Mobile Data: Time For Rationality

McKinsey Telecom Extranet Webcast September 23, 2010

Objectives of todays session

Smartphones

How to exploit How to exploit mobile data while mobile data while ensuring ensuring profitability? profitability?

Objectives of todays session

What are the What are the optimal go-tooptimal go-tomarket strategies market strategies for dongles vs. for dongles vs. smartphones? smartphones?

Which emerging Which emerging consumer trends consumer trends in pricing and in pricing and packaging? packaging?

Provide transparency about mobile data costs and potential levers to reduce them as a key enabler to profitability Review innovative packaging schemes (pricing, branding, bundling, differentiation) Discuss potential customer management and migration approaches to generate value

Dongles

Looking forward, 100% of industry growth in data

Subscriber trajectory flat in the future Number of wireless subscribers EOY, millions +10% 263 249 231 205 180 +2%

Mobile data Voice/messaging

Profit will mostly be earned in mobile data domain Wireless industry EBITDA1 USD billions

267

273

278

283
59

6% 56 61 65

71

29
2004 05 06 07 08 09E 10E 11E 2012E 27 Voice revenues stagnating, only growth in data Industry revenue by category USD billions
144 16 155 22 159
27

31

37

44

52

27 09E

24 10E

21 11E

18 2012E

2008
165
33

171
38

179
44

103 3 101

115 6 109

129 10 119

+35%

128

133

132

132

133

135

Summary Future profitability of a carrier will largely depend on its ability to gain and defend mobile broadband market share EBITDA projection does not reflect ~ USD 80 billion investment for network upgrades and LTE deployment

2004

05

06

07

08

09E

10E

11E

2012E

1 Does not include M2M, m-commerce, mobile advertising SOURCE: Yankee Group; Goldman Sachs; McKinsey 2

Re-thinking mobile data offering and pricing: Key questions

Mature markets Developing markets

Data cards/ mobile BB

2 3 4 5

What is the best positioning strategy (substitution vs. complementarity)? What pricing schemes are being successful? Should I bundle Mobile and Fix Broadband? How? What are the best practices in migrating customers to more profitable pricing plans?

Mobile data on handset

6 How to use Smartphone data pricing to sustain ARPU? 7 How to bundle VAS/Apps? 8 What is the potential of CLM?

1 What are the overall costs

and how to manage them?

WHAT ARE THE OVERALL COSTS AND HOW TO MANAGE THEM?

1 Overall costs are not negligible

Wireless Broadband 3G costs Cts/MB Average cost/MB (static costing) of a mature operator

ESTIMATES

CAGR

3.5

2.5

-27% p.a.

1.5 1.0 1.0 0.6

2008

2009

2010

2011

2012

2013

SOURCE: Experts interviews; McKinsey analysis

WHAT ARE THE OVERALL COSTS AND HOW TO MANAGE THEM?

1 In fact, network costs are the most important profitability driver of mobile data offers, in particular for high usage offers
Post paid high usage offers monthly costs Monthly cost per client, basis points
100

Variable network costs Basis points

70 30

Total costs

Network costs

Other costs

Cost per MB

Incremental 2G costs per MB

Fully allocated 3G costs per MB

Source: Client interviews, McKinsey analysis

WHAT ARE THE OVERALL COSTS AND HOW TO MANAGE THEM?

1 Wi-Fi off-loading can make the difference

Operators have already introduced WiFi offloading in their offers and are planning for substantial increase in traffic offloaded to Wi-Fi Share of total data card traffic offloaded to WiFi Percent
Offloaded to WiFi

100%

100%

Western EU operator

40%-50% <5% 2009 2011

WHAT ARE THE OVERALL COSTS AND HOW TO MANAGE THEM?

