HnT1yx8*@,XWCoEwNNB|8l^GG1W'1l]. Device financing or procuring devices on a contract/ pay-as-you-go model has been a norm since the last decade or so in the developed countries. The first step in overcoming this challenge requires operators to establish an E2E device life-cycle management approach via P&L visibility and a new operating model that incorporates the seven critical activities. Moreover, the power of the new wave of handset manufacturers - exemplified by Apple - over the industry would be reduced. It delivered significant churn improvements and market differentiation. 4 Anthony Scarsella and William Stofega, Worldwide used smartphone forecast, 20192023, IDC, December 29, 2019, idc.com. Seven key activities define E2E device life-cycle management (Exhibit 1). Deutsche Telekom presented strong earnings again in the second quarter . 0000012151 00000 n Can 5G stimulate handset replacement?, UBS Q-Series: Global Telecom and Technology, September 27, 2019. 0000003414 00000 n Seizing this opportunity requires a well-defined re-commerce strategy that boosts and leverages a devices residual value Problem Statement : Company X is a local telecom company and is facing a decline in profits over the past few years. Typically, a client is required to make monthly payments for one year or more. OEMs require payment for their phones within 30-90 days, while customer payments span 24 months. 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. But if the consumers switch to an alternative network as soon as the initial lock-in period is over, the telcos essentially lose. Offering leasing tends to reduce the need to offer discounts to attract subscribers, which also had revenue impacts. It is also beneficial to highlight the advantages that the customers may enjoy if they decide to sign up for a device leasing agreement. Singtel reported a net profit of S$541 million for the first quarter, down 35% largely due to Airtel's losses and higher depreciation and amortisation costs in network and spectrum across the Group. Chinas surge into 5G will push the worldwide smartphone market back to growth in 2020, according to IDC, IDC, November 26, 2019. As . 3. Here is the background information on your task. %PDF-1.4 % new units per year due to multiple factors. Residual value is a function of device age and condition, source of supply, and end resale channel. 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. 0000000016 00000 n If you want to getsatisfactory results, you must go beyond your website. Thanks for sharing with us. Up to 10 percent of it can be tied up in receivables for smartphone-related affordability options, such as installment billing. The telcos on the other hand can be assured of customer retention and make the most of device financing without risking their profit margins. At the moment, approximately 3.81 billion individuals utilize social media, a figure that is growing every year, according to Smart Insights. Leading OEMs and operators Operators also can serve as strategic partners to OEMs to help distribute used phones in developing markets. By offering to lease, you can avoid the need to give discounts to attract members, which hurts revenue. Subscribed to {PRACTICE_NAME} email alerts. Further growth potential is constrained by industry fragmentation and associated value loss, as supply takes on average seven touchpoints to find corresponding demand. Both Philippines and Germany has lost 11% in absolute EBITDA between the 10 Year periods maximum and 2013. The interception of mobile devices in human lives, in the day-to-day operations at work as well as home, has resulted in such ascending popularity that imagining a world without mobile phones is next to impossible. Total Revenue: $490~. 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. 0000010787 00000 n Case study: the United States 5.3. For sure i will check out more posts. In India there were several attempts of such plans over last two decades but failed to attract consumers. For instance, phone subscription programs can be expensive to administer due to increased upgrade frequency and operational complexities. The same thing can happen with leasing a . It guarantees the lessee, also known as the tenant, use of an asset and guarantees the lessor, the property owner or landlord, regular payments for a specified period in exchange. 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. After 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. Accessory and connected device sales also are under-explored margin pools for most operators. profitability and debtor's days, inventory days, and The study period was 2007-08 to 2014-15 and creditor's days. This suggests that despite its cost advantages, network sharing may not be a good strategic move for mobile operators. Singtel delivered a second quarter net profit of S.9 billion, boosted by gains from the divestment of 75.2% of its stake in NetLink Trust in July this year. Net profit was S$541 million for the first quarter, down 35% largely due to Airtel's losses and higher depreciation and amortisation costs in network and spectrum across the Group. - Consider how the contractual terms of the sub-lease agreement may impact the lease term for the head lease - e.g. For their part, OEMs also would likely see faster-growing sales of new devices and would stand to gain from a structured, secondary-life ecosystem. Elisse wants an email with your recommendation on whether the team should explore this idea further for the client. 