MVNO Performance
Evolution, Business Models, and Optimization
www.cartesian.com Copyright © 2017 Cartesian, Inc. All rights reserved. “MVNO Performance” was delivered at a workshop during the Annual MVNOs World Congress in April 2017.
This presentation covers the history, evolution, and current developments of the MVNO market; MVNO objectives and strategy, and the implications for the MVNO model; and, MVNO business optimization, covering acquisition costs, ARPU, operational costs, churn, retention, and the customer lifetime value.
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 2 Agenda
1 Introduction
2 Evolution of MVNO
3 MVNO Business Model
4 MVNO Business Optimisation
5 Follow-Up
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 3 Cartesian is a specialist consulting firm in the telecoms, media and technology sector
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 4 Our services help clients think, plan and operate faster and smarter
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 5 We have experience from over 50 MVNO projects across the US, Europe, Middle East and Asia
• Strategy and business case support including detailed cost and revenue modelling • Negotiation support for contracts and commercial terms • Securing funding MVNOs • Vendor evaluation and selection (e.g. MVNE, content, etc.) • OSS, BSS and network planning and design • PMO and launch support (e.g. proposition development, distribution, platform deployment)
• MVNO and sub-branding strategy including scenario analysis • Cost modelling to determine wholesale pricing • Identification and recruitment of wholesale / MVNO partners MNOs • Contractual negotiations with MNOs and vendors • Development of optimal operational and technical architecture • End to end processes / architecture development • Vendor short-list, assessment and selection Confidential Retailers • Assessment of MVNO policy, regulation and market impact • International regulatory benchmarking and support with preparation of NRA’s regulatory licensing framework Regulators • Preparing the MVNO business case, drivers and alternative operational and commercial models • Detailed cost and revenue modelling to calculate MVNO / wholesale commercial terms
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 6 Agenda
1 Introduction
2 Evolution of MVNO
3 MVNO Business Model
4 MVNO Business Optimisation
5 Follow-Up
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 7 The MVNO has evolved significantly over the past 17 years
2000 - 2005 2005 - 2010 2010 - Present
Significant MVNO Launches 1999 2000 2003 2006 2007 2011 2016 2017 MVNO 2.0 MVNO Business MVNO 1.0 Models Digital MVNO Traditional MVNO
• Saturated markets with 110-150% mobile penetration • MVNOs mostly grew on the back of market growth • Data is still a growth drive, but it is slowing as mobile BB • High growth in penetration and usage of voice and SMS, penetration nears 70-90% Market Environment and subsequently growth in data • Competitive markets with establish MNOs with own • Less competitive markets on MNO and MVNO front sub-brands and dozens of MVNOs
• Low cost structure is still essential but it has become a • Leverage existing assets (e.g. distribution, brand, hygiene factor MVNO Competitive customer base) • True differentiation comes from service innovation • Lean cost structure through a single segment focus and Advantage which goes beyond connectivity, redefining value lean operations proposition for digitally-savvy customers
Examples
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 8 MVNO is a $32bn global market; MVNO share (of connections) varies dramatically by region with Western Europe and North America showing greatest success to date
MVNO Share of Total Connections and Revenues (2016)
Western Europe Eastern Europe
• Total Connections: 517m • Total Connections: 540m • MVNO Share: 14% • MVNO Share: < 1% • MVNO Revenues: $15bn • MVNO Revenues: $280m
North America Middle East Central & S Asia
• Total Connections: 397m • Total Connections: 383m • Total Connections: 1.5bn • MVNO Share: 9% • MVNO Share: 1% • MVNO Share: ~ nil • MVNO Revenues: $7.6bn • MVNO Revenues: $463m • MVNO Revenues: $4m
LatAm & Caribbean Africa E & SE Asia, Oceania
• Total Connections: 780m • Total Connections: 1.0bn • Total Connections: 2.6bn • MVNO Share: 1% • MVNO Share: < 1% • MVNO Share: 3% • MVNO Revenues: $637m • MVNO Revenues: $167m • MVNO Revenues: $7.9bn
Source: Ovum, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 9 Western Europe and North America account for almost all double-digit MVNO penetration; however most of the large MVNO growth markets lie in other regions
Markets with MVNO Share above 10% (2015, 2019) Top MVNO Growth Markets (Millions, 2015 to 2019)
30% 5.0 2015 2019 W Europe & N America 4.5 Other World Region 25% 4.0
3.5 20% 3.0
15% 2.5
2.0 10% 1.5
5% 1.0 0.5
0%
Germany Netherlands Austria Belgium KingdomUnited Spain France Kong Hong Oman USA
Denmark 0.0
China * China ** USA Brazil Germany Japan Mexico Philippines Egypt Thailand KingdomUnited France Vietnam Malaysia Spain Saudi Arabia Colombia Italy Russia
Notes: * China 80 million ** USA 12 million
Source: Ovum, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 10 While MVNO entry into new markets is being supported by national regulatory authorities, regulators in mature markets are scaling back regulations as MVNOs become more established and competitive with MNOs
Iran India
Developing
Czech Republic
Developed Spain
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 11 Even in mature markets established brands are still coming to market
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 12 Agenda
1 Introduction
2 Evolution of MVNO
3 MVNO Business Model
4 MVNO Business Optimisation
5 Follow-Up
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 13 MVNO 101: At its most basic, the MVNO business model enables firms to provide mobile services without owning a (expensive) mobile network
Sales & Spectrum Network Distribution Service Marketing
Vertically Integrated MNO A
B MNO Wholesale MVNO
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 14 The MVNOs business model therefore allows them to specialise, target specific segments, and explore innovative new services Established MVNO Segments Innovation Examples
VALUE / NO FRILLS ETHNIC / MIGRANT COMMUNITY BASED
(Community support) (Youth engagement)
INTERNATIONAL / ROAMING ENTERTAINMENT / LIFESTYLE PRICING INNOVATION
(Simple, shared plans) (Data allowance trading)
(Ad-funded) BUSINESS RETAIL FINANCIAL SERVICES
CONVERGED / QUADPLAY M2M OTHER NICHE SEGMENTS
(Charity) (Children) (Seniors)
Source: Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 15 With subscriber totals approaching 5M, Wi-Fi based MVNOs are disrupting the U.S. wireless ecosystem
U.S. Top 3 Wi-Fi Based MVNO Wireless Subscribers (Q2’13 – Q2’16)
CAGR ‘13-’16 = 360% • Wi-Fi based MVNOs are competing 4,863K with traditional carriers using Scratch Wireless 4,431K competitive pricing models for data FreedomPop 3,993K ─ Consequently, ARPUs are lower Republic Wireless 3,549K than the industry average ─ Republic Wireless’ ARPU is 3,082K $17.60 compared to an industry 2,491K average prepaid ARPU of $33.40 • However, Wi-Fi based MVNO subscribers are not traditionally 1,501K value-conscious consumers, but 985K rather college educated, high 706K income early tech adopters 430K 537K 50K 75K
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q5 2015 Q1 2016 Q2 2016
The re-launch of Google’s Project Fi, which opens the service to all potential subscribers, should further drive the momentum behind Wi-Fi based MVNOs in the U.S.