1 as well as smart network deployment

Model inputs covering all key cost and revenue assumptions Business Model Demand Existing subscriber base Forecast of subscribers ARPU levels Market share Existing mobile infrastructure Number of 2G/3G base stations Percent of indoor coverage Copper coverage Number of COs Cost drivers CST populated Topology (service area, percent of high-rise buildings Operator-specific network parameters Cost-drivers pre-populated Network dimensioning Network, CPE, provis. costs Non-network costs (labor cost indexed)

CLIENT EXAMPLE
3G network rollout plan optimizing CAPEX Outputs 1 Business case by region for each of the mobile BB technology options
Region 3 Region 2 Region 1
e.g., 3G/2.5 G coverage
Data Years Revenues OPEX SAC CAPEX NPV Total NPV Post-paid contracts only Pre-paid + Post-paid contracts 2.009 2.010 2.011 2.009 2.010 2.011 22.233.493.461 66.700.480.382 88.933.973.843 27.841.277.500 83.523.832.501 111.365.110.002 7.489.010.509 22.467.031.528 29.956.042.037 7.977.377.682 23.932.133.047 31.909.510.730 2.445.018.788 6.376.747.422 7.224.584.640 2.294.111.859 5.983.173.608 6.778.682.184 112.632.973.200 112.632.973.200 46.649.418.262 123.755.380.715 123.755.380.715

NPV (10 years) Billion X 182

123 17

Full 3G coverage

3G/2.5G coverage

2.5G only coverage

2 Countrywide plan for mobile BB deployment/upgrade

NPV Region 1 Region 2 Region 3 Region 4 Region 5 Region 6 Region 7 Region 8 Region 9

Full 3G coverage 3G/2.5G coverage 2.5G only coverage

Region 1

Source: McKinsey analysis

WHAT IS THE BEST POSITIONING STRATEGY (SUBSTITUTION VS COMPLEMENTARITY)?

2 MBB positioning will depend on the type of market and player

CASE EXAMPLES

Emerging weak fixed In South Africa, Vodacom and mobile players winning over fixed with MBB In Ukraine, operators launching aggressive USB offer for substitution, even on CDMA In Tanzania, MBB as main internet access technology

Market maturity

+
Mature

Developing In Russia, fixed BB high-speed only in some high-end areas: mobile in others/rural In Brazil, aggressive MBB marketing by mobile only players leveraging 2.5 assets In Czech Rep., mobile BB growing but often complementary to fixed In Turkey, incumbent catching up in highspeed DSL diffusion, substitution becoming more selective

In all West Europe countries, offer sophistication for complementary usage: Bundles Pre-paid and low usage offers F/M integration for offloading capacity

In Saudi Arabia., mobile players playing aggressive vs. low-speed fixed

SOURCE: Interviews

WHAT PRICING SCHEMES ARE BEING SUCCESSFUL?

3 Our pricing benchmark reveals increasing innovation in mobile data pricing schemes
Scheme 1 2 3 4
M I -2 4.1 /1 3 .12- 0 0 22 0 10 -67 7 94 B L 8 /A

Dongles

Smartphones

Examples

Flat rate (volume) Unlimited flat (volume/time) Fixed/WiFi bundle Voice bundle Usage-based QoS based Pay-as-you-go Prepaid voucher Off-peak HW subsidy Roaming plan Daily/weekly rate Service specific (e.g. Facebook)

Vodafone Broadband 5 GB (UK) H3G 3 Data Flat (Austria) TMN (Portugal) Vodafone (Spain) MTS Super Onliner (Russia) Orange (Spain)
T mobile (Austria) O2 (Germany) Mobistar (Belgium) T-mobile (UK) Vodafone Internet Night (Italy)

Pricing sophistication in most advanced markets

Most sophi sticated co untri es Most frequent p ricing schemes Emergin g pricing schemes

5 6 7 8 9 10 11 12

Pricing schemes 1 F lat rates volume 2 Unlimited 3 F ixed/WiFi Bundle 4 Voice Bundle 5 Usage-based 6 QoS based 7 Pay as you go 8 Prepaid voucher 9 Off-peak 10 HW subsidy 11 Roaming 12 Daily/weekly rate 13 Service specific 14 F lat rates time 15 Group plans 16 Sessions 17 T op-up bonus 18 Speed based

