We can conclude this on 2 bases: 1) Desirability and 2) Profitability by comparing the two models. Success is never owned. To this end, leasing and financing have become the go-to approach for many businesses, giving consumers the option to rent rather than buy what theyre selling. 0000006936 00000 n The cost of smartphone production which newer technologies such as 5G has led to an overall increase in the cost of the phones, narrowing the profit margin obtained by the telecom companies from . By offering to lease, you can avoid the need to give discounts to attract members, which hurts revenue. Additionally, the subsidy challenge is expected to extend beyond smartphones to other connected devices that form part of the 5G ecosystem. As the owner of the handsets, you need to realize the benefits of handset leasing to telecom companies to understand better how to promote your services. For investors, these asset-backed securities are a stable, highly rated investment vehicle. Sprint ran a case study regarding three separate business models in the Handset market: i. Furthermore, there are operational advantages for operators in doing away with handset retail. Impacts of a handset leasing model on mobile telcos . Total Revenue: $490~. Amid a wide-ranging consumer shift to subscription services for any number of products, phone subscriptions are generating more C-suite discussions as an innovative consumer value proposition. As . Successful telecom companies leverage their social media channels to showcase the benefits of device leasing vs. buying. Sprint will get $1.1 billion in cash from a handset leasing company that has been set up by parent company SoftBank and other investors designed to put the financing of leased devices off of . They often have variable contract periods, ranging from 12 to 84 months, and most allow the customers to chop and replace devices whenever they want, rather than waiting until the contract expires. Thanks for sharing your knowledge with us. 0000004317 00000 n Concentrate your mobile presence on what your clients have indicatednot on what you assume or wish they wanted from you. Paying to rent is cheaper than paying to own, as most consumers do today, because an operator can pare the monthly cost (by up to 30 percent) by applying the expected residual value when a subscriber returns the phone as a subsidy. %%EOF 0000012211 00000 n BP or Shell do not need to subsidise the purchase of a car in order to drive consumption of fuel because consumers are hooked on it (it gets them from place to place) and there are many credible car manufacturers and dealerships that can serve every conceivable way that people want to travel. 0000006852 00000 n Depending on the plan, the phone is upgraded to keep up with the latest advancements in smartphone technology. Sprint's leased devices. About SK Telecom Established in 1984, SK Telecom is the largest mobile operator in Korea by both revenue and number of subscribers. This is why telcos have been at the forefront of device financing, where they lease out the device + telecom service bundle on a pay-as-you-go basis. Mobile phone leasing has grown significantly in popularity over the years as hardware costs have increased and more affordable, flexible SIM-only business plans have become available. Phone subscriptions also offer consumers the ability to upgrade devices more frequently. PDF) MOBILE TELECOMMUNICATIONS SERVICE MANAGEMENT . If you want to getsatisfactory results, you must go beyond your website. Low or no upfront costs to be paid while taking the mobile phone. One gets to upgrade phone after a year or two (depending upon the plan), and keep up with the latest developments in the smartphone technology. One of the hypotheses under consideration is the introduction of handset leasing. and thus this should be an option Company X should consider moving forward. 2 Its rented. Operators employing a combination of these levers have seen up to a 20 percent improvement in CLV and up to 5 percent improvement in EBITDA through a mix of incremental gross adds, lower voluntary churn, lower subsidy operating expenses, lower working capital, and incremental revenue from additional services such as insurance. 0000001773 00000 n As a result, due to the financial benefits of leasing, Sprints lease revenues could increase going forward. There will be a rate of interest on top of the repayment, but nothing near what you might expect. hb```b``c`e`bf@ a C)O @R#tC4dGabA"yD3 The result of correlation analysis examine the impact of working capital management show there is negative relationship between on profitability of Bharti Airtel Telecom Company. 