Source: SNL Kagan, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 16 Over time, several variations on the MVNO model have emerged to meet the needs of firms seeking greater/lesser operational involvement and independence for service design
Billing Core Service Value Brand and Activation Handset Channel Marketing Network Platforms Proposition Content and Care Examples Low
Simple Licensing: Partner licenses its Operator Partner brand in exchange for licensing fees
Branded Reseller Model: Operator/ Resell existing carrier service under Operator Partner Partner different brand umbrella
Revenue Share MVNO: Partner brands service and acquires Operator/ Operator MVNO customers; control over value prop MVNO but limited customization of plans
Light MVNO: Partner performs customer facing activities; back office Operator MVNO Cost & Operational Complexity Operational & Cost functions performed by operator or outsourced to 3rd party
Full MVNO: Partner has full operational control, operator provides Operator MVNO High raw network access only
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 17 MVNO provides a low-cost entry option for existing brands to launch mobile services as a means to drive revenue to both the core and mobile businesses
Relative Revenue Focus Retail Examples
Telecoms Revenue
Mobile Handset Sales Carriage Core
Revenue Business
Loyalty Mobile Money Ordering Portal Programmes
Customer LBS Bespoke Feedback Promotions Promotions Traditional Current Future Minimal / Key Business 100% No Impact Case Driver Dependent Increased customer spend and retention
Source: Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 18 MNOs have launched services as MVNOs, either to target a specific segment with a sub-brand or as a means of international expansion (e.g. to serve ex-pats) Ethnic Japanese Example (USA) MVNO Segment Operator Year Brand
No-Frills 2012 (acquired France Spain from KPN)
Youth 2014, 2015 Spain Mexico, Peru, Ecuador
Business 2012 Taiwan US
2012, 2013 China UK, France
2011 Japan US
Ethnic 2010 Indonesia Hong Kong and Expat 2008-13 Philippines ~6 countries
2005 – 2006 Netherlands Belgium, Germany
2016 China Americas, UK
Source: Cartesian, press releases, company documents Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 19 Some MVNOs have chosen to expand internationally – typically these have internationally recognized brands, or internationally-oriented services
Chile Poland Austria Ireland Romania Colombia South Africa Australia Italy Spain France UK Belgium Norway Sweden Jordan US Denmark Netherlands Switzerland Australia Malaysia Saudi France Poland UK Canada Mexico Oman Germany Portugal US
^ Tata announced it plans to discontinue its alliance with Virgin India * FRiENDi is now Virgin Mobile MEA but retains the FRiENDi branding in its Middle Eastern markets Source: Cartesian, press releases, company documents Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 20 Agenda
1 Introduction
2 Evolution of MVNO
3 MVNO Business Model
4 MVNO Business Optimisation
5 Follow-Up
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 21 Agenda
4 MVNO Business Optimisation
1 CLV Definition
2 Protecting and Growing ARPU
3 Reducing CCPU
4 Extending the Customer Lifetime
5 Minimising Acquisition Costs
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 22 Customer Lifetime Value (CLV) is a useful metric for communications service providers 1 CLV (CSPs) to understand, providing a basis for maximizing customer base value Components of CLV
1 Monthly Revenue All recurrent revenue per user What Is Customer Lifetime Value (CLV)? (ARPU) discounted to its present value – • CLV is the present value of a customer: For an 2 individual customer, Customer Lifetime Value (CLV) is Recurrent Costs All recurrent costs incurred to serve a the total benefit derived by the business from their (CCPU) customer relationship with that customer x • CLV optimization aligns business strategy and 3 Length of processes with financial outcomes: Optimization of Estimated duration Customer Tenure of the customer relationship CLV is a primary aim for CSPs, as it results in the most profitable outcome possible – 4 CLV can be used to shape both strategic and tactical One-time costs required upfront to Acquisition Costs initiatives that enable firms to better understand and sign a new customer manage customers = Customer Lifetime Expected net profit for customer, based on net present value (NPV) of Value projected cash flows
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 23 An illustrative CLV calculation for Ting Mobile finds that, with an average monthly 1 CLV phone bill of $37 and monthly churn of around 3%, CLV comes to around $320
2016 Revenue $70M Subscribers 151,000 Devices 245,000
1 Monthly Revenue Avg. Phone Bill (ARPU) $37 – 2 1 Recurrent Costs COGS % SG&A % Avg. Phone Bill $25 x (CCPU) = 51% + 17% $37 x 3 1 Length of 36 months Customer Tenure = Monthly Churn – ~2.8% 4 Acquisition Costs ~$100 Notes: 1) Cost of revenues for mobile services include costs of provisioning mobile services = (primarily customers’ voice, messaging, data usage provided by MNOs), costs of providing mobile phone hardware (cost of mobile phone devices and SIM cards sold Customer to customers, order fulfillment related expenses, and inventory write-downs) ~ $3202 Lifetime Value 2) CLV calculated without applying discount rate to monthly revenue & recurrent costs
Sources: Tucows, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 24 CLV can be improved through one of three key drivers: reduce SAC, improve margin 1 CLV per subscriber and/or extend lifetime
Reduce 1 SAC Base Case
€ CLV Boost Increase t CLV 2 Margin Lifetime (ARPU-CCPU)
SAC
3 Extend Lifetime
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 25 The three CLV drivers can be mapped to major phases of the customer lifecycle 1 CLV
Customer Lifecycle Management Framework
Acquisition (SAC) Base Management (Margin) Retention & Winback (Lifetime) Customer Experience Phase: Learn and Buy Onboard and Use Renew or Leave
Strategic Costs of Programmes: Acquisition Revenue Assurance Churn Strategy
Cross sell/Upsell; Channel Loyalty $ Take-up/Usage
New Revenue Streams
Ongoing Operational Costs
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 26 Agenda
4 MVNO Business Optimisation
1 CLV Definition
2 Protecting and Growing ARPU
3 Reducing CCPU
4 Extending the Customer Lifetime
5 Minimising Acquisition Costs
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 27 At a macro level, mobile ARPU is forecast to remain flat or decline over the next few 2 ARPU years, due to high competition and changes to pricing strategies
Forecast of Mobile ARPU by Region ($/Month) 5-year Drivers for Decreasing ARPU 45 CAGR: • Traditional competition from MNOs and MVNOs 40 - 2.0% 35 • Competition from OTTs (e.g. WhatsApp)
30 • Shift to “all you can eat” plans
25 • Multi-SIM adoption (in selected markets) 20 - 0.3%
ARPU ($/month) ARPU 15 10 - 0.4% - 2.1% 5 +0.1% 0 2016 2017 2018 2019 2020 Year North America Western Europe Asia & Oceania Middle East & Africa Eastern Europe