Austria

Belgium France

Italy

Poland

Portugal Russia

Spain

Sweden UK

Orange (UK) Vodafone (across Europe) A1 Mobilkom (Austria) T-Mobile (UK) Orange (France) Wind (Italy) Vodafone (Greece) Orange (UK) Vodafone WebSessions National (Germany) O2 Pay and Go (UK) Telenor (Sweden) NTT docomo (Japan)

SOURCE: Tariff Consul tancy, Apr 2 010; companies websites; team analysi s

McKin sey & Company | 1 0

13

14 Flat rate (time) 15 Group plans 16 Session based 17 Top-up bonus 18 Speed based 19 Flat rate/ usage based hybrid

SOURCE: Tariff Consultancy, Apr 2010; companies websites; McKinsey analysis

WHAT PRICING SCHEMES ARE BEING SUCCESSFUL?

3 In UK, introduction of low priced prepaid offers increased net additions significantly
In H1 2008, UK operators reduced prepaid MBB price British pounds and number of prepaid gross adds more than tripled in 3 months Number of gross adds, 2008
x%
Prepaid Postpaid Share of prepaid in total gross adds

120 24.1% -59% -59% 10.2%

49

22.6% 28,000 96,000 10.5% 9,000 244,000 77,000 10,000 88,000

32,000 101,000

685,000

Before revision

After revision

Total base Mar (end of Feb)

Apr

May

Jun

Total base (beg of Jul)

Recently launched prepaid offers from other operators across the world

10

WHAT PRICING SCHEMES ARE BEING SUCCESSFUL?

3 More sophisticated data pricing plans combine the advantages of usage-based and flatrate offers
"Pake-hodai double" combines usage based and flatrate pricing

EXAMPLE JAPAN

Flatrate at low data usage at 3 EUR/month Usage based pricing above a certain threshold Flatrate at high data usage depending on access mode: 34 EUR/month for provider's portal i-mode and i-mode mail 47 EUR/month for i-mode Full Browser 106 EUR/month for access via PC

Providing advantages to both provider and subscriber

Gives subscriber sense of cost control linked to flatrates Market insights indicate that pay-as-you-go rate less visible than the two flat rates Scheme stimulating elasticity by inciting subscribers to reach the unlimited threshold

SOURCE: Company website Nov 2009

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WHAT PRICING SCHEMES ARE BEING SUCCESSFUL?

3 Italy has experienced high consumer acceptance of data pricing per hour
Mobile broadband offer Usage need Allowance Mega unlimited Mega 100 ore Mega 50 ore Wind easy internet Price EUR per month 20
ITALY

Unlimited (10 GB FUP)2 100 hours1 of usage 50 hours1 of usage Pay per use (per hour)

15

People dont understand the amount of data they need per week or month; they feel reassured when you talk about hours We introduced two hourbased packages and an unlimited with FUP2 for the heavy users This was real product innovation in the market; all other players rapidly followed Wind Italy, Head of mobile BB
12

EUR 0.5/ hour Semester fee: EUR 4

1 Counted at billing periods of 15 minutes 2 Speed slow-down after threshold SOURCE: Web sites; interviews, April 2010

WHAT PRICING SCHEMES ARE BEING SUCCESSFUL?

3 Vodafone Spain offers unlimited mobile internet packages, which only slows down your connection in case of network congestion

SPAIN

Unlimited Internet Contigo Speed is reduced only in case of network congestion Price: 39 / month Traffic: Unlimited Speed: Maximum speed up to 21.6 Mbps, the first 4 GB Voice: None

Unlimited Internet Contigo+ Voice Price: 49 / mont Traffic: Unlimited Speed: Maximum speed up to 21.6 Mbps, the first 4 GB Voice: Flat Rate to landlines (1000min/month)

Contigo Internet Gold Price: 49 / month Traffic: Unlimited, including VoIP traffic Speed: Maximum speed up to 21.6 Mbps, the first 10 GB Voice: None

Vodafone also has a 1GB package at 32 / month with speed reduction down to 128kbps after 1 GB usage

Source: Company Web site, August 2010

13

WHAT PRICING SCHEMES ARE BEING SUCCESSFUL?

