Mobile Market in Finland

Mathias TallbergTKK Helsinki University of Technology

mathias.tallberg@tkk.fi

Slide 2Helsinki University of Technology Mathias Tallberg

29/03/2007

Outline

• Introduction• The Finnish Mobile Market• The Influence of Price Competition• Impacts of 3G Handset Bundling• Conclusions

Slide 3Helsinki University of Technology Mathias Tallberg

29/03/2007

Introduction

• The nature of the mobile communications market is seeing rapid change• Convergence of networks, services and devices• Evolution towards all-IP• The mobile networks are evolving towards:

– higher data speeds and capacities, land lower latencies– reasonably priced connections

• Declining ARPUs• It has become very difficult to predict what will happen in the future (market

uncertainty). Possible reasons may be e.g.: – deregulation of telecommunications in general;– technology evolution;– convergence of networks, services and devices;– new services that are disruptive by nature;– emergence of new and innovative business models.

Slide 4Helsinki University of Technology Mathias Tallberg

29/03/2007

Introduction

• Much has happened during the last five years on the Finnish mobile communications market.

• Recent developments include:– the introduction of mobile number portability (MNP) in July

2004

– the emergence of mobile virtual network operators (MVNO)

– price war and hyper-competition followed by consolidation

– late deployment of 3G networks, however, with early upgrades to HSDPA

– the allowing of 3G handset bundling.

Slide 5Helsinki University of Technology Mathias Tallberg

29/03/2007

The Finnish Mobile Market

• Fresh studies and statistics (Ficora, 02.03.2007)– According to market research done by Ficora approximately

100 000 bundled 3G-subscriptions was sold in Finland between October 2006 and December 2006 (Q4)

– These accounted for approximately 32% of all “new” subscriptions during this period

– Increase in usage compared to the same time period in 2005 e.g.:

• growth in mobile voice usage 23%• growth in SMS usage 22%• growth in MMS usage 35%• growth in mobile data traffic nearly 300%

Slide 6Helsinki University of Technology Mathias Tallberg

29/03/2007

The Influence of Price Competition

• Huge impact on the profitability of all Finnish mobile operators• One of the most important factors was the introduction of MNP in July 2004

– a total of over 3 million mobile numbers have been ported during the period between July 2004 and the end of 2006

– recently, there has however been a decline in the amount of ported numbers– started already before the start of 3G handset bundling in 2006– market consolidation had an impact already before April 2006.

• Market consolidation– the acquisition of Saunalahti by Elisa– market exits (Tele2 and ACN Finland)

• Finland was the 35th country in the world to open commercial 3G operations– Sonera opened its 3G network for commercial use in Q3/2004– Elisa followed soon after by opening their network Q4/2004 (HSDPA Q1/2006)– DNA in late in year 2005 (HSDPA Q1/2007)

Slide 7Helsinki University of Technology Mathias Tallberg

29/03/2007

Impacts of 3G Handset Bundling

• Bundling of handset and subscription allowed for 3G from April 2006– slow progress of 3G and mobile data services has motivated

the regulator to allow bundling– for a 3 year period, max. 2 year contracts etc.

• Why did mobile operators start offering bundles after the law change?– because bundling helps to reduce churn – because bundled subscriptions bring higher ARPU– a new way to handle marketing and sales of subscriptions– to improve the handset base

Slide 8Helsinki University of Technology Mathias Tallberg

29/03/2007

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Slide 9Helsinki University of Technology Mathias Tallberg

29/03/2007

Impacts of 3G Handset Bundling

• Rapid transition from no-bundling to 3G handset bundling

• Ignores non-usage consequences of handset bundling– also non-bundling factors affecting service usage

• Bundling of 3G handsets seem to work in Finland– Bundling of 3G handsets has played a big role on

total amount of sold 3G handsets since April 2006– 300 000+ 3G bundles sold by the end of 2006

Slide 10Helsinki University of Technology Mathias Tallberg

29/03/2007

Impacts of 3G Handset Bundling

• What has happened in Finland?– Regulatory action– Market consolidation=>– Improved base of sophisticated handsets– Less focus on price competition (both for bundled and

unbundled) – More focus on mobile data services– Faster build-out of 3G network coverage and capacity=>– More usage of mobile data services

Slide 11Helsinki University of Technology Mathias Tallberg

29/03/2007

Impacts of 3G Handset Bundling

April 2006 Before (Jan 06) After (Jan 07)

Handset bundling Not allowed Allowed - Targeted

Competition Heavily on price Services and 3G-packages

Mobile handset base ~0,5% 3G ~10% 3G

Marketing of mobile data No Still No

Usage of mobile data X MB (3-4)*X MB

Customer churn >15% <15%

Switching cost Low Higher

Sources: COIN Project, Operators, Ficora, Numpac

Slide 12Helsinki University of Technology Mathias Tallberg

29/03/2007

Conclusions

• The nature of the mobile communications market is seeing rapid change

• Price competition has had a huge impact on the profitability of all Finnish mobile operators

• Targeted 3G handset bundling, if carefully tuned by regulator, can have a positive impact on the adoption of new mobile data services

• Bundling of 3G handsets has worked in Finland, at least until now

– However, similar positive impacts may not be easy to achieve in the future

Thank You!