Source: Ovum, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 28 ARPUs for MVNOs are typically below market-average; this reflects their “challenger” 2 ARPU status, bias towards pre-pay and – for some – a focus on the value end of the market
Comparison of MVNO and Market ARPU ($/month) Pre-Paid Market Characteristics:
$50 • ARPU can be ~60-70% lower than post-pay • Subscribers on average are less credit-worthy $45 • Churn rates high vs. post-pay, driven by: $40 – Lack of contract lock-in $35 – Ease of switching – Low credit scores of subscribers $30
$25 $20 MVNO Focus by Segment $15 Telecom, 21% Discount, 26% $10
$5
$- Roaming, 8% Cellular M2M, 4%
Retail, 11% Business, 10% Mobile ARPU (US$) MVNO ARPU (US$) Migrant, 12% Media/Ents, 8%
Source: Ovum, GSMA Intelligence Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 29 MVNOs can be close to or above market ARPU if they offer high value in their bundle 2 ARPU
Illustrative MVNO Offers (Germany, 2016)
Product Revenue Simyo XL €13.36 MTV Plan €16.76 Market Average €14.30
Notes: • Revenues exclude VAT at 19% • Comparison only considers headline rates • Addition revenues, e.g. from overage and VAS not counted
Source: Operator websites, Ovum, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 30 An MVNO’s pricing strategy will ideally take a holistic view of the firm’s key objectives 2 ARPU
Example Pricing Plan Considerations
Strategic Goals Financial Goals Customer Perception Ability to Execute
✓ ✓
• Differentiation from • Revenue targets • Rapid adoption • Easy to explain and market competitors • Subscriber targets • Value • Easy to support • Maintain leadership • Market share gains • Fairness • Easy to migrate from legacy position, on cost or quality technology axis • Profit maximization • Simplicity • Margin preservation and/or • Choice • Addressable within current • Promote adoption of new network and/or IT roadmap services growth • Flexibility • “Disincentives” to X% of • Billing/rating requirements • Maintain quality/user • Creativity and timelines to execute experience base • Complexity • … • Incent use vs. OTT services • Enables serving all or x% of subs profitably • … • … • …
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 31 There are many potential price structures to consider; working through these in a 2 ARPU structured fashion enables the operator to exclude options that don’t align with the goals
ILLUSTRATIVE Pricing Model Short-Listing
Messaging Pricing Buckets of Messages Unlimited Messaging Messaging as an App
Voice Pricing = Short-listed Buckets of Minutes Unlimited Voice Voice as an App = Screened out
Data Access Pricing Device Types: Smartphone Tablet Feature Phone Laptop MiFi Device
Cap and Structure: Unlimited Blocked Tiered Overage Rollover Zero Rated Throttle
Speed: Best Efforts Assured Application-specific
Bundle Single Service Double-Play Bundle Triple-Play Bundle Quad-Play Bundle Options:
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 32 The use of time-limited bundles is a common pricing tool in pre-pay services to 2 ARPU incentivize regular top-ups; larger bundles offer greater value with some expectation of breakage Illustrative Pre-Pay Bundles (UK, 2016) Bundled Minutes vs. Price (UK, 2016)
Operator Voice SMS Data Price 1,000 150 mins Unlimited 500 MB £10 800 Vodafone 250 mins Unlimited 1 GB £15 500 mins Unlimited 2 GB £20 600
500 mins Unlimited 1 GB £10 400 Giffgaff 500 mins Unlimited 2 GB £12 Minutes per per Month Minutes 200 1,000 mins Unlimited 4 GB £15 100 3,000 1 GB £10 0 £0 £5 £10 £15 £20 £25 3 300 3,000 12 GB £20 Price per Month
500 3,000 Unlimited £25 Vodafone Giffgaff 3
NB. Providing large, discounted bundles is challenging for MVNOs with a variable cost structure
Source: Operator websites, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 33 Utilisation of the bundle can significantly impact the MVNO’s profitability 2 ARPU
Implication Illustrative Bundle Profitability Calculation Retail price of voice bundle 24.00 • When offering a bundle of minutes for Number of minutes offered in bundle 500 a set price, utilisation of that bundle is Wholesale rate 0.0662 the main driver of profitability • Generally there are two ways to Bundle utilisation 40% 60% 80% 100% predict utilization: Minutes used 200 300 400 500 –Conduct a pilot and track usage Wholesale cost 13.248 19.872 26.496 33.12 –Get advice from tariff developers Profit for voice per month per sub 10.75 4.13 -2.50 -9.12 and experts
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 34 Ting and US Mobile allow customers to create their own bundle allowances to fit 2 ARPU their budget
• US Mobile is a US MVNO that allows customers to customise plans according to their needs • US Mobile offers all university students a free SIM card and partners with universities to provide SIM cards at student services offices • Users can change their plan at the beginning of every month • Offers a 30 day risk-free trial offer for up to 100 voice minutes, 100 texts, or 100 MB or data usage
• Ting is a US MVNO, focusing on transparent usage-based pricing –Customers create their own mobile plans by choosing a combination of voice minutes, SMS and data usage –If usage exceeds expected level, the customer is charged at the next usage tier (which will have lower rates); overage is not charged –If usage does not meet expected usage tier, the customer is charged at lower usage tier and issued with credits • Multiple users/devices on one plan
Source: Operator websites, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 35 To gauge customer interest and price tolerance, various forms of primary research – 2 ARPU from surveys to focus groups – can be used, either alone or in combination
Customer Research Options
Surveys Interviews Focus Groups • Gauging customer interest in product • Discovering price levels for illiquid or non- • Customers’ qualitative perceptions • Gauging willingness to pay transparent markets • Allows for deeper interaction between • Gauging customer awareness • Holistic or forward-looking views on pricing purchaser and brand Purpose • Segmenting customers • Understanding customer psychology around • Mass-market services purchasing decisions
• Likert scale • Subject matter expert interviews • Single-moderator focus groups
– Defined responses: 5=“Very More Comprehensive likely,” 4=“Likely”, etc. • Buyer interviews • Double-moderator focus groups • Price sensitivity measurement • Seller interviews • Online focus groups – Open-ended responses used to Options determine price vs. quality • Client participant focus groups perception • Choice modelling & conjoint analysis – Allows dynamic modelling of customers’ willingness to pay across multiple dimensions
Example • New product categories • Enterprise services • Brand perception • New pricing structures • Wholesale services • Channel perceptions Use Cases • Channel insights • Emotional factors affecting purchases
Most Quantitative Most Qualitative
