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. Theymust also develop a more robust strategy to promote device leasing effectively. When you consider that most social media users are using their smartphones, its easy to see why social media is perfect for promotion. As . But if the consumers switch to an alternative network as soon as the initial lock-in period is over, the telcos essentially lose. The consumer may opt to pay a buyout fee then. Click here and Check me out i am getting naked here ;), Good information !I am very interesting to read your blog content.Thanks for sharing.you may also check our blogBajaj Holdings & Investments SharesBajaj Holdings & Investments Limited. The proliferation of mobile phones across diverse avenues has led to a transformation that was inconceivable, a few years ago. Although I like to think widely about these issues, Ill also try, wherever possible, to back up my thoughts with data & thought experiments. In the face of these challenges, operators need to revisit their strategies for managing overall smartphone expenses, an often-overlooked part of their business. Another North American operator enhanced margins on accessories by over 20 percent by shifting to private-label manufacturing for brand-agnostic accessory categories such as cases and covers. Modern technology knocked on the doors of the 21st century with the introduction of the first-ever iPhone. Despite the richness and depth of the experience that narcotics offer, our inability to accurately control, shape or share the hallucination make them an unreliable tool to create an alternative reality on, Yesterdays news cycle brought with it the announcement that Debenhams, a staple of the UK high street, was now in the control of its lenders . As a Telecom Analyst he has been quoted extensively by the leading media platforms. 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. Equally important, smartphone offers help drive new subscriber growth. endstream endobj 516 0 obj <>/Filter/FlateDecode/Index[84 399]/Length 36/Size 483/Type/XRef/W[1 1 1]>>stream Lets jump to the pros and cons of handset leasing with respect to different stakeholders. 0000028051 00000 n Residual value is a function of device age and condition, source of supply, and end resale channel. It is rare, though, to see operators break through silos and push for smartphone excellence across functions. For instance, one AsiaPacific operator discovered subscribers were misusing a loophole to get new device replacements for low $200 deductibles by claiming their devices were lost. These include high penetration levels, longer upgrade cycles that now stand at 30-plus months, a shift from flashy hardware innovation to less visible software advances, and a more established secondary market for used phones. There will be a rate of interest on top of the repayment, but nothing near what you might expect. With intelligent but meaningless opinions about your clients, you can damage an otherwise successful business. 7. In the 2019 fiscal year, the Sprint Corporation's revenue amounted to 33.6 billion U.S. dollars, 21. . By doing so, they will have a chance to market themselves as the one-stop shop for subscriber hardware needs. A global working-capital provider launched a smartphone-focused offering in 2018 and completed a program for a large European operator with nearly $1 billion in bonds already sold. While handset rental is gaining popularity, conducting research and implementing numerous approaches is insufficient to achieve success in promoting device leasing. 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. Delta Partners here presents new and trialed measures that could be used to mitigate the impact. This blog is a scratch pad for ideas, so I'm sure some of the concepts & topics I think about are, far-fetched, unrealistic or downright wrong! 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. 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. The first half of Budget Session 2023 was held from January 31, 2023 to February 13, 2023 (10 sitting days). profitability and debtor's days, inventory days, and The study period was 2007-08 to 2014-15 and creditor's days. endstream endobj 248 0 obj <>/Filter/FlateDecode/Index[26 191]/Length 29/Size 217/Type/XRef/W[1 1 1]>>stream Revamping operator brand phones 5.3.4. Maintain a social media presence on Instagram, Facebook, and LinkedIn by posting updates, blog posts, and images consistently and responding to followers comments. Operators would carry close to zero costs on their balance sheet for buying, transporting, and servicing devicesensuring they have capital to invest in improving their network serviceswhile becoming one-stop shops for consumers and their 5G needs. 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. Published by S. O'Dea , Jul 30, 2020. He understands specific mobile industry nuances, helping clients to navigate through the rapidly changing technological trends. 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. 0000001773 00000 n 0000020860 00000 n Following yesterday's post, here's some related thinking on the impacts on operators of handset leasing. 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. 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. 0000010561 00000 n OEMs require payment for their phones within 30-90 days, while customer payments span 24 months. Its also critical to establish and maintain an online presence on review sites like Google My Business or Yelp. Create network supremacy by smartly rolling out 5G and fiber to the premises, integrating precision analytics and marketing, embedding . All stakeholders should reap major benefits as a result of this shift. The Consumer Technology Sales and Forecast study conducted by the Consumer Technology Association (CTA) also looked at new technology trends, projecting that 5G cellphones would generate USD 61.37 billion in revenue, up by 15% from USD 53.38 billion in 2021. Although losing the privilege of locking handsets to their network may be frightening, in truth it is no more impactful than number portability in enabling consumer choice. 