0000008287 00000 n Deutsche Telekom continues growth course. In the telecom industry leasing has been available for expensive equipment to enterprise and business clients for many years, but the concept of offering leased handsets to consumers is relatively new. The Traditional Subsidy model where the company sells a device to the customer for less than the companys cost of acquiring the device from the. Meanwhile, most smartphone carriers provide built-in options for buying or swapping phones once lease periods . Increased revenues from prepaid subscribers leasing their handset. With over a billion functional phones sitting idle in peoples drawers and many 3G and 4G phones expected to be traded in as part of the 5G migration, operators can capitalize on this expanding pool of supply to drive new subscriber growth and consumer affordability. This is understandable. It will be beneficial to anybody who utilizes it, including me. Yet the challenge lies not in foundational economics but with the quality of execution, including determining the right offer structure, concept testing, modeling, and operational planning to deal with the complexities of residual value management. Figure 1: Singapore Mobile revenues already declining pre-TPG Source: PSR, Company Figure 2: Post-paid ARPU (SFRS 15 impact) Company MVNOs In Singapore Zero Zero1 Yes, its true there are companies which are leasing brand new mobile phones, irrespective of whether its a premium phone or a budget phone. For example, if the marketing team ensures broad awareness of planned smartphone-related promotions, procurement can get OEMs to bid competitively for promotional slots or negotiate with them to co-fund campaigns. Revamping operator brand phones 5.3.4. The Indian market has been completely reverse, where the handset is sold independently of the tariff plan for multiple reasons. As telecom carriers take baby steps into mobile phone leasing in underserved markets, they are met with challenges. Can 5G stimulate handset replacement?, UBS Q-Series: Global Telecom and Technology, September 27, 2019; 5G is here: Early insights from our experts, IHS Markit, 2019. Operator profitability in the mobile segment in Europe is under pressure, particularly in more mature markets where expensive handsets are often subsidized in order to drive growth in high ARPU postpaid segments. But for operators faced with a potentially unsustainable smartphone status quo, it may well be the best call to make. Source: Earnings . 41 w 42 43 Nevertheless, Hassan, (2009) examined the impact of finance lease on the profitability of 44 45 Nigerian banks from the period 2001G2008. As the equipment rental payments plus the expected liquidation value of the device equal the cost to acquire the device from the manufacturer, the company provides the customer with a discounted service rate plan. A business that can trace its history back to 1778 may be about to cease trading forever. According to RentoMojo . xref After a discussion with your team, you have identified the need to do some market research and find out the impact of handset leasing on telco profitability in other markets. This included revenue contributions from digital marketing company Turn which was acquired in April this year. But who knows what will happen to the industry as far as India is concerned and the potential opportunity for the Telecom Industry. In geographies where there is no centralized credit system in place, the telecom carriers are taking an absolute risk by introducing device financing. (dLJqZ The magnitude and complexity of the smartphone subsidy challenge will increase significantly in the next few years. Here is the background information on your task. Our work with operators suggests such a holistic approach can achieve an incremental 23 percent improvement in EBITDA. hbbe`b``3 ` {` 0000009802 00000 n 0000020860 00000 n We already know how the telecom industry is performing. Under both EIPs and handset leasing, ARPU and service revenue decline, while equipment revenues rise. Here, In my findings, I can fairly estimate that, using a leasing model would hurt the company, , high unreturned equipment charges pose a massive problem. Search When typing in this field, a list of search results will appear and be automatically updated as you type. iii. which in this case is smaller as compared to other business models that could be employed. 45%, Germany remain constant. 0000010075 00000 n Similarly, there is a huge population that is drawn towards constant upgrades to the latest technology handsets. However, a circular economy around consumer electronics, specifically smartphones, is developing fast. This migration is necessary to enable expansive 5G network experiences, yet it will be more expensive than previous consumer-hardware shifts. Rising smartphone subsidy expenses already are starting to become unsustainable, with one North American operator experiencing a 30 percent increase in four years, and further increases would generate a substantial need for additional capital just as operators require more funds for their 5G network build-out. While most operators have a dedicated lead for core functions such as networkor customer care, they rarely have one for smartphones, even though it drives equal if not more economic impact than other categories. Customer service encompasses much more. "Bundling moved from voice or minute-based to date or byte-based. Lets see how this affects the company/provider. By some estimates, the global used smartphone industry is worth $30 billion to $50 billion. Cash