2. Yet, operators cannot retreat from smartphones that continue to be among the most important drivers of stickiness and a powerful tool to fuel subscriber growth. Further optimization of subscription programs requires tight coordination across multiple activities. All it takes is placing an initial payment for multiple devices on a credit card, canceling the card and selling the phones online for people to use with a different carriers service. Modern technology knocked on the doors of the 21st century with the introduction of the first-ever iPhone. So in order to ensure affordability of those devices that become a costlier proposition for operators, smartphones already . Significant interdependencies also exist between supply chain, sales, marketing, and procurement teams that can be addressed only through an agile E2E device life-cycle management approach. Calculate the impact of handset leasing for Company X Year 0 Year 1 Year 2 Step 1. Therefore, every telecom company must have a customer support team equipped with the best help desk software systems. TjJ3'00QT.pv=r-[C Lnn'X6:?B1 ifvHR%-(e{75_j/>A@YlAA#Euw|qj7,@5kf0 PDF | On Aug 9, 2020, Adil Malal published Handset Leasing and Telecommunication Sector and Operators | Find, read and cite all the research you need on ResearchGate Financing companies, though, are not cheap; typically, the operator has to take a 35 percent haircut on assets and pay a Worldwide quarterly mobile phone tracker, IDC, idc.com. Coinpayments verified account, We were somewhere around Barstow on the edge of the desert when the drugs began to take hold. With mobile data traffic rising by 76% y-o-y in 2016 driven by growing . Operators can realize additional benefits by routing subscription returns of used phones to their own insurance programs to serve as low-cost replacement units. This includes registration of devices,, Device financing or procuring devices on a contract/ pay-as-you-go model has been a norm since the last decade, We are excited to have joined hands with Angaza, a leading provider of software technology designed specifically for, democratizing technology with smartphone financing, How to Effectively Promote Device Leasing, Democratizing Technology with Smartphone Financing, SIM-based Locking: How NuovoPay Makes Device Financing Lucrative for Telcos. This partly reflects more expensive modem and radio-frequency components, at least until 5G smartphone design and production scales, and it also continues the recent trend, with average selling prices for flagship devices growing at a 21 percent compound annual growth rate (CAGR) from 2014 to 2018. an option to extend the head lease when a sub-lease is for a period that reflects the option being exercised. However, this is not the case. But times change and so thinking of the customers as well . The secret to unlocking value from smartphones lies in adopting an end-to-end (E2E) device life-cycle management approach to managing key obstacles while innovating with both traditional and still relatively underexplored levers such as re-commerce, insurance, and phone subscriptions, all pursued in tandem. Heres how NuovoPay makes it easy for telcos to make the device financing model lucrative: This truly serves as a win-win for the telecom carriers as well as the consumers. Although fuel stations are often clustered around points where there is a large amount of traffic, they do not share facilities as their strength in a location is a key competitive differentiator. This auction was successfully held by the end of July 2022 and grossed $18.77 Bn. NuovoPay for Handset Leasing in the Telecom Industry. How to Push Payment Reminders with NuovoPay? The average net profit margin can be higher or lower depending on . This is where device financing and handset leasing play a pivotal role. As the owner of the handsets, you need to realize the benefits of handset leasing to telecom companies to understand better how to promote your services. Phone subscriptions differ from traditional purchase offers principally in pricing, ownership, and upgrade frequency. L About SK Telecom Established in 1984, SK Telecom is the largest mobile operator in Korea by both revenue and number of subscribers. The Lessee receives services or the use of assets under the terms of a contract from the lessor (the owner of the assets). 0000003300 00000 n Paying to rent is cheaper than paying to own, as most consumers do today, because an operator can pare the monthly cost (by up to 30 percent) by applying the expected residual value when a subscriber returns the phone as a subsidy. 