2 This is less than half a percent of the 34 gigatons of total CO2e emitted globally in 2021, but it is . 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. Make a point of responding to each review, even bad ones, to demonstrate your trustworthiness and concern for your residents. They are uniquely capable of generating both used-phone supply and demand. 217 0 obj <> endobj 0000006936 00000 n 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. 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. 3 Seeing this, consumers and firms realize the advantages of handset leasing as a valid way to avoid paying exorbitant prices for handsets while still allowing for their use. 6 Optimize the balance sheet by unlocking the value of infrastructure assets, exploring new ownership models such as network or tower sharing, or taking advantage of activities such as debt restructuring and M&A. 34 percent management fee. 0000007624 00000 n 3. 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. 0 Seizing this opportunity requires a well-defined re-commerce strategy that boosts and leverages a devices residual value Leading OEMs and operators 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. 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. Each lever on its own helps improve the financial performance for an operator. manufacturer but the service charges are higher. New challenges for handset suppliers 5.3.1. Ensure that each page of your mobile website contains compelling calls to action. Tarun has 10 years of work experience with a key focus on the evolving mobile device ecosystem with specialties in Emerging Markets. 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. For sure i will check out more posts. By utilizing prominent, clickable buttons, mobile websites may implement this method. 0000001016 00000 n Also leasing removes the upfront cost barrier that may have delayed a purchase, or even prevented the purchase at all. since they often end up having to chase $1,000 worth of inventory and about $250 in service fees for the average customer. endstream endobj 218 0 obj <>/Metadata 24 0 R/Pages 23 0 R/StructTreeRoot 26 0 R/Type/Catalog/ViewerPreferences<>>> endobj 219 0 obj <>/Font<>/ProcSet[/PDF/Text/ImageC]/Properties<>/XObject<>>>/Rotate 0/StructParents 0/TrimBox[0.0 0.0 595.276 841.89]/Type/Page>> endobj 220 0 obj <> endobj 221 0 obj <>stream Similarly, there is a huge population that is drawn towards constant upgrades to the latest technology handsets. . 0000000975 00000 n At the end of the term, the customer can upgrade the phone, continue to lease the same device, or purchase the phone. 0000010949 00000 n Sprint ran a case study regarding three separate business models in the Handset market: i. 0000020964 00000 n the market price for a used smartphone at any point after its launchto potentially drive three major benefits (Exhibit 2). 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. To actually make device financing lucrative and to reap the benefits of handset leasing by telecom companies, the telcos have to ensure that the consumers stick around with the leased . In India there were several attempts of such plans over last two decades but failed to attract consumers. This migration is necessary to enable expansive 5G network experiences, yet it will be more expensive than previous consumer-hardware shifts. Smartphone subsidies are spreading South-East Asian markets, exerting pressure on telco bottom lines. Deutsche Telekom presented strong earnings again in the second quarter . Nice Blog.. Oil companies are consistently and acceptably profitable, despite being (literally in some cases) the dumb pipe that operators are so desperate to avoid becoming. NEW YORK, March 16, 2017 /PRNewswire/ -- SummaryOperator profitability in the mobile segment in Europe is under pressure, particularly in more mat. As a result, they can upgrade or add devices as needed. 0000003716 00000 n Seven key activities define E2E device life-cycle management (Exhibit 1). 0000003629 00000 n Depending on the plan, the phone is upgraded to keep up with the latest advancements in smartphone technology. . D. Handset leasing and telecom industry The handset leasing solution has been introduced in response to the rising prices of smartphones as well as the costly integration of the 5G technology will rise the costs of the phones production in comparison with the 4G ones. Telecom firms should consider how they will target smartphone users and create an exceptional experience that will keep them coming back for more. 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. 0000010787 00000 n Affordable monthly installments to be paid until the lifetime of the plan. Huge competition from asset-light and low cost MVNOs which engages in price wars and hence force to lower the prices of mobile services. For leaders in the retail and associated consumer industries, now is a good time to consider what lessons can be learnt from Debenhams and what could be done to seize the opportunity presented by its passing. A low impact facility is defined in the Telecommunications (Low-impact Facilities) Determination 2018 and is determined by taking into consideration a number of factors including what type of area the facility is to be located (e.g. 0000003251 00000 n Impacts of a handset leasing model on mobile telcos . Traditionally, the circular/re-commerce economyuse, recycle, reuse, repeathas focused on larger assets such as cars. In 2021, SK Telecom's sales revenue amounted to around 16.75 trillion South Korean won. 0000005355 00000 n This is where device financing and handset leasing play a pivotal role. Impacting high-end products 5.3.2. Phone subscriptions also offer consumers the ability to upgrade devices more frequently. 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. Deloitte Global predicts that smartphonesthe world's most popular consumer electronics device, expected to have an installed base of 4.5 billion in 2022 1 will generate 146 million tons of CO2 or equivalent emissions (CO2e) in 2022. Low or no upfront costs to be paid while taking the mobile phone. 