3 Maxis in Malaysia follows a more targeted communication strategy for the heavy users of mobile broadband
Maxis USB modems covered with cool sleeves targeting the youth in the country

Maxis organizes music fests and distributes small gifts (e.g., goodie bags) to its young customers
SOURCE: Web search; McKinsey analysis 14

SHOULD I BUNDLE MOBILE AND FIX BROADBAND? HOW?

4 Fixed line integrated offer in Turkey to slow down substitution

TURK TELEKOM EXAMPLE

500 MB internet package at 9,99TL (5,99 TL for the first six months) with a 24-month contract Free 10 hours Wi-Fi/ month Additional 500 MB data upto 2GB is at 7 TL/month Excess usage fee after 2GB is 0,05 TL/MB ADSL ownership required Mobile operators charge ~30 TL for 1 GB and 10 TL for 100 MB (mostly advertised for handsets)

15

SHOULD I BUNDLE MOBILE AND FIX BROADBAND? HOW?

4 Mobile Broadband + ADSL bundles can be analyzed under different scenarios

Description Base case: No bundling Implications

Independent selling of ADSL and MBB Todays prices

Scenario A: Bundle ADSL + MBB with a discount in the upfront fee Scenario B: Bundle ADSL + MBB with hard discount

In addition to the offer in the base case, the incumbent bundles MBB to ADSL customers with a discount in the upfront fee

Lower cannibalization of ADSL ADSL market share increases Increase in MBB share

In addition to the base case, the incumbent bundles MBB to ADSL customers with a 20% discount in the bundle

Much lower cannibalization of ADSL Increase in ADSL share Significant increase in the number of MBB customers, although at a smaller ARPU Higher ADSL cannibalization Larger MBB market but at a significant lower ARPU

Scenario C: Discount in MBB (standalone)

All operators reduce MBB prices to the implied level in scenario B No cross selling of ADSL+MBB

16

SHOULD I BUNDLE MOBILE AND FIX BROADBAND? HOW?

4 Portugal Telecom offered mobile broadband services under two brands

Standalone mobile offer Wireless internet access, easy to install and ready to navigate A top of the range equipment offer and standard monthly fee plans Multi-access offer Internet access that adapts to the needs of its user everywhere

Everywhere
Fixed access

1GB @ 29.90/m 2GB @ 34.90/m Multiaccess

23

35

40

61

48

57

86

Price evolution in line with other mobile operators

Price evolution indexed to standalone fixed access (premium product of fixed access)

17

WHAT ARE THE BEST PRACTICES IN MIGRATING CUSTOMERS TO MORE PROFITABLE PRICING PLANS?

5 Making switch to UBP is difficult, but global examples from wireless and wireline suggest customers accept change if done right
Guiding principles Description Wireless Austria Condition customers Wireline

Start by introducing FUP/AUP Use soft caps not hard caps, i.e., penalize by reducing speed Communicate to customers early and clearly Highlight benefits of UBP Offer open and transparent bandwidth usage reports

Educate customers

Make pricing transparent

Demo customer best interest

Offer rightsizing recommendations and proactive bill review

Use events to introduce new prices

Introduce pricing changes with other events such as new speed offering or new device launch

SOURCE: McKinsey analysis

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HOW TO USE SMARTPHONE DATA PRICING TO SUSTAIN ARPU?

6 Smartphone diffusion further stressing the network and putting an end to unlimited data pricing: the AT&T example
2% of smartphone customers use 40% of the overall data bandwidth Percent 2 Monthly usage Over 2GB/month and 40% of network capacity Between 200MB and 2GB Data Pro Data Plus leading AT&T to introduce new tiered pricing Price USD 15 (+15)

DATA PLAN FOR SMARTPHONE USERS

Capacity 200 MB (200 MB)

Example of usage

33

25 (+10)

2 GB (+1 GB)

and to educate data users 65 Below 200MB/month

1,000 e-mails 150 e-mails with attachment 400 web pages 50 pictures 20 minutes of streaming video 10,000 e-mails 1,500 e-mails with attachment 4,000 web pages 500 pictures 200 minutes of streaming video Managing usage Customer text notification on data usage Data usage monitoring application on iphone and other devices Data calculator on AT&T website

AT&T smartphone users

SOURCE: AT&T press release

19

HOW TO USE SMARTPHONE DATA PRICING TO SUSTAIN ARPU?

