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