Effective Pricing Strategies for Retaining Margin in Mobile Markets
2005.12.23   |   34 pages   |   Tariffing Mobile Services for Profit

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This paper seeks to provide an insight into the pricing strategies and propositions that incumbent MNOs can use to off-set pressure on pricing, driving usage as well as attracting and retaining customers, all of which will impacts on operator margin. The focus of this paper is on voice tariffs targeted at the consumer market, where margin erosion due to competition, has been most severe.

In this report we address the following questions:

  • What factors are causing margin erosion?
  • What are the key elements of margin?
  • How should MNOs assess the potential margin impact of new pricing propositions?
  • What innovative pricing strategies are being used to sustain/grow margin?
  • What factors must a mobile operator consider in implementing a pricing strategy?
  • Why should operators not be persuaded to reduce tariffs on the basis of international mobile tariff benchmarking?

Keywords: pricing, orange, telecom, voice, bouygues, t-mobile, objectives, tariffs, incumbent, propositions, mvnos, uk, margin, effective, benchmarking, hybrid, mobistar, mvno, focus, competition, france, retaining, belgium,

1 Introduction 1
1.1 Overview 1
1.2 Objectives 1
2 Factors Impacting Margin 2
2.1 New MNOs 2
2.2 New MVNOs 2
2.3 Fixed Line Substitution 3
2.4 Bundling Broadband and Carrier Pre-select Service (CPS) 4
2.5 Mobile Number Portability 4
2.6 Falling Interconnect Prices 5
2.7 VoIP 5
2.8 Regulatory Pressure for Transparency 5
2.9 International Benchmarking Studies 6
2.9.1 Objectives 6
2.9.2 Considerations: Factors Affecting Mobile Pricing 6
3 Margin Impact of Pricing Strategies 8
3.1 Elements of Margin 8
3.1.1 Overview 8
3.1.2 ARPU / Revenue Uplift 9
3.1.3 Interconnect Costs 9
3.1.4 Operating Costs and Economies of Scale 10
3.2 Margin Impact Evaluation Framework 11
4 Effective Tariff Strategies 12
4.1 Overview 12
4.2 Temporary Discounted Tariffs 15
4.2.1 Objective of Tariff 15
4.2.2 Orange UK Example 15
4.2.3 Implementation Considerations 16
4.3 Permanent Discounts Based on Usage or Spend 16
4.3.1 Objective of Tariff 16
4.3.2 Bouygues Telecom France Example 16
4.3.3 T-Mobile UK Example 17
4.3.4 Implementation Considerations 18
4.4 Tenure / Loyalty 18
4.4.1 Objective of Tariff 18
4.4.2 O2 UK Example 18
4.4.3 Implementation Considerations 19
4.5 Add-Ons / Bolt-Ons 20
4.5.1 Objectives of Tariff 20
4.5.2 Mobistar Belgium Example 20
4.5.3 Implementation Considerations 21
4.6 Hybrid Tariffs 21
4.6.1 Objectives of Tariff 21
4.6.2 T-Mobile UK Example 22
4.6.3 Implementation Considerations 23
4.7 Tariff Matching and Best Plan Advice Schemes 23
4.7.1 Objectives of Tariff 23
4.7.2 Orange UK Example 23
4.7.3 Implementation Considerations 24
4.8 Fixed Line Substitution ('FLS') 26
4.8.1 Objective of Tariff 26
4.8.2 O2 Germany 'Genion' Example 26
4.8.3 Implementation Considerations 27
4.9 Community Tariffs 27
4.9.1 Objective of Tariff 27
4.9.2 T-Mobile USA Example 28
4.9.3 Implementation Considerations 28
4.10 Segmented Tariffs 29
4.10.1 Objective of Tariff 29
4.10.2 Megafon Russia Example 29
4.10.3 Implementation Considerations 30
4.11 Simplified/Flat Fee Tariff 30
4.11.1 Objective of Tariff 30
4.11.2 Simyo Belgium Example 31
4.11.3 Implementation Considerations 32
5 Conclusions 34

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