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 36 ARPU can also be increased through the cross-sell of additional services: in addition to 2 ARPU traditional mobile VAS, some MVNOs have moved into financial and content services
Example: Smart Pinoy Remittance Example: Lebara Play
• Smart Pinoy (PLDT) serves Filipinos overseas, many of whom send money back home • Launched remittance services in 2006, with rates up to 65% less than traditional providers • Lebara focusses on ethnic groups overseas in with low cost international calls • Lebara Play targets the same customer base with access to TV shows and films from their home markets
Source: Operator websites, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 37 Identification of key historic CLV drivers can be used to design engagement initiatives 2 ARPU that guide customers into forming desirable behavioural patterns
Example: Using CLV to Design New Customer Engagement Initiatives
1 Insight Into Historic CLV Drivers 2 Actions to Influence Customer Behaviour
CLV $600 Segments that use VAS heavily are associated with higher CLV $500
$400
$300 Improve overall CLV by increasing take-up and usage of VAS amongst new customer cohorts whose behaviour can be influenced $200
$100 This can be achieved by training sales and contact centre staff to encourage VAS adoption $0 and through promotion of VAS in initial Low High welcome material -$100 % of Customers Using VAS
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 38 Revenue leakage is a common problem for telecoms operators; even pre-pay MVNOs 2 ARPU can experience issues with their internal application of business rules
MVNO Revenue Assurance Challenges 1 New Services and Delivery of new or evolved services e.g. updated tariffs and new Recent surveys suggest that most revenue streams to maintain relevance to customers and stimulate Technology Platforms operators are leaking at least 1% of usage/adoption will present risks revenue with ~15% losing more than 3%. With lean operations and 2 Legacy / Many MVNOs with limited resources are managing RA issues on poor ability to scale, there are Heterogeneous RA legacy and aging platforms that are unable to keep up with the suggestions MVNOs may leak over Platforms changes in industry 5% of revenue. 3 Rapid Deployment Rapid deployment of new offers and tariffs are critical for an MVNO’s competitiveness when responding to needs and in tactical of Services campaigns 4 Lack of End-End RA Limited resources mean MVNOs are managing RA with gaps and in- Coverage coherent systems
5 Lack of In-House RA Limited resources mean MVNOs are managing RA with gaps and in Expertise RA capabilities, knowledge and expertise
Source: McKinsey, Aricent, KPMG, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 39 A review of existing control frameworks can help MVNOs identify areas for 2 ARPU improvement and reduce revenue loss from factors such as poorly integrated systems, increased sophistication in billing/bundling, and lack of standardization Cartesian Revenue Assurance Framework
Current State Identification of Opportunity Prioritization Opportunity Analysis Assessment Gaps & Risks & Implementation
• Understand current high- • Analyze KPIs, metrics and • Identify opportunities for • Develop strategies to level architecture and control points improvement based on address priorities based on operating model • Identify: current state findings results of controls testing/risk scoring • Document current state RA – Gaps (missing or • Perform audit of highest business rules & processes misplaced controls) risk areas • Define initiatives to implement strategies • Develop end to end process – Low value controls • Quantify outputs of map indicating control controls testing to • Estimate implementation point gaps and status of – Areas of risk demonstrate proof of costs and timeline existing control points • Score risks based on leakage and business case • Rank initiatives based on likelihood and impact benefits of production cost / benefit analysis implementation
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 40 Revenue Assurance operations involve the continuous management and improvement 2 ARPU of processes, people and systems incorporating industry standards and best practices
Revenue Assurance Operations Cycle
Management & Control Organization and Skills
Control Platform Product, Sales, Customer Care Reporting Platform Roles & Responsibilities Dashboard and Metrics Staff Allocation KPI Monitoring & Management Accountability SLA and Metric Management Training Revenue Assurance Operations Business Processes IT Systems
Order-to-Cash Data integrity Provisioning / Fulfillment, Installation Systems integration Switch-to-Bill Automation Collections / Accounting Process interfaces Process documentation and efficiency Technology roadmap
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 41 Establishing proper control points and key performance metrics is a critical step to 2 ARPU manage risks and ensure revenue stability
Critical Success Factors
Process Management People Management Systems Management
• Objective and documented processes • A single, empowered and accountable • Regular reference data synchronization • Defined control points with metrics owner of the switch-to-bill process • Established baseline of key volumes along the entire RA value-chain • Sufficient qualified staff to manage the and metrics—a starting point • Timely implementation of policies and RA process • Ongoing monitoring of the key corrective actions • Clear expectations from the RA volumes and metrics • Regular comprehensive audits to process confirm the integrity of processes • Management support and scrutiny of • Anomalies and errors resolution RA process process
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 42 Agenda
4 MVNO Business Optimisation
1 CLV Definition
2 Protecting and Growing ARPU
3 Reducing CCPU
4 Extending the Customer Lifetime
5 Minimising Acquisition Costs
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 43 MVNOs operate on slim margins, optimising costs is critical to MVNO success 3 CCPU
Typical Prepaid MVNO EBITDA Margins (%) Top MVNO Cost Items
• Go direct to MNO (if sufficient scale) 25% • Scale will drive bargaining power Wholesale • Ability to reforecast and re-negotiate rates (based on 20% Rates thresholds) 20% • Potential to capture termination rates (although less interesting now in many markets due to MTR decline) 15% 15% • Minimise inbound calls • OTA set-up and provisioning 10% Customer 10% • Self-service where possible Care • No paper bills 5% • Outsourcing (onshore vs. offshore)
0% • Consider using an MVNA / MVNE Reseller Service Provider Light MVNO Other Opex • Move back office functions to outsourced model (e.g. Components HR, legal, etc.) • Leverage cloud models for BSS (e.g., CRM)
Source: McKinsey, Aricent, KPMG, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 44 There are many different wholesale pricing components to take into account 3 CCPU