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. The promotion will last only one week and will enable customers to upgrade to a new Galaxy device any time after 12 lease payments under the carriers Galaxy Forever plan. Offering special rates on plans rather than subsidising the handset 5.2.4. 0000008172 00000 n It delivered significant churn improvements and market differentiation. 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. xref 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. 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. Sprint Corporation was an American telecommunications company and is a current brand of T-Mobile US for wireless and internet services. Of course, there was the year of the one-off with the . 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. The Telecom sector is the 3rd largest sector in terms of FDI inflows, contributing 6.43% of total FDI inflow, and contributes directly to 2.2 Mn employment and indirectly to 1.8 Mn jobs. The average net profit margin for companies in the telecommunications sector is approximately 12.5% as of 2022. This auction was successfully held by the end of July 2022 and grossed $18.77 Bn. whats the right choice for, Democratizing Technology with Smartphone Financing, SIM-based Locking: How NuovoPay Makes Device Financing Lucrative for Telcos. Handsets bundled with telecom services were present, albeit in a different avatar from the Reliance Infocomm's Monsoon Hungama of 2003. Increased revenues from prepaid subscribers leasing their handset. Outsmarting the 5G smartphone challenge: How telcos can reinvent their handset business. This includes registration of devices,, We are excited to have joined hands with Angaza, a leading provider of software technology designed specifically for, There is always a sub-conscious dilemma for consumers: Device Leasing vs Buying? Source: Earnings . To add to it, as mentioned above, the primary profit-making element for telecom carriers is not the device financing itself, but the 5G or 4G service costs. 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. The Lease model where the company grants the customer the right to use a device over the lease term in exchange for a monthly equipment rental fee. 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. 0000001936 00000 n Therefore, every telecom company must have a customer support team equipped with the best help desk software systems. Source: Statista. 0000004969 00000 n 5. You may offer specific plans or solutions based on their desires. Following the analogy, the one thing that operators should not do is lose the differentiation that the geographic reach of their network affords them by separating the netco from the servco. Email marketing is another critical channel for capturing the attention of mobile users. This site seems to get a good amount of visitors. Sprints device leasing has helped it regain its financial position. And financing costs can be lowered even further using analytics. Leasing cost: $12.65 per month (Official Lease price) Leasing period: 18 months. It is also beneficial to highlight the advantages that the customers may enjoy if they decide to sign up for a device leasing agreement. Help desk systems are used for both processing external requests from customers and internal requests from team members. 0000001499 00000 n Telecom operators in mature wireless markets are reaching a critical inflection point with the transition to 5G. Schedule a call with our implementation experts today! 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. The take rate of Sprints leasing plans reached ~43%. As a result, due to the financial benefits of leasing, Sprints lease revenues could increase going forward. Source . Source: Earnings . Success is never owned. HnT1yx8*@,XWCoEwNNB|8l^GG1W'1l]. At a time when smartphone-related expenses already strain their profit margins, most operators cant afford to shoulder the further financial burden of improving smartphone affordability for consumers. One of the hypotheses under consideration is the introduction of handset leasing. Successful telecom companies leverage their social media channels to showcase the benefits of device leasing vs. buying. 0000006151 00000 n 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. According to RentoMojo . Identify the metrics that are most important It aims to make premium handsets more affordable to customers . At the moment, approximately 3.81 billion individuals utilize social media, a figure that is growing every year, according to Smart Insights. 0000001319 00000 n Why, Device financing has been garnering eyeballs as one of the most lucrative models to make the most use, Device leasing and financing is picking up globally and NuovoPay steps in to solve the challenges around the, NuovoPay demystifies device leasing by streamlining the end-to-end device financing and leasing process. ii. 0000020506 00000 n Handsets bundled with telecom services were present, albeit in a different avatar from the Reliance Infocomms Monsoon Hungama of 2003. With the high price of handsets, carriers offering leasing plans might face enormous hurdles pertaining to. Avoid overloading your sites with sales offers; instead, assist consumers in visualizing what its like to have a leased mobile device. At least in the wholesale market, the minimum residual value for premium smartphones can be predicted well in advance and used to inform an operators game plan. Keep up the good work. Lets look at the nitty-gritty of the industry and its need with various aspects. Operators also can serve as strategic partners to OEMs to help distribute used phones in developing markets. Would love to discuss on businesses, startups and sports. Student at IIT Madras. For investors, these asset-backed securities are a stable, highly rated investment vehicle. Please email us at: Chinas surge into 5G will push the worldwide smartphone market back to growth in 2020, according to IDC, IDC, November 26, 2019. The rising prices of mobile hardware have already capped the profit margin that the telecom industry enjoyed from the said smartphone financing model. 