Driving Mobile VAS Adoption and Creating a Sustainable VAS Proposition in New Mobile Generations

Driving Mobile VAS Adoption and
Creating a Sustainable VAS Proposition
in New Mobile Generations
By ALI Saghaeian
Chief Analyst & Consultant
Telecoms, IT and Media
Ali.Saghaeian [at] gmail.com

Objectives
• What are the transforming drivers in our industry
• How to effectively drive Mobile VAS Adoption
• How Video is Shaping the Telecom Industry
• Understanding Location Application Domains
• What are New Sales Potential via Value Added
Services
• How to build a solid VAS Proposition for Operators

Agenda
• Mobile VAS and Real time Contextual offers
• Go-To-Market Solution for Next Generation
Mobile Operators
• Superior Monetisation Potential and Freemium
Business Models
• Churn Reduction Potential via VAS Offering
• Video Content & MNO Business Models
• Spectrum of LBS applications for mobile operators
with extended Wi-Fi

Five drivers are transforming our industry
Intensifying M&A
and consolidation
Fierce competition from
traditional & OTT players
Changing customer
expectations
These
game-changers
require
service providers
to adopt
new strategies
Regulatory
interventionism
Technology & innovation
accelerating

Mobile VAS – Real time Contextual offers
• Flexible Offer design ,rule based promotions based on usage, loyalty, traffic and
events
• Event based Offer Management , Integrated with Real time Analytics
• Personalized offers based on subscriber historical data records
• Proactive Real time updates and notifications for upsell
Data Top Up Turbo Boost
Day special
offer Wi-Fi Add on Plan
Location based
Promotions
Data Passes
Data
Roaming Uses Cases that Substantially Increase Offer Uptake

Go-To-Market Solution for Next Generation
Mobile Operators
Launch Monetize
Personalize
•Target Customers & Market Positioning
• Decide business model
•Selecting the Right IT Platform
•Increase Revenue & ARPU
•Flexible Pricing
•Monetization Use Cases
•Enhanced Customer experience
•Value Added Services
•Mobile Self Care App
•Analytics to Personalize user experience
Go-To-Market Solution for Next Generation
To succeed, Operators must pursue a strategic approach, with next-generation BSS systems that leverage the opportunities of real-time interaction and commerce

Freemium Business Model
It is based on the up-sale of high-margin value-added and digital services
to a ‘low-cost’ freemium-acquired customer base
Basic Plan
Up-sell high margin Value Added Services
Usage Alert
Extended Warranty
Private Internet
Data Rollover
Security
Premium VIP Services
€ 1.99
€ 3.99
€ 7.99
€ 3.99
€ 2.99
€ 3.99
€ X.XX / month
X Mins
Y SMS
Z MBs
MONTHLY
€ 0.00 / month
X Mins
Y SMS
Z MBs
FREE
€ Y.YY / month
X Mins
Y SMS
Z MBs
YEARLY
Upgrade and up-sell implemented through sophisticated conversion platform
Upgrade to Subscriptions

Superior Monetisation Potential
Once a 'free' end-user has been acquired, the most important next step is
its conversion from a 'free' into a 'paying' user, resulting in the
monetization of the newly acquired base
Underlying technology platform drives paid conversion better than world's best Internet companies
"Free" converts to revenue generation as subs use more data and take up value-added services
35%
42%
35%
37%
41%
42%
47%
48%
49%
48%
48%
Q1-2013
Q2-2013
Q3-2013
Q4-2013
Q1-2014
Q2-2014
Q3-2014
Q4-2014
Q1-2015
Q2-2015
Q3E-2015
Traffic bundles, 36%
Pay as you go, 6%
Value Added Services, 29%
Free traffic, 29%
7%
8%
9%
10%
11%
14%
18%
23%
29%
32%
35%
Q1-2013
Q2-2013
Q3-2013
Q4-2013
Q1-2014
Q2-2014
Q3-2014
Q4-2014
Q1-2015
Q2-2015
Q3E-2015
Monthly conversion rate
(%)
Distribution of 'pay' services among customer base
(%)
VAS adoption rate
(%)
Required conversion rate to 'break-even': 30%
Current conversion rate: 48%
Once a 'free' end-user has been acquired, the most important next step is its conversion from a 'free' into a 'paying' user,
resulting in the monetization of the newly acquired base