Typical Pricing Elements
Capex • Upfront investment costs
Upfront Per Sub Fee • Set-up cost per subscriber
• Set-up fee per call • Interconnect rates Voice • On-net / off-net rates • International and roaming • Peak / off peak • Inbound rates
Usage • Per MB (domestic and roaming) Data • Overage charges • Bundled charges
• SIM cost • White label / managed services (e.g. call centre) Other Services • Change requests (e.g. tariff change) • VAS • Termination costs
MVNOs should also seek contractual mechanisms to benchmark and adjust wholesale prices during the contract
Source: Ofcom, DLA Piper, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 45 MNOs may chose to serve MVNOs directly, or indirectly via an aggregator 3 CCPU
Direct (with MVNE) Direct (MNO Platform) Indirect (MVNA)
MVNO MVNO MVNO MVNO MVNO MVNO MVNE MVNE MVNO MVNO
MVNA MVNE Platform MNO MNO MNO
• MVNO negotiates its own agreement • MNO develops its own MVNE • MVNE acts as aggregator or provides with MNO infrastructure using components platform to specialist MVNO • MVNE platform hosted and operated from one or more vendors aggregator by specialist MVNE providers for and • Provides a base platform for hosting • Outsourcing of MVNO business, on behalf of MVNOs MVNOs, and sub brands technical and operational • Example MVNEs*: Materna, Martin • MVNE platform is either hosted and management to MVNE partner; MNO Dawes managed by an MVNE partner or manages strategic MVNOs directly themselves • MVNE aggregator often has its own • Example MVNEs*: Ericsson, Aspider agreement with MNO and resells Solutions traffic to MVNOs • Example MVNE’s*: Transatel, Cognatel, Gamma
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 46 When it comes to technical and operational partners, MNOs and MVNOs have a 3 CCPU greater than ever choice of MVNEs to support them
Specialist MVNE Providers
•Provision of full solution or components of turnkey MVNE platform • Increasing number of MVNEs in the market, •Targeted at MVNO and MNO supporting both MVNOs and MNOs customer base, although focus tends • MNOs are aligning themselves to MVNE to be on servicing MVNOs partners •Smaller vendors often easier to work with • MVNEs are generally able to provide: •However, most MVNEs lack – A full solution or components of a international scale turnkey MVNE platform – An operator in a box model where the Vendors and System Integrators MVNE will provide the MVNE or MNO most / all of the technical elements to • Focused on enabling MNOs to build host and manage an MVNO their own MVNE platform • Higher likelihood of being existing – Options for either “MVNO-led” or supplier to MNO “MNO-led” model • Provide international presence • Often have more flexibility / willingness to bespoke core platform components to fit MNO’s requirements
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 47 MVNAs have become common place in some markets, driving significant growth in 3 CCPU the number of niche / micro MVNOs
Operators are still Number of focussed on larger MVNAs are MVNO deals enabling the long The MVNO Long Tail Subscribers tail per MVNO
Number of MVNOs
• Lower minimum subscriber MVNA Examples requirements • Lower set-up costs (€5k+) MVNA Enabling Lower • Provision of “softer” support Barriers to Entry functions • Rapid set-up timeline (6+ weeks) • Managed services
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 48 Cost assurance is important to ensure that MVNOs are not being charged in excess of 3 CCPU actual usage – both for MNO airtime and any usage-based MVNE/MVNA services
NON-EXHAUSTIVE Issue Description MVNO Services Impacted
Data volumes do not match between MVNO
Data Volume Mismatch retail systems and MNO/MVNA/MVNE Domestic Int’l wholesale systems Data Data
MNO/MVNA/MVNE wholesale systems Erroneous Record Generation erroneously generate records not captured in Domestic Int’l Voice SMS MVNO retail systems Data Data
Incorrect Retail Cost Assigned MVNO retail systems erroneously assign a domestic or zero-rated cost to international to International Activity activity Int’l Voice SMS Data
Voice minutes do not match between MVNO Voice Minute Miscalculations retail systems and MNO/MVNA/MVNE wholesale systems Voice
Retail rate for a voice record is lower than Lower Retail Voice Rate wholesale rate charged by MNO wholesale system Voice
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 49 MVNOs are using Wi-Fi to reduce airtime costs and improve customer experience 3 CCPU
Example of Providers Prioritizing Wi-Fi
• US MVNO launched by Google • US MVNO that uses Wi-Fi first • Prepaid mobile services with simple pricing and plan • Handset automatically switches over from Sprint’s network Service proposition Service to Wi-Fi for calls and data when in range of known Wi-Fi Description • Focus on service quality and customer experience Description network • Multiple cellular networks and Wi-Fi • Limited selection of handsets: Moto E, Moto G (1st gen), • Roaming in 120 countries with flat rate Moto X (1st gen) and Moto X (2nd gen)
• Monthly plans come with unlimited calls and texts, with a • Unlimited voice and SMS + 1GB data from $30 (significantly variable amount of data on top per plan ‘size’ cheaper than other US providers) • The XXS size is entirely minutes and texts ($10/month), with Offer • Wi-Fi connectivity (prioritized network) including Wi-Fi Offer the XXL size offering 5 GB ($85/month) Calling • Users can add more data on the dedicated app and are • Roaming included refunded for unused cell data
• The MVNO leverages T-Mobile and Sprint network (market • Reviews have generally been favourable, however some Market challengers) to compete against AT&T and T-Mobile Market criticism about the transition from Wi-Fi to the network Impact • Wi-Fi is a major feature to reduce costs and improve Impact • In May 2016, added T-Mobile (a GSM-based carrier) to customer experience complement its initial CDMA-based carrier, Sprint
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 50 In an increasingly crowded market, differentiating through customer service is seen 3 CCPU as a strong value-add to an MVNO’s service offering
The More Digital the Journey, the Higher the Satisfaction
Channels Customer Service Journey • It is not simply a matter of adding digital Starts Ends options to traditional customer-service
Traditional: IncreasingCustomer Satisfaction channels Traditional only Phone • Careful thought must be given to the Vendor degree of digitisation desired: digital Mail / Fax care can be fully self-serve or involve a E-Mail mix of live customer-service agents; not Digital to Traditional Click to Call all options need to be available on every digital platform, and e-care should not be implemented as Digital: Traditional to Digital aggressively where there is significant E-Chat potential for upselling Forum FAQ Personal Account Virtual Assistant Digital only Social Media
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 51 Agenda
4 MVNO Business Optimisation
1 CLV Definition
2 Protecting and Growing ARPU
