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Australian Telco 2017


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Insights and trends influencing Australian telco in 2017

Published in: Technology
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Australian Telco 2017

  1. 1. Australian Telco 2017
  2. 2. Australian Telco 2017 Exec Summary : Soon, almost the whole Australian telco market will be like SIM Only / prepaid is now
  3. 3. Executive Summary 1 of 4 : Telco is already 60% SIM Only / prepaid, fueling MVNOs and ‘tiered’ content to value add People keeping phones longer Cheaper to buy phone outright and add SIM Data included in plans rising at similar rate Individual data usage rising 90% YOY 4G Network Coverage Parity A number of factors are driving SIM Only and Prepaid Sales These factors are accelerating SIM Only sales in Australia. Big telcos (+OVO) seek to differentiate with content in their plans MVNOs win as the market moves to SIM only. MVNO market share has nearly doubled in the last 2 years. SIM Only ‘taking over’ is Stimulating the growth of Australian MVNOs ( Network Resellers ) Optus and Telstra have content to differentiate in a no contract market but it’s not helping them sell plans.
  4. 4. 2 of 4 : eSIMs + phone leasing will further distrupt telco & their phone contracts - before 5G rocks the industry again Below : ( Actual eSIM screenshot ) The eSIM will explode the SIM Only and MVNO market Users will be able to pick their plan & telco from settings in 2017 The eSIM will remove friction in the changing process – increasing churn. Above : Credit : CNet Below : ‘5G arrives in 2020. It will become hard to charge for data in ‘GB’. Leasing phones allows users to avoid the up front cost of a phone without tying them to a particular telco. Below : ‘Unshakled’ just launched in the UK, allowing people to lease phones. Telcos will have to charge per service / for time periods. Per GB will be meaningless when data capacity is infinite.Leasing options, alongside the eSIM disintermediate telcos from their customers. Users experience ‘unlimited bandwidth’ entire seasons of TV shows can be downloaded in seconds. The eSIM will remove friction in the changing process – increasing churn.
  5. 5. 3 of 4 : Soon, the whole of telco will look like prepaid / SIM Only ; Forced by the economics & the removal of friction As individual data usage grows 90% per year, people have to shop around more. Nearly everyone now has a SIM Only / prepaid plan. The fact that 4G networks are all similar reduces fear of moving from Telstra / Optus. SIM Only & prepaid month to month agreements provide 50% more data each year. They move plans more often to get the data they need to match their usage. Once out of contract, moving SIMs is not hard as things stand.. Extra data charges in phone contracts ( up to $300 ) deters uptake these agreements. MVNOs, SIM Only plans, keeping phones longer and choosing refurbished devices lowers cost of ownership 50%. Phone leasing helps avoid up front cost of devices disintermediating telcos. MVNO SIMs can save $100 - $200 per year for the same network as some big telcos. Big Telcos rationalize their plan ranges to make it easier – using the Amaysim model. eSIM in phone means people can move telcos from settings. People care less about their 4G network because the 4G networks are much the same. Holding phones 6 months longer & using refurbs saves users $250 more Government enforced national roaming agreements and an end to Telstra’s USO further reduce network difference. Economic burning platform drives users to month to month agreements. How the new world looks. Many obstacles, hurdles and friction points of the current system have been removed.
  6. 6. 4 of 4 : So, what do you do ? Users & small telcos are sweet. Big telcos must educate on the value of content before 5G. Awareness and interest is actually quite good for the telco content. Education and firm up the bottm of the funnel. Small telcos – Educate on segment, acquire through affordable, well qualified traffic. OVO do well as Optus and Telstra educate the market on content. Users – buy the phone outright and move around a lot. They love it. Any tool which helps this will succeed. Below : Life is great for consumers. Everything is getting cheaper quick. Below : Small telcos can sit back and enjoy the ride. They just need to maintain a reasonable CPA. Below : Big telco need to focus on Education to stimulate Desire and Action now that they have the rights to content. • Get to an affordable CPA for sales and increase tenure. • Focus on table stakes with big data inclusions. • Work with partners who help target segmented traffic. • Enjoy the ride : Most of the structural trends currently operating in telco work in their favor.
  7. 7. Australian Telco 2017 The huge economic incentives driving the market to SIM Only & Prepaid plans
  8. 8. Above ; Cisco report that average data usage on a mobile phone increases around 93% per year in our region. This is not well understood by the public. People use twice as much mobile data each year. If this happens while youa re under contract, it can cost you $300 Above ; Users trapped in a contract while their data usage grows can be charged $100 - $300 for out of bundle data utilization. Being stuck in a contract as your data usage rises can cost $100- $300 in overage.