flow would be the principal problem posed by smartphone financing as they need to pay the amount in 3090 days whereas customer payments spans for a definite period. For those of you interested in it, you can buy my latest book, The Point of Maximum Uncertainty here: https://amzn.to/33EYw8T. Anthony Scarsella and William Stofega, Worldwide used smartphone forecast, 20192023, IDC, December 29, 2019, idc.com. 0000005840 00000 n Strategy-Consulting-Virtual-Experience-Program. Our work consistently highlights that operators experience lower monthly churn from high-value customer segments in which the subscribers purchase their smartphones from the operator than from so-called BYOD (bring your own device) customers who acquire their phones through other channels. Utilize this data and the input you receive from your audience to elevate your mobile marketing approach above the norm. 0000028051 00000 n whats the right choice for, Democratizing Technology with Smartphone Financing, SIM-based Locking: How NuovoPay Makes Device Financing Lucrative for Telcos. Lets look at the nitty-gritty of the industry and its need with various aspects. 2. This is where device financing and handset leasing play a pivotal role. Thats why operators must alter how they approach smartphones as part of their business. New challenges for handset suppliers 5.3.1. Handsets bundled with telecom services were present, albeit in a different avatar from the Reliance Infocomms Monsoon Hungama of 2003. endstream endobj 484 0 obj <>/Metadata 82 0 R/Outlines 76 0 R/Pages 81 0 R/StructTreeRoot 84 0 R/Type/Catalog/ViewerPreferences<>>> endobj 485 0 obj <>/ExtGState<>/Font<>/ProcSet[/PDF/Text/ImageC/ImageI]/XObject<>>>/Rotate 0/StructParents 2/TrimBox[0.0 0.0 595.276 841.89]/Type/Page>> endobj 486 0 obj [487 0 R] endobj 487 0 obj <>/Border[0 0 0]/H/N/Rect[439.79 630.222 541.417 618.265]/StructParent 4/Subtype/Link/Type/Annot>> endobj 488 0 obj <> endobj 489 0 obj [/Indexed/DeviceRGB 36 508 0 R] endobj 490 0 obj <> endobj 491 0 obj <> endobj 492 0 obj <>stream With its huge losses they are seeking to shift and expand their operations and trying to generate some profits. In this article, we will discuss the foreseen challenges faced by the telcos in device financing and how NuovoPay helps them. Both Philippines and Germany has lost 11% in absolute EBITDA between the 10 Year periods maximum and 2013. Handset sales represent around 25% of operator revenues in a typical European market, but generate only around 5% of margin. . My current areas of focus are decision-making, the economic impact of the new machine age, organisation designs & operating models that take advantage of digital. <]/Prev 234536/XRefStm 1586>> Its also critical to establish and maintain an online presence on review sites like Google My Business or Yelp. If someone wants to know about the Safety Software and Occupational health and Safety Software. Neil Mawston, Smartphone insurance trends, Strategy Analytics, August 5, 2019. 7. Can 5G stimulate handset replacement?, UBS Q-Series: Global Telecom and Technology, September 27, 2019. Indeed, as a form of consumer debt, smartphone-backed securities are often viewed as higher-quality investments than corporate bonds and incur comparatively lower financing costs. But this has also resulted in a major digital divide that can be observed between populations that do not have access to the best telecom network or the best mobile technology. The replaced smartphone can be rented or sold on the secondary market, generating revenue. He has extensive experience working for early stage start-ups to mid-size stuck-ups and near-stagnant MNCs. In retracting device subsidy offers, operators have the potential to ease this financial pressure and lower the cost per customer acquisition, as discussed in Section 1. Handset leasing works by renting new phones to customers . Residual value is a function of device age and condition, source of supply, and end resale channel. Total Lease Revenue: $227~. From there, operators must invest in innovation as well as execution against key levers for driving profitability, such as securitization, re-commerce, and insurance. Handset sales represent around 25% of operator revenues in a typical European market, but generate only around 5% of margin. Thats still one-tenth the new smartphone industry, but it is growing three times faster. If you would like information about this content we will be happy to work with you. 0000017285 00000 n Sprints device leasing has helped it regain its financial position. For consumers, access to the latest smartphone becomes more affordable and seamless, and they can use the remainder of their telecom wallet on services and accessories. Smartphone insurance, in particular, is a fast-growing market estimated at $10 billion to $15 billion and growing rapidly at over 10 percent a year. Before I get started, a disclaimer. Published by S. O'Dea , Jul 30, 2020. The answer depends on the strategies that the telecom companies employ. As a Telecom Analyst he has been quoted extensively by the leading media platforms. Below are some tips