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| Next Generation Prepaid |
More information about the report
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Most of today's mobile telephone customers around the world use various types of prepaid solutions when purchasing their mobile telephony. There is simply no doubt that it was prepaid telephony that resulted in the explosion of mobile telephony penetration.
From a historical point of view it was Andrew Wise, founder of Banana Cellular, who filed patent number 5826185 on 16 November 1994. This patent was for a solution allowing customers to connect to any other mobile phone on the prepaid network.
In 1996/97, TIM in Italy was the first operator to launch the prepaid solution that is so widespread today, allowing customers to purchase and pay for a certain amount of traffic that is credited an account related to a mobile number and a SIM card and which can then use the money or amount of traffic available in the account.
When we look at the global mobile market, there is no doubt that the marketing and sales of prepaid mobile telephony is a global success that all mobile operators around the world now offer their customers. Billions of euro and trillions of minutes and SMS are being consumed on the prepaid platforms being used by operators, MVNEs, MVNOs and Service Providers.
The development of prepaid products since their launch in 1996
When we examine the prepaid market from a global perspective, we see that this area has not changed a great deal since the launch of the very first prepaid products. In fact today's prepaid products are very similar to those launched by operators at the end of the 90s.
If we take a closer look at the innovation within this area, it is limited to 5 areas:
1. The introduction of electronic topping up - ATM, online, PtP and electronic vouchers
2. The possibility of roaming - the introduction of Camel
3. The use of multibrand's and other brands, rather than the operator's primary brand
4. The use of MVNOs to market and sell traffic
5. The introduction of new types of traffic that can be purchased via a prepaid account
In actual fact, innovation has been very limited within the prepaid area since the product launched and new customer segments started choosing it to purchase their mobile telephony.
How much innovation can you honestly say you have seen on the prepaid market during the past 10 years? And has the limited amount of innovation you have seen helped increase ARPU, reduce distribution costs and improve profitability on the prepaid market? The results from our research say "no".
10 Mega-trends on prepaid markets - today's largest challenges
When we examine the prepaid market, there is little doubt that many operators are seeing their prepaid business case develop negatively, and that what was once good business is developing into a less attractive business area, with operators in many countries fighting to move customers away from prepaid accounts and over to various types of postpaid products.
At Strand Consult we have spent almost 2 man years researching the prepaid market and we have identified 10 Mega-trends within the prepaid area that almost all mobile operators will need to address, if they want to avoid seeing the negative trends on the prepaid market continue. The 10 Mega-trends are:
1. Decreasing traffic prices - outgoing traffic and terminated traffic
2. Inexpensive or free on net traffic
3. Cheap international traffic
4. Cheap SMS packages with huge numbers of SMS
5. Prepaid mobile broadband
6. Increasing churn
7. Distribution fraud - the race to increase the number of SIM cards is resulting in many SIM cards never being activated, or alternatively being recharged and used more than once.
8. Decreasing top up prices - the use of electronic top up has reduced top up costs in many countries
9. The increasing use of the Internet for distribution - online SIM sales and topping up
10. Multi SIM problems. An increasing number of customers have two, three or more SIM cards and use them depending on who and/or when they call.
Most operators recognise the above trends. In reality these trends are resulting in the margins on prepaid products decreasing over time.
In some countries the consequences are so large and competition is so fierce, that operators are experiencing increasing SAC and decreasing ARPU - and a churn rate that is simply exploding. A mobile penetration of over 120% is not a sign of a healthy market, but a sign that an increasing number of customers are choosing to use multiple SIM cards.
Around the world there are now operators that are seeing this segment of their business - that once was a cash cow - developing into a business that in many areas is becoming a nightmare. The price difference between prepaid and postpaid products is marginal, while at the same time an average prepaid customer has a significantly lower ARPU compared to postpaid customers.
As penetration increases and the battle moves from being a battle over new customers, to a battle over retaining existing customers, it is most often the pricing parameter that is used to compete over which operator a customer chooses for their telephony. And we are increasingly seeing that customers are choosing to have multiple SIM cards from various operators, basing their choice of SIM card on who they call, when they call and why they are calling. All customers are interested in is access to cheap traffic, without taking into consideration any impact this has on operators.
How can Strand Consult help you optimise your prepaid business case?
We have spent the necessary time to analyse and understand this market and have had a close dialogue with many operators around the world to collect knowledge, analyses and experiences from the global prepaid market.