  9. 9. Conversely, outside contracts, every network raises their data inclusions 50%-100% per year –with no charge Above : SIM Only plan data inclusions rise by at least 50% each year, irrespective of network. Users who are prepared to take SIM Only and move around get this data for ‘free.’ Data inclusions in non contract plans rise between 50%- 100% per year. With no additional cost.
  10. 10. Factors driving BYO Sales. People keep phones longer. All the 4G networks are now the same. ( Not well understood. ) LEFT : People are holding on to their phones longer, reducing the total cost of ownership. For the ‘extra months’ they need a SIM Only plan. This is not well understood by the public. Click to find out more about how holding on to your phone will cut your phone costs. Extending your phone contract 6 months can save you $250
  11. 11. As SIM Only Plans ‘Take Over’, users are moving to MVNOs. Same network, more inclusions, lower price. MVNOs only sell SIM Only / Prepaid plans. Companies like Kogan, Amaysim, Yatango and Lebara use the entire Optus or Vodafone network – now including 4G – but are often cheaper. That Growth is Stimulating the growth of Australian MVNOs ( Network Resellers ) Below : Side to side comparisons make it easy to see what’s happening in the SIM Only market. Who would choose Optus here ? SIM Only ‘taking over’ rising from ‘less than 20%’ to more than 45% in 4 years. These from the SMH show the aggregate effect of the factors shown in earlier slides.
  12. 12. Factors driving BYO sales. SIM Only plans save a lot of money. Up to 25% when taken in place of a contract. Left : iPhone 7 users who bought their phone outright and added a SIM saved at least 25% over the course of their contract. Click to find out more about buying your phone outright ad saving 25%. Click to find out more about saving another 25% by avoiding overage. Buying an iPhone 7 this year and adding your own SIM Only plan could save you $500
  13. 13. Australian Telco 2017 3 factors could remove remaining friction and put an end to all but a few phone contracts
  14. 14. 1 ) You don’t need to stick to a particular telco to get a quality network – the 4G networks are all the same Unless you live on the geographical fringes of Australia, the 4G networks are all about the same quality, This is not well understood by the public. Click to find out more about Australian coverage. Click to find out more about why we should not have 3 parallel Australian networks. 0 100 200 300 400 500 600 700 800 900 1000 Telstra Optus Vodafone Networkscore/1000 December 2016 - Another report shows near network parity Source : The Australian Multiple sources confirm this. National roaming agreements and an end to Telstra’s USO funding are likely to accentuate this trend.
  15. 15. 2 ) You don’t need to sign a 2 year agreement with a telco to get a ‘free’ phone ( if leasing is launched here. ) Source Source Source Above : Telstra recently announced a consumer leasing scheme. Below : Telstra’s Leasing Scheme Below : Apple’s Leasing Scheme Below : Samsung’s Leasing Scheme Above : Apple’s scheme operates in the USA. Above : Samsung may be testing their scheme in South Korea. Left : In Nov. 2016, an independent UK company started leasing phones • Such a leasing scheme in Oz would separate the phone from the telco and remove the last incentive to sign a contract : • Leasing schemes provide a phone without an up front cost, too. • It appears only a matter of time until independent leasing schemes land here.
  16. 16. 3 ) You don’t need to go to the shops to get a SIM when the eSIM launches – you just change providers in settings The eSIM lets pick a plan from settings • Thee eSIM has been operating in a small number of devices in the USA and UK for the last 18 months. • It is likely that both Samsung and Apple are testing the eSIM • Notably, some eSIM implementations are half and half solutions. • On Apple’s iPad for example, the user inserts a physical SIM which then downloads settings over the air. • Note – the eSIM sign up experience is really bad – one of the reasons it is forecast to roll out slowly. Picking a plan requires the user to select an operator and then select a plan.