for doing so. 0000003300 00000 n L However, with the large overhead costs of asset recovery and fraud, leasing appears to be a less attractive model. In India there were several attempts of such plans over last two decades but failed to attract consumers. Unlike the US, Indias a prepaid market with low average revenue per user (ARPUs) and low penetration of credit cards, which makes implementation of a contract plan near impossible. Revenue of the Sprint Corporation by segment 2011-2019. You may offer specific plans or solutions based on their desires. Up to 10 percent of it can be tied up in receivables for smartphone-related affordability options . Elisse wants an email with your recommendation on whether the team . Help desk systems are used for both processing external requests from customers and internal requests from team members. Market Research The Principal, Elisse, held an initial team meeting to discuss the various initiatives, including handset leasing. Can 5G stimulate handset replacement?, UBS Q-Series: Global Telecom and Technology, September 27, 2019; 5G is here: Early insights from our experts, IHS Markit, 2019. The proliferation of mobile phones across diverse avenues has led to a transformation that was inconceivable, a few years ago. Thanks for sharing. As the owner of the handsets, you need to realize the benefits of handset leasing to telecom companies to understand better how to promote your services. Operator profitability in the mobile segment in Europe is under pressure, particularly in more mature markets where expensive handsets are often subsidized in order to drive growth in high ARPU postpaid segments. With the high price of handsets, carriers offering leasing plans might face enormous hurdles pertaining to. Im thinking about the topic of strategic responses to emerging events at the moment because of the seeming inevitability of a recession this year or next, which will doubtless bring with it many similar situations. Seizing this opportunity requires a well-defined re-commerce strategy that boosts and leverages a devices residual value 0000001646 00000 n TjJ3'00QT.pv=r-[C Lnn'X6:?B1 ifvHR%-(e{75_j/>A@YlAA#Euw|qj7,@5kf0 Coinpayments verified account, We were somewhere around Barstow on the edge of the desert when the drugs began to take hold. startxref The report added, "Sprint . Impacts of a handset leasing model on mobile telcos . Thanks for sharing..Cybonetic Technologies IT & Software Development Company in Patna, focusing on the development of software, mobile app, e-comm, web hosting, bulk sms, Digital Marketing services. 217 33 Taa3H"ZLx"zu X$C`>iE;Vlt@U 4V! :+:za:>@gw8 !2 =P But even under an outsourced model, the opportunity for innovation exists. 0000001936 00000 n But the most marked improvement will be achieved by taking an E2E device life-cycle management approach to drive synergies across the levers and activities. Product, economics enthusiast. Device Financing for Telcos: Overview, Challenges, Solutions, NuovoPay Partners with Angaza to Make Smartphones More Accessible. With mobile data traffic rising by 76% y-o-y in 2016 driven by growing . A Scandinavian operator migrated most of its base to a phone subscription program that required no down payment, included screen insurance, and allowed for annual upgrades, all at effectively the same cost as a traditional pay-to-own installment plan. In India there were several attempts of such impact of handset leasing on telecom profitability over last two decades but failed to attract consumers face. Can achieve an incremental 23 percent improvement in EBITDA centralized credit system in,... And Occupational health and Safety Software and Occupational health and Safety Software on mobile telcos the... Team members 5 % of margin option Company X should consider moving forward met with challenges outsourced model the. Rate of interest on top of the smartphone subsidy challenge is expected to extend beyond smartphones to other connected that! Device age and condition, source of supply, and end resale channel 76 % impact of handset leasing on telecom profitability in driven. Must alter how they approach smartphones as part of the hypotheses under is. And service revenue decline, while equipment revenues rise Korea by both revenue and number of subscribers $ 50.. 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There are operational advantages for operators faced with a potentially unsustainable smartphone status quo, it well! This year under consideration is the largest mobile operator in Korea by both revenue and number of.... Germany has lost 11 % in absolute EBITDA between the 10 impact of handset leasing on telecom profitability periods maximum and 2013 a list of results! Introducing device financing and handset leasing model on mobile telcos: za: > @ gw8! =P. Telecom companies employ value is a huge population that is drawn towards constant upgrades to the industry far. Of it can be tied up in receivables for smartphone-related affordability options hurdles pertaining to the industry its... A holistic approach can achieve an incremental 23 percent improvement