Mmc Approach Multiple Sim Blog

Multiple SIM Ownership in Emerging Markets: Drivers and Best Strategy Presentation at the 4th Mobile Pricing Symposium 22 July 2009 Cambridge, UK

For further information please contact: Carlos Valdecantos (+34 696 940 221, [email protected])

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 1

Agenda What drives multiple SIM ownership? •  Operator factors •  Ecosystem factors •  Market factors •  Society factors How to address multiple SIM ownership?

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 2

The typical modes of multi-SIM usage fall into four cases, the choice of which depends on preferences, perceived cost of inconvenience and lifestyle. MULTIPLE SIM OWNERSHIP > TYPICAL MODES OF USAGE

NOT EXHAUSTIVE Typical modes of multi-SIM usage

Several Handsets

Rotating the SIMs

Multi-SIM Handset

Second Device

Car phone 1. Does not require to switch cards manually. 2. Subscriber can keep SIMlocked phones – one for each operator. 3. Practical limit is 2 – rarely do people walk around with 3 handsets.

1. Convenience of only carrying around only one handset. 2. Cannot receive urgent/ emergency calls on SIMs outside handset. 3. Handset must be unlocked. 4. Messy card-swapping procedure.

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

1. Convenience of carrying only one handset 2. Cards are always on (with limitations) 3. Handset usually more expensive and not that easy to find (not enough variety).

Page 3

Fashion phone

Net book

1. In some cases it is very difficult to remove the SIM card. 2. Some devides as netbooks use predominantly the data connection. 3. While the SIM is inserted in a netbook, it cannot receive mobile calls, so using the primary SIM may mean missed calls.

The existence of the multiple SIM phenomenon is driven by four groups of factors related with the operator, the market, the ecosystem and the society. MULTIPLE SIM OWNERSHIP > MAIN DRIVERS

Specific actions of the operator such as promotions and pricing differences drive multiple SIM usage.

Operator

Ecosystem

The mobile industry’s ecosystem – mainly handsets and niche devices, affect multiple sim usage.

Multiple SIM Usage

The mobile market composition (prepaid vs. Post-paid), value brackets, regulation, etc.

Market

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Society

Page 4

Social composition, norms, rhythm of life and cultural specifics do affect the multple SIM phenomenon.

The pricing decisions of mobile operators are probably the main driver behind multiple SIM ownerhip. MULTIPLE SIM OWNERSHIP > OPERATOR-RELATED DRIVERS

Operatorrelated drivers

Large difference between tariffs on-net / off-net

•  Large differences between on-net and off-net tariffs stimulates arbitrage behavior – one SIM for each operator. The on / off-net difference may be manifested through headline price or generous on-net bundles.

Attractive sign-up minutes bundle (w/o commitment)

•  During aggressive acquisition campaigns operators will include many on-net minutes as an initial sign-up bonus. Activating this new card then becomes attractive even only to use the initial bundle minutes.

Attractive promotions with bonus minutes

•  Frequent promotions where large bundles can be accumulated make people keep active SIMs from different operatos and get the best of both worlds - the so called “hamster effect”.

Aggressive SIM Placements

•  Also known as “SIM flooding”, aggresive SIM placements occur where an operator wants to be used by a subscriber at any cost, even if that means giving the SIM away as a present.

Strenght of operator brand

•  When an operator brand is perceived as prestigious and attractive, a subscriber will not give up their old SIM even if they activate a SIM of the competition.

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 5

The players in the mobile market ecosystem contribute towards multiple SIM usage directly or indirectly. MULTIPLE SIM OWNERSHIP > ECOSYSTEM-RELATED DRIVERS

Mobile Ecosystem drivers

Low-cost of handsets

•  The low cost of handsets permits subscribers keep 2 or more SIM cards simultaneously active without having to switch. This drives multple SIM usage in cases where the user would normally avoid SIM swapping.

Availability of unlocked handsets

•  The possibility to acquire unlocked handsets (because they are available on the market or because they can be unlocked) permits rotating SIM cards from different operators on the same handset.

Availability of multiple SIM handsets

•  The availability of multi-SIM handsets makes it extremely easy to maintain 2 or more SIMs active without the associated inconvenience of swapping SIMs or carrying many handsets around.

Availability of niche devices

•  Fashion phones, car-phones, SIM-slot net-books, blackberries or some consumer M2M devices (such as Amazon Kindle or personal medical telemetry) practically require that the same person uses 2 or more SIMs.

Existence of Channel Fraud

•  Distributors will activate SIM cards in order to meet sales targets. The channel gains from the commission and practically gives away the activatedSIM cards below value. Thus people carry around many SIMs.

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 6

A combination of certain market characteristics can be favorable for the appearance and development of multiple SIM ownership. MULTIPLE SIM OWNERSHIP > MARKET-RELATED DRIVERS

Mobile market drivers

Predominantly prepaid mobile market

•  Postpaid plans will typically not create motivation for arbitrage. In addition maintaining multple post-paid contracts with varous operators is expensive. Largely prepaid markets are fertile soil for multi SIM.