6 Leveraging mobile data may offer MNOs opportunity to introduce flat rate bundles to increase/preserve current ARPU levels
Tiered bundle offers New MoU Bundle 4 (given mins) Bundle 3 New ARPU Bundle 3 Increase in ARPU possible due to increase in voice minutes and addition of mobile data Current ARPU Example offers

ILLUSTRATIVE
ARPU MoU Potential revenue gain

Average MoU / ARPU

Post-paid

2,000 minutes (all networks) + 2GB mobile data @ 29 1,000 minutes (all networks) + 1GB mobile data @ 23 10 top-up: 250 minutes (all networks) + 500 MB mobile data 20 top-up: 500 minutes (all networks) + 1 GB mobile data

Pre-paid

Bundle 2 Current MoU

Bundle 1

Customer distribution

MNOs may preserve current price levels (or adjust for inflation) through adding more mobile data capacity (quota)

Note: Assuming customers will have adequate handsets and will value using mobile data SOURCE: McKinsey analysis 20

HOW TO USE SMARTPHONE DATA PRICING TO SUSTAIN ARPU?

6 Looking forward, pricing experience in fixed could suggest a possible way forward for smartphone pricing strategy
In fixed, incumbents successfully applied smart pricing techniques to react to value erosion Launching flat voice offers

Possible implications for mobile data pricing:

Give discount today to protect ARPU tomorrow and stop erosion Defend from F/M substitution Use data as lever to protect voice Obfuscate voice and data through a unique flat bundle (where possible)

Avoid visible give-away of data access value for smartphone users Where voice bundles are already a market standard, bundle with data packages If possible, avoid transparency of the voice vs. data components to protect value of data from comparability vs. aggressive players

Bundling flat voice with flat DSL

Depending on regulation

SOURCE: Interviews to McKinseys industry experts

21

HOW TO BUNDLE VAS/APPS?

7 Orange France offers service specific bundles: TV, football, music, and mobile cinema
FRANCE

Origami Star for leisure users

Voice advantage in the evening and on week-ends, unlimited SMS Unlimited mobile browsing, however email usage not included, fair-use cap1 at 500 MB Free content to be chosen from either mobile TV, football, music or mobile cinema Discount for web subscription to reduce acquisition costs linked to other channels

Origami Jet for high value customers

1 The operator has the right to limit the access when monthly usage exceeds the cap Source: Company Web site, August 2010

Flat fee including unlimited national and international calls and SMS Unlimited mobile internet, e-mail and access to WiFi hotspots, fair-use cap1 at 1 GB Unlimited mobile TV Free content to be chosen from either navigation, football, music or mobile cinema Highest service level with yearly new handset and device insurance
22

WHAT IS THE POTENTIAL OF CLM?

8 Small number of customers, driving significant share of traffic, already destroying value for MNOs DISGUISED CLIENT EXAMPLE
5% of data users generating 80% traffic Distribution of data users1 and traffic Mobile B2C data users and traffic Sep 2009 1,280 67 9 (100%) 5% 18%
74

can destroy ~25% of total value Life time value of data plan subs EUR millions
100

(100%)

-26%

23%

82%

0.6

54% 16% 3% Data users (million) Data traffic (TB)

xx
Av. traffic per user in MB/month 20 MB to 200 MB 100 kB to 2,5 MB

Monthly data usage per subscriber: >200 MB 2,5 MB to 20 MB

Subs. w. <500MB monthly

Subs. w. >500MB monthly

All data subs.

1 Wireless subscribers with more than 100kB monthly mobile data traffic 23

WHAT IS THE POTENTIAL OF CLM?

