom Research services from Analysys Research, or to discuss how we could help you to meet your specific information needs, please contact our Custom Research team on +44 (0) or us on custom@analysys.com. Analysys Research Limited 2005 Custom Research: meeting your information needs

11 Analysys Consulting: providing clarity in an increasingly complex and dynamic environment Analysys has developed its mobile industry expertise through cutting-edge consulting assignments in developed and emerging markets along the entire mobile value chain including network infrastructure suppliers, operators, content providers, banks and regulators. Analysys undertakes projects with both a strong quantitative and qualitative assessment, providing clarity in an increasingly complex and dynamic environment. We can help you to understand the key issues for mobile, and to devise strategies that shape the future of the mobile communications industry. Our range of expertise spans: strategic perspective on the industry value chain business planning based on a strong understanding of operator economics assessing market opportunity, including an understanding of key technologies driving mobile data services identification and selection of potential partners advice on key regulatory issues. Analysys is also the co-founder of Cambridge 3G, an organisation set up in 2000, which now has over 100 corporate members involved in the 3G mobile market. Its objective is to establish Cambridge as the leading centre in Europe for the early roll-out of 3G services, by building a strong community of like-minded companies and acting as a catalyst for an applications test-bed and 3G test network in Cambridge. For more information about Analysys Consulting s expertise in mobile strategy, please contact Andrew Wright (andrew.wright@analysys.com, +44 (0) ). Analysys Consulting Analysys Research Limited 2005