3 Reducing CCPU
4 Extending the Customer Lifetime
5 Minimising Acquisition Costs
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 52 Even within a developed market, individual operators can have quite different 4 Lifetime churn rates
Monthly Mobile Churn Rates (US, 14Q1 – 16Q3) Example Factors Affecting Churn 4.00% • Product 3.50% – Mix of post-pay vs. pre-pay 3.00% – Contract lengths – Service bundles 2.50% • Service
2.00% – Network coverage – Service quality / performance 1.50% – Quality of support • Competition 1.00% – Promotional offers 0.50% • Demographics – Credit worthiness 0.00% Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
Verizon Wireless AT&T Sprint T-Mobile USA
Source: Statistica, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 53 Established MVNOs should consider implementing a churn management framework 4 Lifetime so that they can respond quickly when churn indicators start to show
Cartesian Churn Management Framework
Collect & Conduct Churn Identify Significant Develop Churn Prioritize High Churn Aggregate Data Analytics Churn Drivers Reduction Strategies Propensity Customers
1 ✓ 2 3 ✓ 4 5
Dataset and Churn Churn Segmentation and Correlation and Driver Churn Reduction Strategy Propensity Model Variable Assessment: Analysis: Identification: Development: Implementation: Identify all relevant data Measure churn across a When correlations between Identify and prioritize Once customers are elements and integrate variety of dimensions to variables are identified, churn reduction strategies, proactively identified ‘at sources to construct a identify all relevant churn perform root-cause execute the appropriate risk’, they can be targeted comprehensive dataset for patterns analyses to determine the approach, and track and by retention strategies churn analysis most significant and measure performance actionable churn contributors
Churn Awareness and Understanding Churn Targeting and Reduction
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 54 Measuring churn across a variety of dimensions will highlight important churn trends 4 Lifetime and patterns for further investigation Examples of Churn Measurement across Various Dimensions
Churn by Customer Churn by Tenure and Product Geography
Example Trend Identified: Across all products, churn typically experiences Example Trend Identified: The highest churn occurs in a select few states, a spike 3, 12 and 24 months into the customer tenure highlighting the need to further investigate these states
Churn by Churn by Sales Channel Demographics
Example Trend Identified: Two channels had outsized churn rates relative Example Trend Identified: Churn is highest amongst subscribers to other channels at the start of the observed period of lower income levels with smaller family sizes
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 55 Information on the reason for churn can be asked from post-paid churners 4 Lifetime
Churn Reason Categorization and Churn Drivers
Churn Theme Churn Reasons Cited by Customers Example Churn Drivers
• Service doesn’t meet need Unmet Needs • Competitor products have more features + Early Tenure Churn ‘Right Sizing’ Error • Unhappy with bundle
• Persistent service disruption/outages + Subsequent Churn Poor Product Product Issues • Confusing or hard-to-use product features Performance • Lack of product flexibility (e.g., contracts, locked devices)
• Activation process was unsatisfactory + Early Tenure Churn ! Negative Onboarding Customer Service • Lengthy or frustrating service issue resolution times Experience Issues • Conflicting information provided by different reps
• Unexpected price increase + Churn After Price Increase 30th Promotion Expiration Pricing • Competitor prices are cheaper • Product price is too high
• Service termination after non-pay + Low Utilization of Auto Debit Non-pay Auto-Debit Issues • Bankruptcy/financial difficulties
For pre-pay, churn reasons can often be deduced from behaviour
Note: The list of churn reasons and churn drivers above are not exhaustive. Source: Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 56 Examining churn trends alongside other data elements enables MVNOs to pinpoint 4 Lifetime specific churn drivers Potential Churn Drivers for a Typical MVNO
Negative Onboarding Poor Product Promo Pricing Churn Driver: ‘Right Size’ Error Experience Performance Expiration
! 30th
Business Unit Responsible: Sales & Marketing Customer Care Product Management Sales & Marketing
Example Trends • Early Disconnects: • Activation Issues: • Coverage Issues: High • Promo End Churn Spikes: Customer disconnects Documented issues with levels of churn for Churn spikes at the end Observed: early in the lifecycle activation process, specific geographies of introductory indicating dissatisfaction insufficient information • Network Outages: promotion periods (e.g., with bundle about activation process Products and 12/24 months) • Segmentation • Limited Product Usage: geographies also • Service Downgrades: Mismatches: Mismatches Data shows minimal or associated with high Bundle downgrades between customer intermittent use of levels of network errors increase with the expiry demographics/ service immediately after and/or customer of promotional pricing segmentation and installation complaints about service purchased bundles outages
Source: Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 57 Churn reduction strategies can then be developed to address the specific drivers 4 Lifetime
Developing Effective Churn Reduction Strategies
Negative Onboarding Poor Product Promo Pricing Churn Driver: ‘Right Size’ Error Experience Performance Expiration
! 30th
Business Unit Sales & Marketing Customer Care Product Management Sales & Marketing Impacted: • Sales Training: Train sales • Automated Escalation: • Wi-Fi Calling: Provide • Targeted ‘Saves’ Campaign: Strategy reps to identify and sell Create automated solution to use Wi-Fi Offer to extend promotion Description: segment appropriate workflows that trigger indoors to augment for subset of customers products escalation network coverage with high value and high • Marketing: Improve • Root Cause Analysis: • Customer Education: price sensitivity marketing messaging and Pinpoint root cause for Provide better information • Make Products ‘Sticky’: product definitions failed activations and regarding network outages Include ‘sticky’ add-ons as remediate part of promo packages • KPI refinement: Improve customer service KPIs
Example Success • Early tenure churn • Customer satisfaction • Product performance- • Promotion pricing customer Metrics: reduction • Service metric related churn reduction retention • Product engagement and improvement • Reduction in service • Use of complementary add- usage complaints ons
Source: Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 58 Agenda
4 MVNO Business Optimisation
1 CLV Definition
2 Protecting and Growing ARPU
3 Reducing CCPU
4 Extending the Customer Lifetime
5 Minimising Acquisition Costs