Price sensitive market

•  Low GDP/cap markets with price sensitive consumers will look for ways to optimize their telecom spending and therefore be more prone to arbitrage.

Little or no regulation of churn accounting

•  In markets with no standardized churn accounting (via regulation or industry agreement), operators may have long validity periods of SIMs which enables users to keep several SIMs even without active usage.

Large market share disbalance

•  In markets where there is a large gap of market share between the leader the followers, the followers will typically have aggressive acquisition behaviour, which (even temporarily) drives muliple SIM usage.

Quality of mobile network coverage

•  In makets with poor network coverage, people on the move will maintain two or more cards to ensure they will always be in range (especially for travel in non –urban areas).

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 7

Among the society-related drivers of mulptle SIM usage there is a number of non-rational factors such as image and relationships. MULTIPLE SIM OWNERSHIP > SOCIETY-RELATED DRIVERS

Societyrelated drivers

Importance of own number + existence of MNP

•  In some markets the mobile number is part of “the personal brand”; yet in others not at all so - there is no problem carrying various SIMs and having several numbers.

Importance of prefix

•  In some countries the mobile prefixes associated with early adoption of mobile telephony is a symbol of prestige, so people will not give up their original number even after activating another SIM.

Personal privacy

•  Some people will keep 2 numbers: a personal one (which will never change like a Yahoo account) and a second job-related one. •  Some people will activate a SIM card just temporarily to put up an ad in the newspaper that they are selling sell their car and not give their “usual personal” number.

Value of time and rhythm of life

•  People with a lot of time on their hands (unemployed or part-time jobs), will have no problem carrying around and swapping SIM cards. In fact for an unemployed person cost saving is important.

Employer pays the mobile bill

•  When the employer pays the mobile bill, personal calls usually have to go on another SIM card. Despite various operator supported solutions (e.g. dual number singleSIM) multiple SIMs remains a polular choice.

Social circles & relationships

•  In some countries you communicate different number to members of your different social circles. Leaving this group (or person) is easy: just throw the SIM.

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 8

Agenda What drives multiple SIM ownership? How to address multiple SIM ownership? •  For whom is it a problem? •  Important facts to keep in mind •  What is the right strategy towards multiple SIM ownership?

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 9

Fact 1: Market share of SIMs has lost its traditional meaning. What matters today is share of telecom spend. The share battle is in the pocket. MULTIPLE SIM OWNERSHIP > CHANGE IN PARADIGM

Before

Today

Operator C

Multi-SIM-ers

Relevant Focus

Reve nues

Operator C Operator A

MoU

Subs Operator B

Operator A

Operator B

Lines

Zero sum: Typically subscribers were considered as belonging to one operator only and in order to change operator they churned, i.e. left the first one. Multi-SIM usage was not even considered or was regarded as a rare phenomenon.

Multi SIM: It is a fact of life for mobile operators. The amount of multi SIM usage depends on various factors and is different in different markets. Multi SIM in itself is not a cause for concern - the question is: what’s behind it?

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 10

Paradigm shift: Usually “market share” means share of SIMs – a con-cept losing its relevance, because 2 lines belong to one subscriber who balances the usage. The really rele-vant metric is share of revenues and in some cases share of traffic / MoU.

Fact 2: Multi SIM both creates and erodes value for all players; Fact 3: The market leaders risk more revenue erosion. MULTIPLE SIM OWNERSHIP > WINNERS AND LOSERS

Fact 2: Multiple SIM also creates value

Value eroded

Value created

Fact 3: Market leaders stand to lose

Total impact

Single SIM Scenario If subscribers were forced to use only one operator they would go with their 1st choice – overall best operator.

1st choice operator

Value is eroded by multi-SIM usage whenever there is a deal-seeking behavior. From origination perspective value is eroded from foregone subscriber revenues. From termination – loss of interconnection revenues.

Value is created whenever a subscriber has a chance to use the mobile phone where he/she normally would not: •  while driving •  while in the disco •  while in zone without coverage with their usual operator.

If subscribers have 2 SIMs they will take some of their traffic to the 2nd SIM (whatever the reasons)

1st choice operator 2nd favorite or niche operator

The net impact is the combination of both effects and depends on the proportion of each group of factors.

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

MultipleSIM Scenario

Part of traffic migrated to secondary network.

The leaders – those players who have a better overall offer, who have a strong brand and generally dominate the market stand to lose. New entrants, niche players or second-tier players will chip-away parts of traffic by being present in subscriber’s pocket through a 2nd SIM.

Page 11

Strategy towards multiple SIM ownership depends on player’s market position and the presence of the phenomenon on the market. MULTIPLE SIM OWNERSHIP > STRATEGY TOWARDS MULTIPLE-SIM OWNERSHIP

How to address multiple SIM ownership?

Early Stages / Non-existent

Level of Multi-SIM Ownership

Very present

Leader

Preemptive Strategy

Share Win-back

Build loyalty through operational excellence and retention initiatives. Preempt the need for 2nd SIM.

Focused BTL campaigns in order to win back share of revenues from muli-SIM subscribers.

