Numbers vs. Value: Commercial Implications of Marginal Customers
2016.07.13   |   42 pages   |   Direction, Strategy and Brand Differentiation

Author:
Robert Harrison


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Many MNOs, especially late entrants to markets, use low prices to acquire customers from competitors and gain market share.  In the process they often acquire a significant number of customers that generate little revenue.

This approach can result in reduced profitability for both the new entrant and existing players as the latter respond to competitive pressure by cutting their own prices.

Operators need to understand fully the commercial implications of acquiring and retaining large numbers of customers delivering marginal profitability.

To ensure their ongoing commercial viability MNOs need to find means of increasing the profitability of their customer base.  Options include reducing the proportion of marginal customers and increasing the revenues they generate.

This report is essential reading for any MNO facing falling market prices and a growing marginal customer base, and is of particular interest to marketing staff such as the CMO and pricing and product management. 

 

Companies: Bouygues, Orange, SFR, Free, Telkomsel, XL Axiata, Indosat Ooredoo, Tri (Hutchison), Spotify, Netflix, MTN, Vodafone, AT&T

Countries: France, Indonesia, Kenya, Nigeria, Pakistan, South Africa

Keywords: competition, quad play, repositioning upmarket, marginal customers, ARPU, EBITDA, data allowances, convergence, postpay, pricing strategy, social media, customer experience, prepay, video, value share, tariffs, IoT, Market share,

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

MNO Performance: Indonesia & France

5

3.1

Introduction

5

3.2

Financial & Market Performance: Indonesia

5

3.3

Financial & Market Performance: France

8

3.4

Impact of Marginal Customers

11

3.4.1

Size of Marginal Customer Base

11

3.4.2

Analysis of Impact

12

3.4.3

Scenario 1: Average Spend

13

3.4.4

Scenario 2: Low Spending Marginal Customers

14

4

Emerging Market - Indonesia

15

4.1

Introduction & Options

15

4.2

Indonesian Market Development

15

4.2.1

Subscriber growth

15

4.3

Repositioning: XL Axiata

17

4.3.1

Strategy and Pricing

17

4.3.2

Results of XL Axiata Repositioning

21

4.4

Additional Services: Indosat Ooredoo

23

4.4.1

Indosat Approach

23

5

Developed Market - France

25

5.1

Introduction & Options

25

5.2

French Market Development

25

5.2.1

Penetration and Call Growth

25

5.2.2

Growth in Data Usage

26

5.2.3

ARPU and Revenue Trends

26

5.3

Pricing and Positioning: Free

28

5.3.1

Tariff Policy

28

5.3.2

Strategy to Improve EBITDA

30

5.4

Positioning & Pricing: SFR

31

5.4.1

High End Market Strategy

31

5.4.2

Customer Experience

31

5.5

Impact of Convergence & Quad-play

32

6

MNO Options & Implementation

33

6.1

Introduction

33

6.2

Remaining as Low Cost MNO

33

6.3

Repositioning in Market

34

6.4

Additional Services & Revenues

35

6.4.1

Additional Service Options

35

6.4.2

Financial Impact of Additional Services

36

6.4.3

Introducing Additional Services

38

7

Conclusions

40

7.1

Summary of Findings

40

7.2

Marginal Customer Base Size

40

7.3

Responsibility for Actions

41

8

Recommendations

42

 

Appendix – Feedback Questions

44

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