Mobile Messaging Latin America Getting more ARPU from your SMS September 24, 2002 Jon P. Wells Executive Director Product Management/Development Verizon International Why is Wireless Data Important In Latin America? Wireless data monthly ARPU forecasted to exceed (US) $22 for postpaid and (US) $6 for prepaid by 2006 Wireless data to account for nearly 20% of total ARPU (US $/month) 25.00 20.00 15.00 10.00 5.00 0.00 South & Central America & The Caribbean Wireless Data/Internet ARPU 2000 2001 2002 2003 2004 2005 2006 Prepaid Postpaid $6.42 $22.46 Source: Adopted from Pyramid Mobile Research, Latin America; Nov. 2001 2 1
Why is Wireless Data Important In Latin America? Wireless data revenues expected to exceed $6B by 2006 with over 66M active wireless browser users 25% of wireless subscribers will be active browser users by 2006 Active users (000's 70,000 60,000 50,000 40,000 30,000 20,000 10,000 - Wireless Data Revenue South & Central America & The Caribbean 2001 2002 2003 2004 2005 2006 Active wireless browser users 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Wireless data revenues - (US $ in millions Source: Adopted from Wireless Internet Business Models; Ovum, 2001 3 How do Operators Secure 2G Wireless Data Revenue Streams in Latin America? 4 2
Wireless Data Value Hierarchy Sales & Marketing Strategy Wireless Portal Layer Content Layer Data Portal Content & Applications Voice Portal Customer Value Transport Layer SMS (1-way) MO-SMS (2-way) WAP Voice 5 Transport Layer Strategies SMS (1-way) Inter-carrier SMS messaging drives critical mass Gateway provider peering relationships required MO-SMS (2-way) Leverage MO-SMS feature with value added services: Information Requests Games Instant Messaging 63% of the Latin America mobile data revenue forecast for 2002 is generated by SMS messages* MO-SMS revenue is expected to outpace SMS mobile terminated revenue by a 3:1 ratio * Source: Data on the Go, IDC, Nov. 2000 6 3
Transport Layer Strategies Voice Deploy voice portals (bridges the technology gap) This allows the industry to leverage the core voice business for customers who do not have access to the technology WAP Leverage existing WAP infrastructure Tablestake M-Commerce Vertical Applications 7 Wireless Portal Layer Strategies Mixture of free and premium content Ubiquity of information across HTML, WML, SMS alerts and SMS information requests Develop local vertical applications that appeal to the masses Voice provisioning of SMS alerts important in Latin America 8 4
Content/Application Layer - Segmentation Voice Portal Target Segment Prepaid/ Low-end Analog Low-end/ Moderate users Revenues SMS (1-way) MO- SMS (2-way) WAP Youth High-end users Vertical Applications Corporate/ Enterprise 9 Marketing & Sales Strategies Wireless portal demos running in retail stores (where available) Provisioning of account and simple alerts done at the time of purchase Promotional SMS messages epitome of targeted advertising Develop a rate plan that is, by default, available to everyone Keep rate plans simple 10 5
Key Takeaways Sales & Marketing Strategy Simple pricing plans Default plan for everyone Wireless Portal Layer Content Layer Content & Applications Data Portal Voice Portal Customer Value Focus applications on Youth market Voice portal apps critical for low-end and analog segments Need both portals to gain critical mass Establish free and premium content Transport Layer SMS (1-way) MO-SMS (2-way) WAP Voice MO-SMS is the revenue driver Drive the industry to inter-carrier SMS messaging 11 Maximizing SMS Revenue Through Value-Added Applications SMS Messaging Applications SMS Message Volume Peer-to-Peer Chat / IM SMS Email Gateway Interoperability Ring Tones/Icons Games / Trivia Information Alerts Information Requests Percent of Total SMS Volume 50% 40% 30% 20% 10% 0% Peer-to-peer Chat/IM SMS Email Gateway Interoperability Ring Tones/Icons Games/Trivia Information Alerts Information Requests 12 6
SMS Peer-to-Peer PEER-TO-PEER Text Messaging between phones Most common SMS application today Easy to use and understand Default provisioning is key Youth oriented 13 SMS Chat / IM SMS CHAT / IM WAP Extension of Chat and Instant Messaging to the wireless community Fastest growing SMS application Embedded user community IM interoperability is key 14 7
SMS SMS Email Gateway Internet Email SMS EMAIL GATEWAY Send and receive a text message to/from any email account in the world Most ubiquitous form of SMS origination High appeal to enterprise customers who require a notification solution 15 SMS Interoperability Operator A Interop. Gateway INTEROPERABILITY Send and receive SMS messages to/from subscribers of other operators Increases subscribers community of interest Seamless SMS messaging will drive critical mass Requires movement away from the walledgarden philosophy 16 Operator B 8
SMS Ring Tones / Icons Internet RING TONES / ICONS Ring Tone / Icon Provider Download musical ring tones and graphical icons to the phone Enables subscribers to personalize their phone Requires fresh content Youth appeal 17 SMS Games / Trivia Internet GAMES / TRIVIA Interactive text games and trivia applications via SMS Stimulates both mobile originated and mobile terminated messages Breadth of gaming applications key to increased usage Subscriber education is key 18 Game / Trivia Provider 9
SMS Information Alerts User-Defined Profile Internet INFORMATION ALERTS User-defined content sent to the mobile phone Time-based and event-driven notification Portal / Alert provider branding increasing in importance Breadth of relevant content and user-friendly PIMsapplications is key 19 Portal / Content Provider SMS Information Requests Internet INFORMATION REQUESTS Portal / Content Provider On-demand information pull via SMS Stimulates both mobile originated and mobile terminated messages Breadth of relevant content and subscriber education is key 20 10
Real Time Prepaid Billing Prepaid Billing Requirements Real-time, hot billing has always been elusive for postpaid, but is critical for prepaid High availability any downtime impacts revenue and loyalty Prepaid has become the driving force in many markets system must have flexibility to support evolving market needs Must be scalable market growth has consistently outpaced forecasts 22 11
Prepaid Platform Issues Prepaid market strategies are often poorly defined Targeting low-end market requires basic low-cost solution High value strategy requires more robust system, but where is the business case? Technology has been slow to develop not as mature as postpaid billing Commonly used trunk-based systems become expensive as business grows Prepaid has been the step child, so organizations often provide inadequate technical support Platform is mission critical, but may lack necessary vendor support 23 To Gain a Competitive Advantage Clearly define prepaid market strategy and system requirement Match system cost to business needs Organize around mission critical function of platform: Internal support and accountability similar to other network elements Formal vendor support including service level agreements 24 12
Centralize Statistics and Reporting Centralized Statistics - Issues Culture of crisis management instead of managing by the numbers Never the time or resources to invest in management reporting Inconsistent reporting, everyone has their own version of the facts Organizational challenge Marketing needs the reports, but reports are produced by IT Result is being locked into a more primitive way of managing the business severe competitive disadvantage 26 13
Centralized Statistics - Solution Develop requirements: Where are the gaps? What is critical for decision making Start with a few standard key reports Keep it simple and easy to implement Consider a reporting system in a box, such as Siemens Prepaid Analyzer Easy system but more sophisticated is Crystal Reports/Crystal Enterprise Ideal solution: Quick results User friendly Remote capability 27 14