One of our teams has spent two man years examining the prepaid market and has developed a number of concepts that can help turn the negative trends that many operators are experiencing today. We know that knowledge is the road to success and the operator with the most knowledge and a structured approach to their prepaid strategy, will find it far easier to be successful on this market. Our analyses show that many operators are currently using a great deal of their prepaid market resources on short-term solutions, solutions that are for example focused on matching competitor’s prices. But this behaviour is very similar to a spiral of death, that will slowly but surely result in an operator's prepaid business case developing negatively.
We therefore recommend our customers to purchase a customised Strand Consult workshop, where we together examine the prepaid market, how it has developed and how it will develop in the future. We can deliver a combination of knowledge, inspiration and a number of creative suggestions for concepts that our customers can immediately implement.
We offer a workshop concept that ranges from one to three days:
1. One-day workshop - What does the prepaid market look like and how is it developing?
2. Two day workshop - We go into more detail and discuss with your employees which concepts would suit the markets you are doing business on.
3. Three day workshop - Based on your financial figures and markets, we analyse when it would be optimal for you to implement Next-generation Prepaid products to help improve your business case.
All three workshops are based on the prepaid markets that you do business on and your financial reality. The workshops examine how an individual operator can reinvent his prepaid strategy and take advantage of a number of new initiatives to improve the economy of an existing customer base.
We know that by using the correct strategy, our customers can both improve their market position and increase earnings, benefiting both the company and its shareholders.
Our workshop concept ensures that all our workshops are customised to each individual customer, thereby ensuring that our customers increase their level of knowledge and receive personal creative sparring that can be implemented immediately.
Strand Consult has utilised our knowledge and information to design a process that allows us to help mobile operators optimise the way they work in the prepaid business area. The process on how to create next-generation prepaid products looks like this:
- Pre-workshop process. We deliver pre-workshop tools and materials that enable us and our customers to optimally prepare for the workshop. This includes exchanging questions and information and setting workshop goals etc.
- The workshop. We hold the workshop based on a plan and presentation. During the workshop we examine the operator’s existing experience, current challenges and possible solutions.
- Post-workshop. Practical work. The customer receives a tool that enables them to easily continue working on their prepaid strategy, helping them to e.g. implement new work routines that will increase profitability.
What could the starting point be for a NGP workshop?
When we hold workshops for our customers it is important to us that they receive the optimal benefit from the day. Our workshops are not standard workshops, but always customised to the individual customer and based on the market the customer is doing business on.
It is our goal when the workshop is over, that we have not only heightened your level of knowledge, but also discussed the largest issues and challenges that you - in your opinion - are currently facing.
There are many differences on how prepaid markets function in different countries and continents. Additionally, all our workshops are structured to ensure that we discuss all the subjects that are relevant to the operator during the workshop.
The Next Generation Prepaid – how to achieve success.
• Your mobile market - past and present
• Today's mobile market - moving from a voice market to a voice and data market
• The prepaid market from a historical perspective - MNO, MVNO, MVNE and SP
• The underlying prepaid business case - how will it develop over time?
• Cases: Experiences from other countries
• Five market scenarios based on your market
• Next generation prepaid - our views on this market
• Four continents - different challenges and issues
• Experiences from South America
• Experiences from Africa
• Experiences from Asia
• Experiences from Europe
• Similarities and differences compared to your country/markets
• What can we learn from them - what can they learn from us?
• Creative ideas created as a result of a dialogue
• Creative ideas - packaging prepaid products
• Creative ideas - pricing targeted at different customer segments
• Creative ideas - ways that operators can market prepaid products in the future
• Creative ideas – new distribution models
• Value Added Services – how to add value to prepaid products
• New methods to analyse and segment the prepaid market - what are we measuring?
• A plan of action for the next generation prepaid process
• Q&A
The above agenda is however just a suggestion on how a workshop could be structured. For Strand Consult, it is very important that our workshops are not standard workshops, but always customised to each individual customer, based on their market and current situation.
It is our goal that when the workshop is finished, we have not only helped increase your level of knowledge, but also discussed the most important challenges and issues you are currently facing in this area.
How do we prepare for the workshop?
Before we meet we have done a great deal of preparation - preparation that can be divided into three main elements that are the foundation of all our workshops:
1. The reports and research that are the foundation of Strand Consult’s work
2. The knowledge we have of the market you are doing business on.
3. Your input and the thoughts and questions you want illuminated and debated.
We have a great deal of knowledge and experience and a large research department that is constantly analysing the market. In reality you could say that we do not lack knowledge, but we need help to sort through all our knowledge and experience in order to customise the workshop to your needs and requirements.
We can very quickly make a basic outline of a presentation that contains the elements we believe are important to touch that day and will of course generally base the workshop on the elements and issues from our initial dialogue.