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 59 Acquisition costs can be divided into three categories; device subsidies will not 5 Acquisition Costs apply to all MVNOs Typical MVNO Strategies and the Three Associated Subscriber Acquisition Costs
Existing Fixed Existing Mobile Disruptive Low-cost MVNO Branded MVNO Niche MVNO Line Operator Operator MVNO
Device Subsidy Marketing (Advertising) Sales (Commission) Device subsidies can take up to 20% of a MVNOs must market to its target segments. MVNO commissions to dealers widely vary typical Western European operator’s OPEX. This is very important, especially in the roll- but generally hover at the 10% mark, with Device subsidies are gradually being out phase, when people will be hearing more for dealers who do activations and get replaced with other kinds of customer about a new service for first time. a high percentage of repeat refills. acquisition tools such as device finance, There are a number of dimensions MVNO’s Many new MVNOs bypass the retailer and cashback and extended contract lengths. can optimise marketing spend, this may dealer channel altogether by embracing But the biggest route to profitability growth include: online distribution, web marketing, social for carriers is capturing the growing number • Targeted placement according to key media, viral and multi-level marketing. of BYOD users. For carriers, success in segments In lieu of paying retailers high commissions winning this segment of the market is the and sales incentives while still fighting for number one initiative that could ultimately • Use of online and social media shelf space, these MVNOs rely on newer, lead to the end for subsidized phones. • Or building advocacy for word of mouth lower-cost targeting. promotion
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 60 Many MVNOs have taken the SIM-only route to avoid the cost and complexity of 5 Acquisition Costs offering handsets; however, options do exist for MVNOs to become channels for white label stores
Handset Distribution Challenges for MVNOs Example White Label Websites
Cost of Holding stock of a competitive range Inventory of handsets ties up a lot of capital
Minimum OEMs may require minimum orders Order Qty of e.g. 50,000 units
Need to set-up and operate processes Operations for outbound and inbound logistics
Source: gsmnation, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 61 Partnering with a finance firm to offer device leasing is potential option to offer 5 Acquisition Costs handsets without an upfront cost to the consumer, without the balance sheet risk
The Benefits of a Leasing Model
Customer / MNO Needs Leasing Model
Captures residual value of Customer Keep up to date with new handset handset by selling in secondary Needs models market Provides financing for handset Handset costs spread evenly over subsidy to improve cash flows Fees time without early termination fees and margins of MNO
No cost to carrier of program Reduced device subsidy costs MNO deployment or management Needs Improved customer satisfaction from ability to allows customer to Risk Financial risk born by third party upgrade every 12 months
Reduced device driven churn provided by no down payment, no penalty offer
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 62 In the UK, Giffgaff is using peer-to-peer lending as a consumer finance option 5 Acquisition Costs
Example Giffgaff Devices and Payment Option
Source: Giffgaff Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 63 There are 4 key pillars to consider in channel strategy 5 Acquisition Costs
• Channel Mix & What is the optimal channel mix for today and in the future? • How can the MVNO effectively increase its “capillarity”? Coverage • What are the key alternative channels it should develop? How can (Architecture) micro market activities be applied to low-performing sub-regions?
• Do the incentives entice different channel participants while also ensuring an optimal pay-out to channel partners? Incentives • How does the virtual operator ensure high customer satisfaction and create a system that competitors cannot easily copy?
• What are the ideal enablers for the performance of POS displays, third- party distributors, and other channels? How can the MVNO effectively Process cross- and upsell products through its digital channel and e-sales approach and analytics?
Sales • What are the implications of the chosen channel strategy on the MVNO’s organisation structure? Organisation • For example, should it create its own sales force to control the POS Structure push, and if so, how?
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 64 FreedomPop and Giffgaff socially focused MVNOs that reward their customers 5 Acquisition Costs for referrals; Freedompop also allows trading of unused data allowances
• FreedomPop is a 4G mobile broadband MVNO • Freemium model: Without contractual commitments, customers receive a free mobile broadband service, if they do no exceed 500MB of usage; metered charging starts after this threshold • Customers can trade unused data allowances by using a social dashboard • Customers can earn free data allowances by making customer referrals and signing up to partner promotions
• Giffgaff, a UK MVNO, encourages customers to make customer referrals (£5 bonus), participate in forums, and get involved in service improvements • Various customers have designed apps on their own initiative for Giffgaff and made them available for sale on app stores –Giffgaff recently commissioned a customer to create an official version of balance-checking app he privately created
Source: Operator websites, Cartesian Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 65 Some MVNOs have large retail channel footprints, either indirect or through 5 Acquisition Costs their parent
Lebara Mobile provides PAYG mobile Lycamobile is focused on two main PosteMobile is the largest MVNO in SIM cards for international phone calls parts of the market: users for whom Italy, and is owned by the country’s out of 10 countries. making international calls is a priority post office, Poste Italiane. and value-focused users of core in- It has been extremely successful in market telephony services. PosteMobile used its in-house signing deals with retail partners and developed payments services along already has over 90,000 outlets selling It has an extensive distribution with its extensive distribution network top-ups and SIM cards. The company network, initially garnered from its as a foundation to create a strong has got some big names on board, fixed calling card business. It has good brand presence in Italy. including Tesco, Phones 4u and Esso. channels into ethnic supermarkets and other stores. It is now the largest MVNO in Italy with Over past 15 years, Lebara now has more than 3.5M users and over 50% 250,000 networks throughout Europe Among MVNOs, Lycamobile has the share of the entire Italian MVNO and across all its mobile countries largest international footprint, with market. today. operations in 20 markets.