8 Step-changing CRM and campaign capabilities

However, to capture the full potential a full turnaround of CRM and campaigning capability is required From Targeted push campaigns can be a powerful drivers of revenues To

Flat contact policy without differentiation among cluster of users Limited number of campaigns (~20 per month) with poor possibility to test-and-learn on small targets and new products No monitoring of campaigns results and manual management of reporting 2-month lead-time from design of campaign to results monitoring Only SMS-push campaigns

Contact policy differentiated for users (animation) and non-users (recruiting) 50-100 campaigns per month, with possibility to select micro-targets and a broad range of products to optimize ROI Structured monitoring on campaigns redemptions with automatic monitoring tools to build ROI ranking of campaigns Flexible and just-in-time process (2-3 weeks ?) Exploit all channels (Teleselling, IVR outbound, Inbound, etc.)
24

Increased redemption of factor 10x to 100x through Better targeting Channels improvement through direct call to action Fit between offer and channel

Applying these levers in a throughout manner can yield significant impact

Description Improve customer lifecycle management Best-in-class

EXAMPLES

Sample analysis
2 Adoption of true digital content services still trailing messaging
% of respondents, post -paid users only, (N = 980) Mobile data service SMS Take pictures Listen to music MMS Buy ringtones, games MSN Watch video Watch TV Search / browse internet Send emails Social Networking Maps Shopping Aware Considered Tried Use 76% 77% 75% 47% 51% 46% 53% 64% 38% 41% 47% 52% 48% XX%
PRE-PAID Conversion rate

Perform promotions on high yield devices Drive yield through efficient devices and high APRU data plans through subsidies, promotions and sales rep tactics Cross-sell/up-sell Highlight data VAS, tailored to specific device Migrate customers from lower to higher yield devices/data plans Show customers actual usage to avoid downgrading to lower data plan Highlight benefits of data VAS Perform microsegmentation based on usage patterns and demographic/behavioral analysis Increase penetration through a variety of targeted levers, e.g., improved cross-sell and upsell, pricing and yield management Address opportunities to maximize Internet penetration for 2nd SIM cards Define clear business model and role in the ecosystem Analyze quality & breadth of apps portfolio (e.g., number of apps by category, exclusive games, integration with social networks) Identify opportunities to enhance current portfolio through partnerships and better monetization models Create microsegmented offers to rapidly drive penetration in geographic areas underserved by fixed broadband, incl. targeted pricing and channel strategies Identify specific opportunities for fixed-mobile convergence and create partnerships to address them Identify opportunities to reduce network congestion based on analysis of traffic (incl. geographic distribution) Apply best practices to reduce network congestion (e.g., off-peak downloads, caching of content, innovative pricing models)

3-6% market share gain 1-2% EBITDA increase

97 97 97 95 95 92 89 87 93 93 88 79 82

83 72 69 59 54 49 42 36 48 44 36 31 29

77 62 57 42 39 29 24 19 27 22 18 14 13

59 48 43 20 20 13 13 12 10
9 8 7 6

For pre-paid users usage is lower than for post-paid users, however conversion rates are quite similar Despite high awareness, trial rates continue to be very low across the board. e.g. only 1 prepaid user in 10 has tried to use the mobile internet

Work ing Draft - Last Modified 24/ 03/ 2010 12: 17: 09 PM P rinted 11/02/ 2010 13:00: 29

Q72 - For each of the following mobile serv ic es, please choose one of the following statements: (1) I have not heard of this serv ice, (2) I am aware of this serv ice but have nev er considered using it, (3) I have considere d using this service on my phone but have not yet tried it, (4) I have tried this service on my phone but rarely use it, or (5) I use this service regularly (e.g. few times a month) on my phone SOURCE: LatAm mobile panel 2010 McKinsey & Company | 6

Expand usage aggressively

2-3x expansion of intense users YoY Growth of intense users to 40-50% of user base Double Internet penetration on 2nd SIM 10-20% of all data revenue from apps

Handsets

The consumer market can be segmented based on the appetite for different content/services
Segment Web socials Share of co nsumers* % Attitude toward content/services 28

CASE STUDY, WESTERN EUROPE

Other key characteristics

Strong usage of Web social

networking, IM, photo sharing,

More techies and fashion Younger than average Traditional usage of devices (TV,
fixed phone, etc.) Low penetration of entertainment content (e.g., pay-TV) driven
Work ing Draf t -Last Modified 08/ 05/2010 07: 36:11

