Alternative Device Distribution Models
2016.09.07   |   36 pages   |   Operations and Management

Author:
Nicola Warren


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The area of device financing and distribution has become increasingly dynamic as operators have sought to expand consumer choice and flexibility in this area, while reducing their own costs.  Instalment billing and the separation of handset and service fees have provided scope for innovation and differentiation in this area. Despite the potential benefits of innovation in this area, some operators have so far appeared reticent to explore opportunities to update their approach to device distribution.  Others have questioned the need to remain a key player in the device distribution market.

This report examines the impact that instalment billing has had on operator business metrics in order to identify the potential benefits and costs to MNOs.  It also looks at recent developments in device financing and distribution to illustrate the options open to operators currently considering the move away from traditional subsidy models.

 

Companies: AT&T, Apple, Orange, Sprint, Telefonica, Verizon, Vodafone, Bouygues Telecom, T-Mobile, Sunrise Communication, Brightstar Corporation, HYLA Mobile, Vivo Brazil, Telenor Montenegro, Reliance Jio, Bharti Airtel, Google, Tele2, Maxis, Three, Free, Orange Horizons, PayJoy

Countries: Netherlands, France, US, Switzerland, Spain, Brazil, Montenegro, India, Austria, Malaysia, UK, France, South Africa

Keywords: e-SIM, ARPU, instalment billing, BYOD, handset replacement, EBITDA, device management, discount instalment billing, device financing, outsourcing, distribution, device penetration, leasing, incentives, regulators, distribution costs, collateral, Handset, trade-in, handset recycling, reverse subsidy, iPhone, churn, device sales, companion device, secondary device, early upgrade, disintermediation, subsidies, SIM-only, device, loyalty, retention cost, handset rental, subscriber acquisition cost,

1

Overview

1

2

Introduction

2

2.1

Background to the Report

2

2.2

Report Content

3

2.3

Currency and Conversions

3

2.4

Further Questions and Feedback

4

3

Device Finance/Distribution Importance

5

3.1

Increased Revenues

5

3.2

Penetration of Smartphones/4G Phones

5

3.3

Acquisition

5

3.4

Loyalty and Retention

5

3.5

Ongoing Customer Relationship

6

3.6

E-SIM Challenges

6

3.7

Regulation

6

4

The Demise of Device Subsidies?

8

5

Instalment Billing Approaches

10

5.1

Overview

10

5.2

Market Experiences of Postpay Instalment Billing

10

5.2.1

T-Mobile and the US Experience

10

5.2.2

Sunrise Communications Group in Switzerland

14

5.2.3

Telefónica and Vodafone in Spain

15

5.3

Instalment Device Finance Approaches

15

5.3.1

SIM-only Plans

15

5.3.2

Early Upgrades

16

5.3.3

Operating a Separate Consumer Finance Business

19

5.3.4

Handset Financing for Prepay Customers

20

6

Innovation in Financing and Distribution

22

6.1

Introduction

22

6.2

Discounted Instalment Billing

22

6.2.1

Full Price Phone, Discounted Services

23

6.3

Bring Your Own Device (BYOD)

25

6.4

Outsourcing (Brightstar)

26

6.5

Incentivised Handset Recycling

27

6.6

Handset Rental

29

6.7

The Orange Store

30

6.8

PayJoy

31

6.9

Second Device/Companion Device Financing

32

7

Key Findings

34

8

Recommendations

36

 

Appendix – Feedback Questions

37

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