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 66 MVNOs marketing their services through partners need to optimize a variety 5 Acquisition Costs of offer elements for the indirect channel Indirect Channel Optimization Opportunities
Product overview including core product and service wrap components (e.g. capacity, Product SLAs, service, etc.); standard, bespoke and managed services (e.g., MDM) Offering Price points and structure for products (e.g., pooled data plans, complementary Pricing product add-ons such as international messaging) Partner payment model (commission, referral, wholesale); commission rates/structure Payment Model (e.g. up front, ongoing); extent to which commissions designed to drive sales/margins Ordering and Sales tools by which to price, order and provision products; pre-sales support; length of Operational Provisioning time to price and provision Customer Post sales support including product configuration and troubleshooting; dedicated Support customer care contact Marketing development funds, collaborative sales (e.g. shared leads, joint pitches), S&M Support sales toolkits, geographic considerations, specialist sales support and collateral
Commercial, technical and operational content (e.g. provisioning, differentiators, Training & Outreach competitor intelligence, etc.) and delivery (e.g. “road shows”, webinars, face 2 face, etc.) Sales & Account Dedicated named resource, level of support provided to partners Marketing Management
SLA / Contract SLAs offered to partners (e.g. uptime, capacity, etc.); negotiated contract terms
Self-Provisioning Provision of tools via online portal (e.g. pricing tool, provisioning, sales toolkits, sales and Configuration and commissions reporting)
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 67 Ultimately, indirect channel profitability can be influenced by a range of factors 5 Acquisition Costs including commission structure, channel behavior, and customer mix
Channel Profitability Considerations
How can volume Customer Mix / and margin be Average Deal Size best balanced Volume
Channel Tenure Profitability Marketing Funding Which channels should be utilized for retention (e.g., What is the correct mix sticky revenue)? of marketing funding For which products? and commissions? Retention Costs Commissions
Monitoring these metrics and their impact is key in managing channels efficiently
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 68 MVNOs can leverage advanced analytics to evaluate end-to-end sales and 5 Acquisition Costs onboarding processes and identify performance optimization opportunities across the channel
Pre-Sale Process 1 2 3
NON-EXHAUSTIVE
Marketing & Advertising Sales Process Needs Assessment
Key Questions: • Does the current marketing focus align • Do customers fully understand costs and • Are sales representatives knowledgeable with target demographics & segments? benefits of available service offerings? of various customer needs (e.g., heavy • Does the product marketing accurately • Are orders submitted by customers in streaming, international messaging)? convey the product’s value proposition? good standing (e.g., good credit score)? • Do the recommended products align with customer’s budget and needs? Objectives: ✓ Increase volume of ✓ Increase conversion of ✓ Align services with incoming leads incoming leads customer needs
Post-Sale Process 4 5 6 Professional Self $ NON-EXHAUSTIVE
Service Activation Service Experiences Long-Term Customer Mgmt
Key Questions: • Are in-store and/or call center reps • Is the purchased service working as • How does the end of promotional cycle fully knowledgeable on activation? expected/promised? affect churn for different services? • How various activation methods affect • Are service issues supported/resolved • How are customers being targeted for activation issues and service in a timely manner? upsell and cross-sell products (e.g., larger complaints? data packages)? Objectives: ✓ Reduce cancels prior ✓ Reduce and prevent ✓ Reduce churn and to order activation churn from poor increase upsell service experiences
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 69 Effective sales channel optimization is underpinned by a comprehensive and 5 Acquisition Costs robust framework for data discovery, analysis, hypothesis generation, testing, and refinement Cartesian Channel Optimization Framework
Sales Data Trend Hypothesis Growth Program Testing & Aggregation Identification Generation Development Measurement
Demographic Targets Program A Competitive Responses Program B Bundle Strategy
Pricing and Offer Mix Program …
• Data discovery, • Analysis to identify • Develop hypotheses • Develop growth • Model summary of cleaning, and quality trends (e.g., for drivers of sales programs to test KPIs, variables, growth review demographic drivers, growth (e.g., targeted hypotheses outcomes, and • Upfront channel competitive impacts, advertising, lead • Prioritize programs predictive attributes and channel-specific offers, product based on cost-benefit performance preliminary analysis tends) pricing, bundling analysis and potential • Enrichment with • Develop relevant KPIs strategy, regional upside additional data (e.g., to measure improvement segmentation) performance opportunities)
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 70 To learn more about the importance of sales analytics and how it can improve 5 Acquisition Costs the MVNO sales channel performance, download Cartesian’s latest eBook on analytics-driven sales growth
The Service Provider’s Guide to Analytics-Driven Sales Growth
This eBook discusses the benefits of advanced sales analytics in the telecommunications industry, including:
• Right package, Right Customer – How sales performance analytics can boost sales volumes and improve customer LTV • Insights to Action – How you can leverage sales analytics to develop ROI positive programs • Product Recommendation Engines – How you can increase conversion and reduce churn with predictive analytics • Improve the Customer Experience – How to adopt a data-drive approach to upselling
To download the eBook, go to: http://content.cartesian.com/telecom-analytics-guide-sales-growth-ebook
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 71 Agenda
1 Introduction
2 Evolution of MVNO
3 MVNO Business Model
4 MVNO Business Optimisation
5 Follow-Up
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 72 Questions? Comments?
How can we help deliver on your MVNO objectives?
Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. 73 BOSTON
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Confidential and Proprietary — Copyright © 2017 Cartesian, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval www.cartesian.com system, or transmitted in any form or means (electronic, mechanical, photocopy, recording or otherwise) without the permission of Cartesian, Inc.