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Pricing strategies for an incumbent operator: Mobile Services

Pricing strategies for an incumbent operator: Mobile Services. Saburo Tanaka, ITU. The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the ITU or its Membership. Dr Kelly can be contacted by e-mail at Tim.Kelly@itu.int.

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Pricing strategies for an incumbent operator: Mobile Services

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  1. Pricing strategies for an incumbent operator:Mobile Services Saburo Tanaka, ITU The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the ITU or its Membership. Dr Kelly can be contacted by e-mail at Tim.Kelly@itu.int

  2. Pricing mobile services:Agenda • A Mobile Revolution • Worldwide and in the sub-region • Pricing Mobile • Options • Price comparisons and trends • Price trends • Average Revenue Per User (ARPU) • Fixed-Mobile Interconnect • A Mobile Future

  3. A Mobile Revolution Fixed Lines vs. Mobile Users, worldwide, Million 1'400 Mobile Users 1'200 Fixed Lines 1'000 800 600 400 200 0 1993 1995 1997 1999 2001 2003 Source: ITU World Telecommunication Indicators Database.

  4. Mobile subscribers per 100 inhabitants Year-end 1999 Sub-region Lao P.D.R. 0.16 Viet Nam 0.33 Cambodia 0.81 Indonesia 1.06 Sri Lanka 1.42 3.00 Philippines China 3.42 4.21 Thailand Malaysia 11.09 Source: ITU World Telecommunication Indicators Database.

  5. Mobile subscribers as % of total telephone subscribers Year-end 1999 Sub-region Viet Nam 9.4% Lao P.D.R. 19.7% Sri Lanka 24.8% Indonesia 26.8% China 28.5% Thailand 32.9% Malaysia 35.3% Philippines 42.4% Cambodia 76.3% Source: ITU World Telecommunication Indicators Database.

  6. The secret of mobile success • Why is mobile currently growing ten times faster (~55% p.a.) worldwide than fixed lines networks (~5.5% p.a.)? • Why is the average mobile user much younger than the average fixed-line user? • Why do users make calls using a mobilephone even when a fixed-line telephone is available and cheaper? • What is the secret of the success of mobile? Price Options

  7. A selection of price optionsFrom Orange (UK) Source: http://www.uk.orange.net/kit/index.html.

  8. Pricing Mobile Price of 100 minutes per Indonesia $9.74 month mobile usage, in US$ China $10.87 Philippines $16.26 Sri Lanka $17.80 Thailand $19.34 Lao P.D.R. $19.55 $21.02 Malaysia Viet Nam $27.71 Cambodia $37.00 Note: Price basket based on monthly subscription plus 50 mins peak and 50 mins off-peak use.Source: ITU World Telecommunication Indicators Database.

  9. Declining prices for mobile access, global average, in US$, 1992-98 Note: CAGR = Compound Annual Growth rate.Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”

  10. per month (US$) Revenue/cost per subscriber Average revenue per user (ARPU)Bell Mobility (Canada) 120 1'600 Revenue per sub/month 1'400 100 1'200 80 1'000 Cost per sub/month 60 800 Subscribers ('000s) 600 40 Subscribers 400 20 200 0 0 90 91 92 93 94 95 96 97 98 Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”

  11. Cultivate the high-spenders Source: Price Waterhouse Coopers, based on Canadian data.

  12. Mobile ARPU converging with Fixed-line ARPU, Japan (Yen ‘000s p.a.) 300 Mobile ARPU 250 200 150 Fixed-line ARPU 100 50 0 1990 1991 1992 1993 1994 1995 1996 1997 Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”

  13. Pricing mobile and fixed:Monthly subscription charges (US$) Ratio: Cellular/fixed Residential fixed-line 25 3.0 Digital cellular 20 2.4 1.1 5.0 1.7 15 5.0 10 5 0 Malaysia HK Sar Cambodia Indonesia Thailand Sri Lanka

  14. Pricing mobile and fixed:Price of 3 minute local calls (US$) Residential fixed-line 1.0 Digital cellular n.a. Ratio: 18.2 0.8 Cellular/fixed 6.7 0.6 10.0 0.4 3.0 7.5 0.2 0 0.0 HK Sar Cambodia Thailand Sri Lanka Malaysia Indonesia

  15. Fixed-Mobile Interconnection • Interconnect prices are a major determinant of retail prices • Evidence of “market failure” • Interconnect prices are variable but generally very high • In Calling Party-Pays environments, caller may not be aware of the charge they will be paying • Calling party does not have a choice of operator to terminate the call • Fixed-to-mobile and mobile-to-fixed highly asymmetric • By 2005, 75% of all calls worldwide will involve a mobile

  16. Calling opportunities worldwide 5.0% 0.3% 5.0% 7.5% 19.9% 1993 89.7% 52.7% 23.4% 26.7% Fixed-to- Mobile-to- 19.9% fixed mobile 1998 Mobile-to- Fixed-to- fixed mobile 25.0% 25.0% 2003 Source: ITU Fixed-Mobile Interconnect website: http://www.itu.int/interconnect

  17. Interconnection Rates in selected European countries under CPP (in US $ / minute)

  18. Interconnection Rates in Selected European Countries Calling Party Pays (CPP). In US $ per minute.

  19. Interconnection rates in selected non-European countries Calling Party Pays (CPP) vs. Receiving Party Pays (RPP). In US$ per minute.

  20. A mobile future Actual and projected subscriber growth, fixed-lines and mobile, millions, 1990-2010 2'000 • Mobile has overtaken fixed-lines in Cambodia, Finland, Italy, Korea • Mobile subscribers to overtake fixed-line worldwide before 2005? • Mobile revenue to overtake fixed-line after 2004? • Fastest growth in developing countries 1'500 Fixed 1'000 Mobile 500 0 1990 2000 2010 Source: 1990-1998 data from ITU World Telecommunication Indicators Database. 1999-2010 ITU projections.

  21. Remote Medical Video Service Conference (Medical (High quality) image) Video on Demand: Sports, News Weather Video Conference (Lower quality) Mobile TV Image Video Surveillance, Video Mail, Travel Electronic Newspaper Voice Mail Electronic Publishing Mobile Karaoke Fax Radio E-Mail Audio Data Telephone Weather, Traffic, News, Voice-driven Web Pages (Voice) Sports, Stock updates Streaming Audio The race for 3rd Generation mobiles:IMT-2000 Video Streaming Video Streaming 2,000 1G 2G 3G Still Still Imaging Imaging 384 Audio Streaming Audio Streaming 144 Text Messaging Text Messaging Data Transmission Speed - kbit/s 128 Voice Voice 64 JPEG Still Photos E-Commerce 32 9.6 0 Time Source: Adapted from Motorola.

  22. For more information ... • Publication launch: 10 October 1999 (TELECOM ‘99) • Available on paper and online (PDF format) • World Telecom Indicators Database available online • Website: • http://www.itu.int/ti Other reports launched at TELECOM ‘99 • Direction of Traffic 1999: Trading Telecom Minutes • Trends in Telecom Reform 1999: Convergence • Internet for Development (updated with latest data)

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