  17. 17. Australian Telco 2017 The problem with telco’s content approach
  18. 18. The big telcos have invested heavily in content rights. The result is a complicated, tiered system that few people ‘get’ Critically, entertainment / content is often ‘zero rated’ –users are not charged for the data employed in accessing the content. sdf Optus, Telstra and Virgin all have some form of Entertainment option in their mobile phone plan The pricing is changing regularly and varies from free to charged for.. Below : Multiple different sorts of content are offered. Some ‘free’, others charged for sdf Below : These entertainment offerings are actually simple to understand Existing messaging falls short of actually helping customers understand sdf
  19. 19. The rights were expensive. Telcos had every right to believe entertainment would be adopted quickly. It hasn’t been. • Optus spent an astonishing amount of money, ($A200m) over three years. • Optus experienced a slight decrease in its total mobile subs • 9.3 million for the Sept. quarter, • Down slightly from 9.4 million in the same period last year. Below : Consumption spreads faster each yearBelow : Optus spent a lot of money on the EPL right and have not yet seen a sales benefit Optus has not seen the service taken up in the way that a ) They would have hoped or b ) is now common. Despite having spent a lot of money on football rights The questions are why is this happening and what can be done about it ? Chart source :
  20. 20. And the phone companies need to solve the adoption problem before 5G arrives • Typical agreements between an individual and their phone company include voice minutes, SMS and data. • We are about to enter a world where data speeds are so fast that networks will feel infinitely empty. • Since value flows to things that are scarce, how will telcos charge for the data they use ? • And didn’t this happen with international fibre optics 20 years ago and crash the price for international calls, putting a lot of companies out of business ?! Below : From Cnet – 5G will offer ‘Limitless bandwidth’ When 5G data is essentially limitless, how can phone companies charge for a GB of data ? They will need to charge for services – for example, 1 week of access or ‘unlimited data and ABC iViewer access on your phone.’ Find out more about data charging in a post scarcity world here. Below : The problem in a nutshell’
  21. 21. Australian Telco 2017 What can each party do?
  22. 22. Appendix
  23. 23. Given these circumstances, what can small telcos do ? WhatPhone is designed specifically for small telcos. Small telcos know what they need to do : • Get to an affordable CPA for sales and increase tenure. • Focus on table stakes with big data inclusions. • Work with partners who help target segmented traffic. • Enjoy the ride : Most of the structural trends currently operating in telco work in their favor. OVO Mobile are a good example of focus on the core of what makes MVNOs successful. Segment : Be smart – content and segment like OVO. CTA Tenure is designed to assist segment, qualify and direct shoppers who are about to buy. We convert 70%+ of those who choose a partner to MVNOs.
  24. 24. What can big telcos do? Educate people as part of the SIM buying process. Win hearts & minds before 5G arrives. • Awareness of the new content rights is actually pretty good. • Big telcos need to focus on Desire and Action elements. • Be at point of research with as much detail as is needed. • E.G. Explain what ‘zero rated’ means ! • They have limited time to act. • Charging per GB will be meaningless @5G speed. • There is a limit to the time big telcos can waste in helping users as part of their research process. Clock source : 5G Below : AIDA is a standard marketing framework. The telcos now have content rights. They need to work through the rest of this process. Below : 5G will be released in 2020 in Australia. ( in Approx 3 years. ) 5G will offer users the perception of infinite bandwidth. is present for 1m visitors – educating and informing them about which SIM Only plans to buy.
  25. 25. For the user, things are great. WhatPhone can assist users with tools to make it easier to find the right network for them. Wait, so if I buy the phone outright, and add a SIM Only it’s up to 25% cheaper over the life of the phone ? And I can avoid extra data costs as my usage increases because I am not trapped in a contract ? And they give me 50% more data each year on a SIM Only plan anyway if I am not in a contract ? And has an app which tells me the best plan to get ? And the 4G networks are all on a par now anyway so I can switch it doesn’t matter what network I am on ?? And I can keep my phone longer than 2 years ? Because that’ll make it cheaper, too. Maybe I’ll be able to lease the phone soon, too. That’ll be even better for me. Smart consumers have taken advantage of the move to SIM Only for good reason. There is every reason to believe these trends will continue. Below : What real users say about SIM Only plans And what they need to help manage them has tools to assist users in moving between telcos may do well.
  26. 26. Apple have filed a multi SIM patent. Could the first version be a hybrid physical / eSim to educate the market ? • Left : In December 2016 it was reported that Apple had filed yet another patent. • The suggestion in the article was that Apple might launch the iPhone 8 with dual SIM capability : One eSIM and one physical SIM • This would seem to be in line with the tests they have performed in the UK • And a stepping stone for the market giving the benefit of both SIMs without excluding the ‘tried and tested’ way of adding a SIM. Industry stories suggest that Apple might release the eSIM in the iPhone 8 – September 2017 How could the eSIM experience be improved for customers ?