New Sales Potential via Value Added Services
•VAS are typically used to boost new sales with a bundle model, i.e. customer receives the VAS for free for a certain period when taking a new subscription or porting from competitor
•Bundle can extend to full subscription contract period or be of shorter duration
•Bundle can be ”hard” or ”soft”
–In a hard bundle, the service is connected to all customers signing up for subscription
–In a soft bundle, the service is optional to customers signing up for subscription
•After bundle period, customers either retain the service and start paying standalone, or revert to the free version
Impact on new sales
New sales ARPU ~25 € ex VAT
Bundle cost 25-85% standalone price (~10 €/month incl. VAT)
Bundle validity vs. contract validity (3-24 months)
Bundle is hard or soft
Service retention rate
Average sales commission (taking into account online share)

Churn Reduction Potential via VAS Offering
Churn 20%
Loyalists 25%
Premium service penetration 6-24%
Churn prevented by VAS 20-50%
0,06-0,60 percentage points Will churn regardless Non-users Bargain hunters 75%
Premium service penetration 0%
Churn is not homogenous – your most loyal customers are most likely also to buy your value added services
Extremely sensitive to the nature of the service – how much effort the customer must put into changing the VAS provider

Value for money offers with Distinctive Value
Added Services
Case of PosteMobile (in Italy)
PosteMobile is positioned as the enabler of the mobile digitalization
with innovative, simple and secure services
4
Voice Messaging Internet Contents
Products Distinctive VAS
M-Banking
M-Payment
A Complete and Distinctive Offer
e-mail
Pay per use Browsing
Tariff Plan
Bundle Tariff
Plan
Customised
Options Social
Networks
M-Commerce
M-Postal Services
M-ticketing
News
Entertainment
Finance
Sports
Gossip
Pay per use
Tariff Plan
Bundle Tariff
Plan
Handsets
Smart phones
Internet Keys
Tablets
PCs
W hat’s next?
Mpos & Merchant
Services
M-Ticketing
(parking, transporta
tion, car&bike
sharing)
Mobile Banking
Mobile
Payment
Mobile
Money
Transfer
Mobile
Commerce
Mobile
Proximity Services
Access
(corporate,
m-government
highways)
Insurance
(house, health, car)

The strong adoption of Distinctive VAS is
confirmed by the high volume of transactions
Total transaction value of Distinctive VAS keeps growing since
PosteMobile’s launch, as well as the number of transactions
al Transaction Value Number of Transactions
29.7
Eur Mil Transactions, Mil
256
290
339 +17%
+20%
Total transaction value of Distinctive VAS keeps growing since PosteMobile’s launch, as well as the
number of transactions
Cumulative
18.7
23.3
24.6
2011 2012 2013 2014
198
2011 2012 2013 2014

The Global Media and Entertainment
industry: Opportunities for VAS Providers
TV subscriptions and licence fees
2019
2014
$ billions

Digital music: The potential for growth is
significant
Global music streaming revenue will exceed US$4bn in 2018
0
500
1000
1500
2000
2500 3000
3500
4000
4500
2013 2014
2015
2016 2017
2018
Global music streaming revenue ($USmn)

Global, consumer spending on digital music,
2014- 2018
• Mobile operators’ share in developed markets is very little – negligible - but can command a bigger share of the retail price of mobile formats - ring tones, ring back tones - in the less developed territories
6,258
6,520 6,755
6,891
7,057
2,692
3,174 3,557
3,837
4,035 1,230
1,212
1,233
1,292
1,399
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2014
2015
2016
2017
2018 Consumer spend ($m)
Downloads
Subscriptions and streaming*
Mobile

TV and Video over 4G
•LTE is a Video Distribution Network
•Innovation enables differentiation
•Differentiation drives monetisation

Video is Shaping the Telecom Industry
1 million minutes of video content will cross the network by 2018.
Globally, IP video traffic will be 79 percent of all IP traffic by 2018
Consumer VoD traffic will double by 2018.
Content delivery network traffic will deliver over half of all Internet video traffic by 2018.
IP Video and Mobile trends converge

Key Numbers in the Market
Global video traffic *Cisco
Online global video subscription revenue *Statista
Online video advertising spending in the U.S *DTVR
TV viewing done through digital streaming *gfk MRI
Consumers watch streaming video daily *Nielsen
Abandonment rate immediately with poor quality *Akamai
Abandonment rate with 5 sec startup delay *Akamai
Consumers are frustrated with video buffering *Research Now
Severely irritated when a video didn’t load quickly *Research Now
Users heart rate increase when buffering *Ericsson
25,000,000 TB
$10B
$6.5B
28%
43%
33%
50%
66%
21%
38%