Conservative professionals

20

Utilizing mostly e-mails/calend ars Adverse to web social networking Keen about Web social networking Appetite for music, video, games Low utilization of fixed/home services High usage of Web search, news,
e-commerce Low interest for entertainment mail, calendar)

Young socials Mobilitydriven Utility-driven

13

Young Female Low utilization of fixed/home

devices

12

P rinted 07/05/ 2010 17:09: 06

11

Slightly older than average Somehow biased toward fixed Mostly female Mostly male

Housewives

11

Rejection of professional services (e Neutral about other content/services Appetite for gambling and Very low interest for Web social
networking and professional services ringtones/logos

Frivolous

* France, Germany, U.K., Spain Sources: Segmentation deriv ed from Telecom Customer Insight Survey, 2008

45

Aggregation

Content and applications are offered through the mobile portal

The portals... ...are not perceived as attractive Key take-aways Usage of the mobile p ortal Percent of mobile data users1
A B

Partnership with xx for vast majority of content and The company gets x% of revenue share from the partner Billing is done through a company billing system
Portal content applications

TBD

Raise the game in Apps

Startpage:

News Weather Traffic update Links to sites and

applications

May Aug Nov 2008 2008 2008

Feb May 2009 2009

Download section:
Applications Wallpapers Music Ringtones

Would you recommend the portal? % of mobile portal users1 - May 2009 Very likely Very unlikely Neutral

Email section with links Personal space with

to emailing and instant messaging billing and price plan informations

1 Based on surveys among x-y subscribers using internet on their mobile SOURCE: Company website, interviews, Up-To-Data panelJune 2009 McKinsey & Company | 21

Double down on datacard penetration

Over 60% of mobile broadband share of total broadband

SPO- TF N386-20090206

This requires a mo re CLM type approach for data cards sales

? ? ?
Tighten data l imits and f ai r use policy Restrict vi deo and mus ic appli cati on us ages Upsell to higher ARPU data products Hi gh

? ? ?

Promote higher ARPU products (e.g., roaming) Cross- sel l v oice and WLAN t o maxi mi se ov erall li fecycle val ue Target f or VAS
W ork ing Dr aft - La st Mo d ified 06 /02 /20 0 9 0 9:0 2:0 0

Usage per month

Contr ol & upsell Upsel l to retai n D rive for profitability Seek out & pr omote

P in te d 7 /2 /2 0 09 01 : 46 :3 3 r

L ow L ow Hig h Sp en d per month

Pus h dif ferentiated pricing (e.g., cheap off- peak , best effort speeds, li mited hours per day) Enc ourage hi gher use on profitable products

? ?

Seek out more users (e.g., seni or managers, second card while roami ng) Cros s-sel l v oic e and W LAN to maximi se overall lifecycl e value

McKinsey & Company | 34

Manage data traffic proactively

3-5x average yield improvement

Short-term

Data traffic can also be peakier than voice, with peak hour happening later at night

DISGUISED CLIENT EXAMPLE 3G data traffic 3G voice traffic

3G data traffic Mbps 1,500

Important difference also between week and week-end days

3G voice traffic Minutes 100,000

Work ing Draf t -Last Modified 08/ 05/2010 07: 27:47

75,000 1,000 50,000 500 25,000

P rinted 07/05/ 2010 17:09: 06

0 0 3:00 6:00 9:00 12:00 15:00 18:00 21:00

0 24:00

SOURCE: Client interv iews; Team analysis

56

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Contacts
Gloria Macias-Lizaso Miranda
Partner in the Madrid office Telephone: +34 (91) 346 58 35 E-mail: Gloria_Macias@mckinsey.com

Yavuz Demirci
Associate Partner in the Istanbul office Telephone: +90 (212) 339 4925 E-mail: Yavuz_Demirci@mckinsey.com

Piero Trivellato
Associate Partner in the Milan office Telephone: +39 (02) 72406-469 E-mail: Piero_Trivellato@mckinsey.com

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