How can you optimally prepare yourselves?
We know from experience that our customers will receive the optimal benefit from the workshop if they spend the necessary time preparing for the workshop - the better prepared you are - the better the workshop will be. Quite simply you could say that a workshop is like a meeting and the best prepared employee will most often benefit most from the meeting - especially if the meeting is about exchanging knowledge, experience and ideas.
We have divided your preparation into four elements. You can choose yourself the amount of time you want to spend on each element.
1. Read the chapters in our report we will be focusing on, we can help you with information regarding which chapters are most relevant for the workshop.
2. Make a list of questions/subjects you want to discuss at the workshop, including a description of why these subjects are important to you.
3. Briefly describe your market and who you believe your primary competitors are in the short, medium and long-term and why you believe they are your competitors.
4. Send us a list of participants, including their job description and what each individual participant expects to benefit from the workshop.
If there is anything missing from the above four elements please do send us a mail with that information and any questions you might have.
Quite simply the more information you have acquired before the workshop, the easier it will be for us to further increase that level at the workshop and similarly, the more information and questions you send us, the easier it will be for us to adapt the workshop and thereby ensure you get the maximum benefit when we meet.
What information do we need from you for the workshop?
During the planning phase of a workshop, most of our customers contribute a good deal of information that we use to structure and optimise the workshop and which makes it far easier for us to contribute with exciting suggestions that our customers quickly can implement. Relevant information that you could supply for a workshop could include:
1. Key figures for prepaid markets in your country
2. Key figures regarding prepaid versus postpaid markets in your country
3. Describe your prepaid segments -who is purchasing what and why, how are they purchasing and for how much?
4. What is your traffic ratio - on net, off net, national traffic, international traffic, terminated traffic?
5. What size churn do have within different prepaid segments?
6. How many of your customers have more than one prepaid SIM card?
7. What are your costs in connection with selling prepaid products?
8. Information about the prepaid business case from an operator's perspective
9. Which distribution channels are selling prepaid, how much are they selling and what is their business case?
10. Description of the prepaid products you offer your customers.
11. Your experiences - which products and campaigns have been most successful - which have not?
12. Anything else we ought to know, but have not mentioned.
It is exclusively your decision to decide how much knowledge you want to share with us. On the other hand the more knowledge you share, the easier for us it is to create a fully customised workshop that can quickly help optimise your prepaid business case.
Who will participate at the workshop?
Prior to the workshop we kindly ask for a list of participants, including their title, job description, e-mail, and address and mobile phone number.
If you want, we can send a selection of questions to each individual participant and thereby make the preparation process easier for everyone.
What questions do you want answers to?
You can ask each individual participant to make a list with questions that he or she has, related to the subjects in the workshop. When you make this list there are no dumb questions - all questions are most welcome - we believe that questions are part of the process to acquire knowledge. Our experience shows that it is much easier to customise a workshop when we understand your thoughts and the questions you ask illustrate what you are thinking.
Many questions people send before our workshops are often related to technological developments, the customers ability and willingness to purchase certain products, the behind-the-scenes business models, how competitors will react in the short, medium and long-term and finally what the optimal winning strategy looks like in a certain area.
Background information
If you have any background information or analyses that you believe we can use, either when preparing for the workshop or during the workshop, you are most welcome to send them to us. Any local knowledge you can contribute with will make it easier for us to prepare and customise the workshop.
We will naturally handle your background information in complete confidence and completely secure, ensuring that all confidential information never leaves the workshop.
Anything we may have forgotten, but should remember
We have most probably overlooked some things that you would like examined in the workshop. Please do not hesitate to e-mail us, call us, fax us, snail mail us or send a message in a bottle. It is of utmost important to us that we completely understand your situation and what your employees want to gain from the workshop.
When we are preparing for this workshop it is important to us that you take an active part in this process and ensure that we have access to the necessary knowledge that will result in the best possible workshop.
The usual workshop process
No two workshops are identical, but through the years we have held so many workshops that we have extensive experience with the preparation process, that most often will look something like this:
1. Choice of workshop subject including creating basic agenda
2. This document created and sent - Start of your internal process
3. We receive answers to the questions we have sent to you
4. Based on the knowledge from you we adapt the agenda
5. We prepare for the workshop
6. We hold the workshop
7. Workshop evaluation
8. Workshop follow-up
We can - and will - spend a great deal of time and effort to ensure that you enjoy and greatly benefit from our workshop, but you can and should contribute to the preparation process, so we actually can exceed your expectations to this upcoming workshop.
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