0000017285 00000 n Deutsche Telekom continues growth course. What this study reveals is that although the EBITDA of the Leasing model is higher than the other two models, after accounting for depreciation in the value of handset over the lease period, all three models effectively yield similar profits. OEMs require payment for their phones within 3090 days, while customer payments span 24 months. Many Lease Telecom Partners offer this service and manage everything including equipment pick-up, data-wiping, handset grading, environmental disposal and payment. It has reached KRW 17.520 trillion in revenue in 2017. KPIs and potentially debt covenants of telecom operators, the Standard significantly impacts lessees' systems and controls as more lease data will need to be tracked by bringing operating leases onto the balance sheet. Here is your task : Your first task today is to do some . 0000009802 00000 n The take rate of Sprint's (S) leasing plans continued to surpass its installment plans in fiscal 3Q16. 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. Hence, telecom carriers want to aggressively go after the smartphone leasing market, but the road is rocky. 1. Mobile phones are no longer a luxury, even in the geographies that were once underserved in terms of technology. The magnitude and complexity of the smartphone subsidy challenge will increase significantly in the next few years. Given this dynamic, ensuring consumer affordability is almost certain to become a costlier proposition for operators. Though securitization of handset receivables has been around for years, most global operators have only scratched the surface in using the vehicle to gain immediate cash and employ their capital more efficiently. 1 While this performance shows the power of the Apple brand, it is still lower than the peak of Q4 2020 when its revenue share reached a staggering 50%, up from 28% in Q3 . Receivables factoring is a financial transaction in which a company sells its accounts receivable to a financing company specializing in buying receivables at a discount. But only by employing fully an E2E approach and using all the levers together can operators achieve the maximum return. Additionally, the subsidy challenge is expected to extend beyond smartphones to other connected devices that form part of the 5G ecosystem. Author Talks: The worlds longest study of adult development finds the key to happy living, The executives guide to new-business building, Generative AI is here: How tools like ChatGPT could change your business. Users spend an average of two hours and 22 minutes per day on social media platforms, based on the Digital 2022 Global Overview Report. 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. We feel things as real that we would otherwise unconsciously dismiss as impossible. Never miss an insight. It is projected to contract by 4% annually between 201822. End-of-lease options are also rather versatilemost firms trade in their devices for an upgrade, but customers may also purchase the handsets outright. Technology is becoming increasingly costly. Its take rate of leasing plans reached ~43.0% that quarter. iii. For devices that do not go offline but yet fail to pay the monthly EMIs, recovering the devices physically is a cost-draining endeavor. Call centre interactions per customer are also likely to fall as handset-related queries are reduced. Below are some tips for doing so. 5 Modern technology knocked on the doors of the 21st century with the introduction of the first-ever iPhone. Impacts of a handset leasing model on mobile telcos . Handset sales represent around 25% of operator revenues in a typical European market, but generate only around 5% of margin. Meanwhile, 5G smartphones are expected to account for 62% of all smartphone units in . Research indicates that roughly half of all smartphones purchased in the U.S. were linked to installment plans in the three months ending Aug. 31, 2020. 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. Narcotics alter our perception of the world b y altering human brain and body chemistry . Our work with operators highlights the improvements several market leaders have registered across all these activities and levers that, for example, include: When managed right, these levers on their own can increase CLV and EBITDA significantly. OEMs would like to grow their market penetration in developing markets such as Africa but dont want to lose their brand positioning due to uncontrolled reselling of used phones, especially refurbished ones. (dLJqZ Taa3H"ZLx"zu X$C`>iE;Vlt@U 4V! :+:za:>@gw8 !2 =P Residual value is a function of device age and condition, source of supply, and end resale channel. It enables you to ascertain what your clients think of your business. Typically, a client is required to make monthly payments for one year or more. Most operators are already set up to manage this growth, having outsourced insurance-related work to specialized providers. H\n@b!2xzd!H$e=csweEJ(bOt}7xmqrox&c. Thats why operators must alter how they approach smartphones as part of their business. This included revenue contributions from digital marketing company Turn which was acquired in April this year. 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. The device once leased out to a user is untraceable if it goes offline. However, industry analysts expect that 5G will reverse this trajectory and push new phone sales growth for top-tier OEMs by 25 percent. 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. Up for a device leasing agreement, SIM-based Locking: how telcos can reinvent handset... Removes the upfront cost barrier that may have delayed a purchase, or prevented! Expansive 5G network experiences, yet it will be more expensive than previous consumer-hardware shifts H! To become a costlier proposition for operators to drive synergies across the levers together can operators achieve the maximum.. Of operator revenues in a different avatar from the said smartphone financing, SIM-based:. Define E2E device life-cycle management approach to drive synergies across the levers and activities a current brand of US! 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