Player’s Market position

Attack: Aggressive Revenue Share Maximization Follower

New entrants and followers see an incremental financial impact, even if they only win a small share of pocket of the mobile consumer. Until a balanced revenue share is achieved, their best strategy is to attack.

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 12

Makert leaders should realize that not all multi-SIM-ers are the same: different approaches must be applied based on subscriber profile. MULTIPLE SIM OWNERSHIP > SUB-SEGMENTATION OF SUBSCRIBER BASE

Tactical map for a dominant player in a market with certain level of multiple SIM ownership.

•  High-value: it is important to increase share of wallet as much as possible. (Taking into account all practical limitations). •  For low users where we are not the 1st choice, effort whould be prioritized AFTER the other three quadrants have been addressed.

Subsriber value (MoU)

Share-max strategy

1.  Become 1st choice

1.  Become 1st choice (now) 2.  Stimulate ARPU (later)

Preemptive strategy

1.  Incrase loyalty 2.  Cross / up-sell

1.  Stimulate ARPU

Share of wallet (%)

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 13

•  For intensive users, the probability is that we will not be able to win a lot more in terms of share. Cross and up-selling are good possibilities, but retention actions are a must. •  For low users, ARPU stimulation action should be applied.

There is no unequivocal way to identify multi-SIM users, therefore a combined approach of identification and self-selection must be used. MULTIPLE SIM OWNERSHIP > DETECTING MULTPLE SIM USERS IN OWN BASE

Profile 1

MSISDN 1

MSISDN 2

MSISDN 3

Total mobile usage of one person

1.  The total telecom usage of one person is split between 2 or more different MSISDNs (same or different operators). 2.  The analsysis of each individual MSISDN usage will only give a partial picture and will look like 3 subscribes each with different behavior.

Usage data

Profile 3 No clear profile

Scoring

Each profile can be identified with different degree of certainty (a cut-off point during cam-paingn design and implementation), thus the boundaries between profiles will be soft. There will be a “no profile” category too.

Combined approach

% discount

Scaled benefits

3.  There is no reliable way to identifiy a multi-SIM user.

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Scoring Algorithm

Profile 2

Page 14

MoU off-net “Scale”: the benefit (e.g. off-net discount) is given when a certain volume of minutes is reached. A multi-sim user (who has the minutes and CAN bring them over) will be able to benefit. A lowusage subscriber won’t unless he/she incrases usage (desirable). This separation ensures no cannibalization especially when identification algorithm allows a degree of probability.

The methodology has two main outputs: a customized multi-SIM detection system for periodic reports, as well as first recommended action on multi-SIM. MULTIPLE SIM OWNERSHIP > CREATING THE TOOLS TO COMPETE SUCCESSFULLY IN A MULTIPLE-SIM MARKET

DESIGN

A

Data-driven profiling and segmentation

Define data extration query

Define anticipated MS profiles

IMPLEMENTATION Survey-based validation and refinement

B

Run 2nd probe

Design survery

C

Implementation of regular methodology

Implement script on choisen platrom

Develop delivery system + interface

D

Run first diagn. report and action recommendation

Run first diagnostic report

Extract usage data

Main Activities

Objectives & Deliverables

Run 1st probe

Implement call-out campaign

Adjust input vars, threshold levels and processing algorithm.

Validate input vars, threshold levels and processing algorithm.

WIP: Customized detection algorithm (not validated)

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

FIN: Validated customized detection algorithm

Page 15

Integrate with IT systems and processes

FIN: Automatic algorithm for periodic diagnostic

Based on output recommend on specific course of action.

WIP: First diagnostic report and recommendation

Multiple SIM ownership is the child of the aggressive competition in mobile telecoms. Operators must adapt to the new rules and maximize revenue share. MULTIPLE SIM OWNERSHIP > CONCLUSIONS

1.  Strong operator competition fuels the gradual appearance of multiple SIM ownership. 2.  Specifically four groups of factors drive the multiple SIM ownership: a)  The operator – pricing decisions and aggressive promotions b)  The mobile ecosystem – complementary devices and trends c)  The mobile market – market structure, price sensitivity, etc. d)  The society – cultural and non-rational factors 3.  No one single player can affect materially the extent of multi-SIM ownership. 4.  The impact of the mulpleSIM phenomenon is not one-directional, however it will typically erode and redistribute revenues from dominant players towards followers and new entrants. 5.  Strategy towards multiple SIM ownership: a)  Effort must be focused on share of revenues and not share of SIMs. b)  Dominant players should try to neutralize it by revenue protection actions – loyalty improvement (preemptive) and BTL revenue share maximization (reactive). c)  New entrants & followers: attack and take advantage of multiple SIM phenomenon. mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 16

Carlos Valdecantos Email: [email protected]

mmC Group Strategy Consultants Joaquin Turina 2, 1st floor 28224 Pozuelo de Alarcón, Madrid Spain Phone: +34 91 129 8100 Fax: +34 91 714 1888 Web: www.group-mmc.com Blog: consultantvalueadded.com

mmC GROUP Strategy Consultants – Multiple SIM Ownership in Emerging Markets

Page 17