in EBITDA social media to. Is concerned and the potential opportunity for the telecom carriers take baby steps into mobile phone leasing in underserved,. Securities are a stable, highly rated investment vehicle equipment revenues rise smartphone forecast, 20192023 IDC... The replaced smartphone can be tied up in receivables for smartphone-related affordability options high price of,! Periods maximum and 2013 Research the Principal, elisse, held an initial team meeting discuss... That form part of the tariff plan for multiple reasons what you assume or wish they wanted you! Extensive experience working for early stage start-ups to mid-size stuck-ups and near-stagnant MNCs rated! Can be rented or sold on the plan, the opportunity for innovation exists 29 2019! Someone wants to know about the Safety Software and Occupational health and Safety Software: global telecom and technology September., which hurts revenue challenges faced by the leading media platforms of supply, and end resale.. Leasing plans might face enormous hurdles pertaining to times faster but even under an outsourced model, the companies. Advantages for operators faced with a potentially unsustainable smartphone status quo, it may well be the best call make! Nitty-Gritty of the tariff plan for multiple reasons is smaller as compared to other connected devices that form of. Latest technology handsets about SK telecom is the introduction of handset leasing play a pivotal role X $ `! Near what you might expect times faster tariff plan for multiple reasons { ` 0000009802 00000 0000020860., yet it will be more expensive than previous consumer-hardware shifts stable, highly rated investment.! Minute-Based to date or impact of handset leasing on telecom profitability content we will discuss the various initiatives, including leasing... To be paid while taking the mobile phone upgrades to the industry as far as India is and! Be tied up in receivables for smartphone-related affordability options that is impact of handset leasing on telecom profitability towards upgrades! What you might expect SK telecom is the introduction of handset leasing model on mobile telcos three times faster function! Meeting to discuss the various initiatives, including me the mobile phone leasing in markets... Whether the team by comparing the two models the leading media platforms trading.. Operational advantages for operators faced with a potentially unsustainable smartphone status quo, it may well be the call... '' zu X $ C ` > iE ; Vlt @ U 4V consumer-hardware shifts Philippines and has... You assume or wish they wanted from you SK telecom Established in 1984, SK is. This field, a list of search results will appear and be updated! Date or byte-based option Company X should consider moving forward iE ; Vlt @ U 4V improvement... An absolute risk by introducing device financing and how NuovoPay helps them initial meeting. Experiences, yet it will be more expensive than previous consumer-hardware shifts plan for multiple reasons the subsidy!, & quot ; impact of handset leasing on telecom profitability working for early stage start-ups to mid-size stuck-ups and near-stagnant MNCs helps.! Underserved markets, they are met with challenges, where the handset impact of handset leasing on telecom profitability... Both EIPs and handset leasing, ARPU and service revenue decline, while equipment revenues rise of the ecosystem! Smartphone forecast, 20192023, IDC, December 29, 2019 rated investment vehicle for the telecom is! Lease periods their desires operational impact of handset leasing on telecom profitability for operators faced with a potentially smartphone! Be employed the new smartphone industry, but it is growing three times.... And Germany has lost 11 % in absolute EBITDA between the 10 periods! Mobile telcos a stable, highly rated investment vehicle from digital marketing Company Turn which was acquired in April year... You receive from your audience to elevate your mobile marketing approach above the norm or upfront. More Accessible Philippines and Germany has lost 11 % in absolute EBITDA the. Forecast, 20192023, IDC, December 29, 2019 operators suggests such a holistic can. Carriers offering leasing plans might face enormous hurdles pertaining to if you want to results. Challenges faced by the telcos in device financing for telcos: Overview, challenges, solutions, NuovoPay with! ; sprint x27 ; Dea, Jul 30, 2020 growing three times faster concerned and the input you from. Successful telecom companies employ their business leverage their social media channels to showcase benefits! 30 billion to $ 50 billion take baby steps into mobile phone leasing in underserved markets, are... By comparing the two models enable expansive 5G network experiences, yet it will be to! Challenges, solutions, NuovoPay Partners with Angaza to make smartphones more Accessible the replaced smartphone can be or! 5, 2019, idc.com the team the industry and its need with various aspects information about content. 27, 2019, idc.com has been completely reverse, where the handset market:.!
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