0000008172 00000 n startxref , Jul 13, 2022. As a result, they can upgrade or add devices as needed. As technological capabilities grow and improve, the cost of maintaining a network of devices increases, particularly for those whorely on high-spec devices to facilitate mobile workplace connection, productivity, and profitability. , at first glance, Leasing might be attractive. Here, In my findings, I can fairly estimate that, using a leasing model would hurt the company, , high unreturned equipment charges pose a massive problem. Benefits of handset rental. Email marketing is another critical channel for capturing the attention of mobile users. H\n@b!2xzd!H$e=csweEJ(bOt}7xmqrox&c. 0000020964 00000 n 0000028090 00000 n Each lever on its own can drive significant financial gains for operators, but they can offer an even bigger impact if executed in tandem. Taa3H"ZLx"zu X$C`>iE;Vlt@U 4V! :+:za:>@gw8 !2 =P Your first task today is to do some research and identify markets in which handset leasing . 0000006666 00000 n 0000002243 00000 n 0000004969 00000 n startxref New challenges for handset suppliers 5.3.1. Avoid overloading your sites with sales offers; instead, assist consumers in visualizing what its like to have a leased mobile device. Telecom operators in mature wireless markets are reaching a critical inflection point with the transition to 5G. Participated in a 1-week program to work with a telecom provider to turn around their decreasing profit by implementing a handset leasing strategy Performed peer benchmarking studies to validate the impact of handset leasing on profits by comparing the industry average growth rate with a peer who implemented the strategy already are laying the foundation for bundled subscription servicesin 2020 and beyond that encompass 5G smartphones, WiFi connectivity, connected devices, insurance, and other offerings, such as streaming media. Handset sales represent around 25% of operator revenues in a typical European market, but generate only around 5% of margin. Research expert covering South Korea. 0000007090 00000 n Schedule a call with our implementation experts today! The take rate of Sprints leasing plans has surpassed its installment plans in the last few quarters. 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. Group service revenues grew by 3.6%, EBITDA adjusted for handset leases grew by 7.3% and free cash flow grew over 5 billion since 2020. 34 percent management fee. Executed correctly, E2E device life-cycle management can secure significant financial benefits, both in earnings before interest (EBITDA) (up to 8 percent improvement) and customer lifetime value (CLV) (up to 20 percent improvement), by cutting costs and by growing the top line through newer subscribers, increased loyalty, and higher popularity of additional services and accessories. dubai online shopping online shopping uae cash on delivery. With subscribers' thirst for data seemingly insatiable, these should be heady times for mobile network operators. The introduction of Equipment Installment Plans (EIP) has made a significant impact on the handset replacement cycle by extending it to 26.5 months in 2014, an increase of 4.1 months compared to the previous year. When you consider that most social media users are using their smartphones, its easy to see why social media is perfect for promotion. 0000004317 00000 n Impacts of a handset leasing model on mobile telcos . Under a subscription model, consumers would pay lower monthly amounts to effectively rent devices over a predetermined contract period. Technology is becoming increasingly costly. Additionally, the subsidy challenge is expected to extend beyond smartphones to other connected devices that form part of the 5G ecosystem. Its rented. Each lever on its own helps improve the financial performance for an operator. 0000008287 00000 n We expect continued weakness from the mobile segment in the medium term. mY9b. Make logical estimates for all other figures, using historical data Step 5. In local currencies, Philippines increased their EBITDA with ca. Telecoms.com is where the telecoms industry goes first for the latest news, in-depth analysis, interviews with senior industry figures and insightful market intelligence. 483 35 0000017285 00000 n 0000007811 00000 n Company X is a local telecom company and is facing a decline in. This market has fully grown in US, Singapore and European countries and even major giants like Apple and Samsung have seen the potential and are entering in this industry. U.S. wireless operators posted their strongest subscriber gains and service revenue growth in several years during 2021, rebounding from sluggish operating performance due to the COVID-19 pandemic. Handsets bundled with telecom services were present, albeit in a different avatar from the Reliance Infocomms Monsoon Hungama of 2003. Maintain a social media presence on Instagram, Facebook, and LinkedIn by posting updates, blog posts, and images consistently and responding to followers comments. The principal impact of the move to handset financing for mobile operators relates to differences in the accounting treatment of the various handset financing models, relative to the subsidy model. And financing costs can be lowered even further using analytics. Smartphones already occupy up to a 50 percent share of a subscribers telecom walletthe money customers spend on both wireless services and devicesso transferring more cost to the customer isnt a viable option. 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. Revamping operator brand phones 5.3.4. 217 0 obj <> endobj Revenue increased 8% led by growth in NBN migration revenue, equipment sales and handset leasing. 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