FIXED MOBILE CONVERGENCE: DRIVERS AND … · Percentage of fixed broadband households with...

Qatar Telecoms Summit 2016: Building blocks for successful operator strategies

© Analysys Mason Limited 2016

QATAR TELECOMS SUMMIT 2016

BUILDING BLOCKS FOR SUCCESSFUL OPERATOR

STRATEGIES

FIXED–MOBILE CONVERGENCE:

DRIVERS AND POTENTIAL IMPACT ON

MARKETS IN MENA

KEREM ARSAL

NOVEMBER 2016

EVENT SPONSOR

#AMTMT



FMC take-up has varied in European countries, due to

different market conditions and operator incentives

2

Percentage of fixed broadband households with fixed–mobile convergence (FMC) bundles, selected European

countries, 2012–2020

40-70%



Many factors act together as incentives and drivers for FMC

take-up

3

0Mobile market

share growth

Mobile

competition

Household

structure

Fixed broadband

churn

Strong declines in ARPU

Strong fixed broadband and

weak mobile; multi-SIMExposed fixed-only players; MVNO-

conducive wholesale regimes

Household size and

budget decision-makers

FTTx strategy

RoI acceleration; cross-selling

by mobile discounts

Pricing and affordability

Recognisable discounts or benefits;

acceptable margins

Market structure

Integrated operator prevalence; consolidation


© Analysys Mason Limited 2016 4

FMC is not always triggered by integrated incumbents but

symmetrical market leadership is key

Leaders in both fixed and mobile can

expose standalone competitors

Fixed challengers without mobile have

little to lose with an MVNO

Leading FMC

operator

Mobile market

share at launch

Fixed market

share at launch

Deutsche

Telekom34% 42%

KPN 46% 42%

MEO 47% 52%

Movistar 35% 49%

Orange 43% 46%

TIM 35% 49%

Virgin 4% 20%

Market structure

Challenge mobile operators with

limited fixed broadband assets

Improve retention (fixed and mobile)

Consolidate mobile SIMs in

households

Steal market share from mobile-only

This does not exist in the region



1 Bundles launched: France – Orange Open; Germany – Telekom MagentaEins; Italy – Wind and Telecom Italia; Poland – Orange Open; Portugal – Meo M4O; Spain – Movistar Fusión.

Flagship FMC bundles were launched in most markets when

mobile ARPU was in sharp decline

Mobile competition

Mobile ARPU, selected European countries, 2008–2014



Data allowances for FMC and standalone bundles, selected European countries, 2015

6

FMC is not the end of standalone mobile plans: operators

keep their high-end mobile tiers out in stable-ARPU markets

Mobile competition



Percentage of contract SIMs that are part of an FMC bundle (excluding M2M),2012–2020

FMC SIMs can climb up to 40% of all postpaid SIMs

Mobile impact



Prepaid-to-postpaid migration is a common consequence of

FMC bundling in many markets

Mobile impact

Postpaid percentage of subscribers before and after convergence, selected European countries



Mobile NPS for standalone mobile and FMC bundles, selected operators, 2015

9

Mobile Net Promoter Scores are better for FMC than for

standalone mobile – fixed broadband acts as an anchor

US operators have

mediocre reputations for

fixed broadband

Mobile impact

Biggest change in score



Number of SIMs per FMC account is a key metric that relates

to mobile market share changes

10

Number of SIMs per FMC account, selected operators, 2015

Mobile impact

High potential in Qatar

(GCC) households



Multi-SIM initiatives are used to capture as many SIMs as

possible in a given household

11

US-like shared data pools

Explicitly multi-SIM

Head start with free SIM

Mobile impact



Discounts at the entry level vary widely and are about closing

gaps between operators’ offerings

12

FMC discounts for basic plans (compared to

standalone sum), selected European countries, 2016FMC prices (USD, PPP-adjusted) for basic plans,

selected European countries, 2016

Pricing



Incumbents want higher ARPU from high-end user segments,

where they have some room for differentiation

13

FMC prices for advanced plans (USD, PPP-adjusted), selected European countries, 2016

Pricing



FMC is not solely about discounting and price – customers

see other benefits

14

Respondents’ overall mobile service satisfaction

scores by bundle type, selected countries, 20151

Respondents’ mobile service satisfaction scores for

price by bundle type, selected countries, 20151

Pricing

1 Question: “Please rate on a scale of 1–7 your satisfaction with the following aspects of your mobile service”, n = 6847. Other service aspects included ‘data allowance’, ‘data speed’, ‘customer service’,

‘voice/SMS allowance’ and ‘coverage’.

Converged

Standalone

novelty of discounts decays, prices sometimes rise, discounts can be

difficult to see.



Bundling tactics go beyond pricing – they allow operators to

target segments, pursue upsell and play to their strengths

15

Highlight benefits instead of

discounts

Make standalone services less

attractive – MEO and NOS reserve top

fixed broadband tiers for 3- and 4-play

Reserve key services for FMC –pay-TV at Movistar Spain

Segmentation by selection of

mobile plans

Pricing

Talk Talk’s maximum

quota is 2GB



How important is pay-TV for take-up of FMC bundles?

16

Pay TV’s role in FMC take-up is

moderated by triple-play tradition

― France, the Netherlands and Portugal:

pay TV a near-must in FMC.

FMC can grow without telco pay-

TV tradition, too

― Italy, Spain and Turkey

― “Light” TV tactics used to compensate

― Pay TV as a new round of upsell and

churn protection

Percentage of fixed broadband subscribers with FMC

or pay TV, selected European countries, 2015



What is the FMC case in the GCC?

Mobile markets are healthy, therefore

FMC pricing may be cautious at best.

Incumbents may use FMC to increase

their hold on customers as fixed

broadband markets open to competition.

Mobile challengers unlikely to initiate

competition in FMC, as they are weak in

fixed broadband.

Cautious (higher) pricing could mean low

consumer appeal and slow take-up.

Incumbents are favourably positioned in

market structures.

Loose bundles can be used to experiment

with different discount points.

FMC may not be urgently required,

especially in two-player markets.FMC can be done, but that does not mean

it should.



Key takeaways

18

1 The market structure is conducive to FMC, but the mobile

market appears too healthy for heavy discounting

2 FMC bundles are not just about discounts; bundling

tactics can be used for segmentation and upselling

3 FMC can be done, but that does not mean it should.

Experimenting with loose bundles is a low-risk scenario



Contact details

19

Cambridge

Tel: +44 (0)1223 460600

[email protected]

Milan

Tel: +39 02 76 31 88 34

[email protected]

Dubai

Tel: +971 (0)4 446 7473

[email protected]

New Delhi

Tel: +91 124 4501860

[email protected]

Dublin

Tel: +353 (0)1 602 4755

[email protected]

Paris

Tel: +33 (0)1 72 71 96 96

[email protected]

London

Tel: +44 (0)20 7395 9000

[email protected]

Singapore

Tel: +65 6493 6038

[email protected]

Madrid

Tel: +34 91 399 5016

[email protected]

Manchester

Tel: +44 (0)161 877 7808

[email protected]

@AnalysysMason linkedin.com/company/analysys-mason youtube.com/AnalysysMason analysysmason.com/RSS

Kerem Arsal

Principal Analyst

[email protected]

Boston

Tel: +1 202 331 3080

[email protected]

Hong Kong

Tel: +852 3669 7090

[email protected]

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