SAUDI ARABIA TELECOMS SUMMIT 2016 BUILDING BLOCKS FOR SUCCESSFUL OPERATOR STRATEGIES #AMTMT MONETISING MOBILE DATA IN MENA: BEST PRACTICES IN PRICING AND BUNDLING EVENT SPONSOR NOVEMBER 2016 KEREM ARSAL
Smartphone penetration has been a catalyst for mobile retail revenue growth in most markets, but KSA has underperformed Mobile retail revenue growth rate (CAGR 2012 2015) and smartphone penetration, 2015, MENA High-potential markets for data Strong migration to 3G; developments in 4G Gradual integration of voice and data offers Low relative to smartphone adoption; on recovery path Maturing data users Smartphones less of an issue Movement to data-led pricing Fierce competition on voice and mobile data Introductory phase of 4G 2
Mobile data growth has been encouraging but the total retail market is struggling to grow Retail revenue by service, Saudi Arabia, 2012 2015 High smartphone penetration Growing mobile traffic App-based pricing present More competitive than peers Mobile data alone not enough for growth and growth rate likely to slow App-based pricing present 3
Prices per GB are low in Saudi Arabia compared to other GCC countries and they usually only decrease Lowest achieved price per gigabyte, SIM-only postpaid plans, selected countries worldwide, Jun Nov 2016 4
Among many monetisation levers; we focus on pricing on network quality, specific apps, and tariffs for prepaid 1 How does 4G network quality reflect to pricing and what is the situation in the KSA? 2 What is the role of app-based pricing? What to pay attention to when setting prices? 3 Focus on prepaid. Among many options, we visit a few interesting tariff structures 5
Operators have been able to move subscribers to higher data allowances and retrieve higher spend on 4G Data allowance size by technology, Saudi Arabia, 2016 +30% 6
They have also improved some customer retention metrics through 4G, especially NPS Intent to churn and NPS by technology, Saudi Arabia, 2016 7
Network performance in Saudi Arabia is lagging behind other MENA countries and consumers recognise this Percentage of respondents citing coverage and speed as reasons for churn, selected countries, MENA, 2016 Responses not very different across operators This is also an opportunity 8
Usually, network differences reflect directly to operator positioning as premium vs. generous Mobile postpaid plan prices by data tier by operator, USA, July 2016 9
Given relatively similar performance levels Operator 4G performance, Saudi Arabia, Nov 2016 average across major cities 10
It is not so easy for operators in the KSA to differentiate on network quality Mobile postpaid plan prices by operator, Saudi Arabia, November 2016 Mobile prepaid plan prices by operator, Saudi Arabia, November 2016 No disruptive pricing although regionally very competitive A new type of competition has emerged: app-based pricing. 11
Operators are turning to OTT partnerships and app-based pricing for differentiation and better access to prepaid users App-based pricing is spreading in the GCC region Examples of app-based pricing in Saudi Arabia KSA is a pioneer market. On major OTT comms apps, largely messaging, and video: Mobily: social media and YouTube Zain: YouTube More OTT reliance on prepaid: 59% prepaid vs. 45% postpaid OTT comms users use only OTT comms for messaging. (postpaid) 12
App-based pricing serves different purposes for OTT comms apps and media packages Advantages Disadvantages Works best for App-based pricing on OTT comms Youth segment Easy entry to data Link to other data Improves retention Supports prepaid Some core revenue traded off Difficult quota management Often discounted data Losing SMS battle Challengers Priced for actual use Source: Analysys Mason 13
App-based pricing serves different purposes for OTT comms apps and media packages Advantages Disadvantages Works best for App-based pricing on media Youth and high-end Exclusivity possible Grows data traffic Decreases churn High service levels Strain on capacity Difficult quota management Can limit data upsell Mature data users Premium position Good 4G coverage Priced for actual use Source: Analysys Mason 14
Mobile data/4g usage maturity Saudi Arabia Telecoms Summit 2016: Building blocks for successful operator strategies OTT bundling strategies must be deployed at the correct time currently the Saudi market is between Phase 2 and Phase 3 Indicative trends in retail revenue as mobile data matures and value of core SMS and voice revenue erodes Total revenue Voice revenue Data-led market conditions SMS revenue Phase 1 Phase 2 Phase 3 Salvaging on-net calls/sms Limited use of OTT bundling Limited any-net calls introduced OTT social packs to smooth/monetise transition Unlimited any-net calls Few select high-end OTT bundles (e.g. video) OTT social packs phased out Value erosion in core voice/sms Source: Analysys Mason 15
Users of OTT comms apps are more satisfied mobile users Net Promoter Score by OTT app usage, 2016 16
App-based pricing can have positive revenue implications and be profitable when actual usage is considered Indicative pricing table for app-neutral and app-specific data allowances GB Price (USD) Percentage used Price per GB (USD) Price per GB used (USD) App-neutral allowance 20 30 90% 1.5 1.7 App-based allowance 10 10 60% 1 1.7 App-neutral allowance 20 30 100% 1.5 1.5 App-based allowance 10 10 50% 1 2.0 17
Time-based pricing is very popular in Asia and is beginning to emerge in MENA Examples of time-based data pricing strategies Operator Pricing and allowance Time-based pricing FRiENDi Mobile (Oman) Omantel (Oman) Reliance Jio (India) Celcom and Digi (Malaysia) Day and night allowance split Day and night allowance split Unlimited 4G data overnight on some data tiers Free data weekends Advantages Addresses the most price-sensitive On/off-peak traffic management Sometimes convincing, e.g. weekends Disadvantages Can be seen as a hygiene factor Difficult quota management Restrictive online experience 18
What else can be done to stimulate mobile data usage beyond social media among prepaid? Sub-brands to fill entry level ranges Number of subscribers for selected sub-brands, 2009 2015 Proven success for youth Started in earnest in the KSA Giving free data Brings loyalty to prepaid Prepaid plans from emerging Asia Pacific, 2016 Self-configuration prepaid plans And letting consumers self-segment 19
Key takeaways 1 Operators should improve network performance to boost revenue and perhaps differentiate in pursuit of premiums. 2 App-based pricing and OTT bundling can be profitable if priced according to actual usage 3 Operators should consider tariffs with more differentiation (and possibly self-configuration) to prepaid customers 20
Contact details Kerem Arsal Principal Analyst Kerem.Arsal@analysysmason.com Boston Tel: +1 202 331 3080 boston@analysysmason.com Cambridge Tel: +44 (0)1223 460600 cambridge@analysysmason.com Madrid Tel: +34 91 399 5016 madrid@analysysmason.com Manchester Tel: +44 (0)161 877 7808 manchester@analysysmason.com Dubai Tel: +971 (0)4 446 7473 dubai@analysysmason.com Milan Tel: +39 02 76 31 88 34 milan@analysysmason.com Dublin Tel: +353 (0)1 602 4755 dublin@analysysmason.com New Delhi Tel: +91 124 4501860 newdelhi@analysysmason.com Hong Kong Tel: +852 3669 7090 hongkong@analysysmason.com Paris Tel: +33 (0)1 72 71 96 96 paris@analysysmason.com London Tel: +44 (0)20 7395 9000 london@analysysmason.com Singapore Tel: +65 6493 6038 singapore@analysysmason.com @AnalysysMason linkedin.com/company/analysys-mason youtube.com/analysysmason analysysmason.com/rss 21