Online Video Viewing Habits
Internet TV show and movie viewership continues to grow for adults
18-24 and 55+, but is relatively flat for other age groups
How often do you watch TV shows or movies on the internet?
(% of respondents who watch at least weekly)
Base: AllSource: 2012-2014 AV&Co. Surveys, 2015 AV&Co./EPIX Survey (n=3,461), AV&Co. analysis
62%
60%
45%
33%
24%
75%
72%
54%
37%
26%
81%
80%
68%
51%
36%
79%
82%
77%
66%
48%
89%
84%
73%
65%
60%
18-24
25-34
35-44
45-54
55+
2011
2012
2013
2014
2015

Barriers to Mobile Video Consumption
•The number one barrier to usage is still ‘Data Shock’
•Adaptive streaming makes it difficult to explain what an hour of TV ‘costs’
•W e need communicate the maximumamount of data used for programmes
•W e can do this for most of the mainstream UK broadcasters
•Do we need to start to think about charging in duration not MB/GB?
•What challenges would that bring?
Consumer barriers to watching mobile video
Data costs too high
Content costs too high
Low internet speed
Poor Coverage
Device limitations
Accessing Content too difficult
Quality poor
Content poor

Mobile Device Usage in Online Video Services
Consumers who use online video services on a smartphone or tablet do
so primarily to watch short clips they can only find online or TV series
Short clips I can only find online
TV series
Music videos
News
Movies
TV series I can only find online
Short shows I can only find online
Live sports
Game shows, Reality TV cooking, etc
How often do you watch the following types of content on a mobile device (e.g., smartphone, tablet)?
(% of respondents who watch video on mobile devices at least weekly)

Video Content & MNO Video Business
Models Mandates
A Flexible Set of Edge-based Delivery Strategies
Mobile-Edge Delivery Strategy
OTT Cooperative Content Delivery
(Billing-Based Rev. Share Agreement)
OTT Encrypted Content Delivery
(Cooperative or Non-Cooperative)
Video Content Type
+ Session Encryption
(e.g. SSL)
+ Content Encryption
(e.g DRM)
Managed Content Delivery (MNO owned Quad-Play) OTT Content provider + CDN
+ Session Encryption
(e.g. SSL)
OTT Encrypted Content Delivery
(Key Sharing Agreement)
OTT Hosted Content Delivery
(Edge-based CDN Hosts: OTT SW + Content)
MNO Video Strategy

Location is a data play, not just a service
enabler

Location Application Domains: An expanding
remit across many domains

Location Based Services Ready for Growth
30% CAGR between 2014-19 Source: Convergence Catalyst 74% Of US smartphone owners use LBS Source: Pew Research $43 B Market Size By 2019 Source: Juniper Research How W ill You Capture the Opportunity? Location Based Services Ready for Growth Guest Wi-Fi Navigation Analytics Push Notification Staffing & Asset Management

Spectrum of LBS applications for mobile
operators with extended Wi-Fi

Paradigm Shift: A Buying Led Approach
Order
Control
Care
International Roaming Pack
200 MB / wk
European Roaming Pack
500 MB / wk
Off-Peak Booster
Unlimited Fast Lane data access during off-peak hours
$3 for 30 days (subject to F.U.P)
Tablet Pack
2G of Standard+ Data
$6 / month
Social Media Pack
Unlimited access to your 5 favourite socials
$2 / month
Offer for One
Create your own personalized plan that’s just for you!
Gaming Pack
Unlimited Fast Lane access to your 5 favourite online games
$1 / hour
SpendControl+
Set your own daily/weekl/monthly text notifications
$3 / month
Navigation Pack
Unlimited GPS access per day (+ appropriate QoS)
$1.5 / day
Share Everything
Unlimited TALK Unlimited TEXT Shareable DATA On up to 10 devices
Starting from $100 / month
Fair Usage
1 GB Fast Lane data & usage notifications. Additional usage @ normal lane speed. Purchase of additional Fast Lane data bundles
Concert Replay
3 day Fast Lane concert replay streaming no other data charges during off-peak
$5 for 3 days

Any Questions?

Driving Mobile VAS Adoption and Creating a Sustainable VAS Proposition in New Mobile Generations

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