The Other Face of the Data Explosion: New Ways to Combat Rising Smartphone
Subsidies and Improve Telco Profitability
SINGAPORE, October 23, 2012
SINGAPORE, October 23, 2012 /PRNewswire/ --
The smartphone sector has become something of a bonanza of late, but it has
also turned into a source of major headaches for CEOs in the
Consumers are increasingly eager to upgrade to smartphones and start accessing
the Internet, using apps and sharing content. Indeed, markets such as
Indonesia already have 19 percent of mobile customers on smartphones, while
Singapore has 72 percent, according to Nielsen.
But smartphones are expensive - the new iPhone 5 retails from US$650 if bought
standalone, so a key driver for smartphone growth is handset subsidies.
Subsidies run at several hundred dollars per device allowing telcos to offer
smartphones to consumers for free or at a heavily reduced price. The hope is
that resulting data revenues will make the economics work, but it has risen
now to become one of the largest operational cost items at 18 percent of
revenue for many operators.
Delta Partners, the leading advisory and investment firm specialising in
telecommunications, media and technology (TMT), today released its latest
article, entitled The Smartphone Subsidy Conundrum, outlining how carriers can
bring a number of new and trialed measures to rein in such subsidies.
"This is a hot topic for telecoms executives worried about the costs
associated with rising smartphone penetration," says Delta Partners Principal
Mar Pages. "Telcos that address this issue now can gain several points of
EBITDA margin without impacting competitiveness."
Some of the potential initiatives this article explores through examples from
leading operators such as Telstra, AT&T and Bharti Airtel include:
*Prolonging handset lifecycles. A Bring-Your-Own approach adopted by
Telstra that offers monthly discounts to consumers who switch provider and
keep their previous device.
*Lengthening the customer renewal process. AT&T has lifted fees charged to
customers who wish to upgrade their handsets before the end of their
*Discount optimisation. Offering "reverse subsidies" where customers
receive a monthly fee reduction instead of a free handset, implemented by
Bharti Airtel and China Mobile.
*Managing data economics. Using deep analytics to optimise the relationship
between smartphone and data pricing.
"Which option is best depends on an operator's market position, environment
and cost pressures," notes Delta Partners Senior Associate Anna Arlorio. "This
article evaluates how to rethink smartphone subsidies and drive
To download the full article, please visit:
Karen Cordeiro, Marketing Coordinator, Delta Partners, Tel: +971-56-681-5864,
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