Pricing mobile services: Trends and tactics Dr Tim Kelly, International Telecommunication Union...

Pricing mobile services: Pricing mobile services: Trends and tacticsTrends and tactics

Dr Tim Kelly, International Telecommunication Union (ITU)Workshop on settlement reform and the costing and pricing of

telecom services, Vientiane, 16-18 November 1999

Note: The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the ITU or its membership. Dr Tim Kelly can be contacted by e-mail at [email protected].

2Pricing mobile servicesPricing mobile services

Pricing mobile services:Pricing mobile services:AgendaAgenda

A Mobile Revolution Worldwide Sub-region

Pricing Mobile Options Price comparisons Price trends Average revenue per user (ARPU) Pricing mobile relative to fixed-line services

A Mobile Future

A Mobile RevolutionA Mobile Revolution

Source: ITU World Telecommunication Indicators Database.

More than 300 million users250’000 new users added each dayUsers double every 20 monthsCompetitive markets

Worldwide mobile cellular subscribers (millions)

553423161191

144

215

318

38%

9%6%4%

13%

3%2%

20%

27%

1990 91 92 93 94 95 96 97 98

Mobile as % of fixed-line telephone

subscribers

2'200

1'957

1'595

1'066

187

61

9

6

Malaysia

Thailand

Philippines

Indonesia

Viet Nam

Cambodia

Myanmar

Lao P.D.R.Mobile subscribers Mobile subscribers

(‘000s) (‘000s) Year-end 1998Year-end 1998

Sub-regionSub-region


Mobile subscribers Mobile subscribers per 100 inhabitants per 100 inhabitants

Year-end 1998Year-end 1998Sub-regionSub-region

3.2

2.2

0.6

0.5

9.9

0.24

0.12

0.02

Malaysia

Thailand

Philippines

Cambodia

Indonesia

Viet Nam

Lao P.D.R.

Myanmar


Mobile subscribers Mobile subscribers as % of total as % of total

telephone telephone subscribers subscribers Year-end 1998Year-end 1998

Sub-regionSub-region

37.1

33.4

28.0

18.5

71.7

16.1

8.6

3.6

Cambodia

Philippines

Malaysia

Thailand

Lao P.D.R.

Indonesia

Viet Nam

Myanmar


Regulating MobileRegulating Mobile


A relative lack of regulation<1% of world market under

monopolyKey issues: Coverage

and interconnect

Number of countries with mobile cellular competition

2838

49

6172

93

1993 1994 1995 1996 1997 1998

Mobile AccessMobile Access


Mobile can enhance access

Pre-paid has given access a major boost, esp. in Europe

Mobile is becoming preferred form of access in many developing countries

Pre-paid mobile cellular subscribers, 1998, as % of total Total

pre-paid (m)

15.2

2.0

1.6

1.3

0.4

0.8

0.7

0.6

74%

60%

53%

50%

40%

37%

35%

35%

Italy

Mexico

Portugal

S. Africa

Indonesia

Austria

Greece

Philippines

9Pricing mobile servicesPricing mobile services

The secret of mobile successThe secret of mobile successWhy is mobile currently growing ten times faster

(~55% p.a.) worldwide than fixed lines networks (~5.5% p.a.)?

Why is the average mobile user much younger than the average fixed-line user?

Why do users make calls using a mobilephone even when a fixed-line telephone is available and cheaper?

What is the secret of the success of mobile?

Price Options

Plan name Monthlycharge for

single phone

Standard talktime included(per month)

Peak timecall charges(per minute)

Off-peakcall charges(per minute)

Chat 60 £17.63 60 off-peakminutes

40p 5p

Talk 30 £17.50 30 minutes 30p 5p

Talk 120 £25.00 120 minutes 24p 5p

Talk 400 £58.75 400 minutes 22p 5p

Talk 1300 £176.25 1’300 minutes 17p 5p

Talk 3700 £470.00 3’700 minutes 15p 5p

Talk 7500 £940.00 7’500 minutes 15p 5p

Everyday 50 50p/day 50 minutes/day 40p 1p

A selection of price optionsA selection of price optionsFrom Orange (UK)From Orange (UK)

Source: http://www.uk.orange.net/kit/index.html.

Pricing MobilePricing Mobile

Note: Price basket based on monthly subscription plus 50 mins peak and 50 mins off-peak use.Source: ITU World Telecommunication Indicators Database.

High prices stunt network development

Specialist mobile companies doing better than integrated fixed/mobile

Prices falling by around 4% p.a.

Relationship between mobile price and density in Western Europe

Mobile density (per 100 inhabitants)

Price per 100 mins per month (US$)

0

10

20

30

40

50

60

70

10 20 30 40 50 60

Switzerland

AustriaUK

Ireland

Finland

Sweden

Norway

Germany

GreeceSpain

Bel.Franc

Italy

Port.Neth.

Denmark

IcelandLux.

0 10 20 30 40

Cambodia

Viet Nam

Malaysia

Lao P.D.R.

Thailand

Philippines

Indonesia

50 mins off-peak

50 mins peak rate

Subscription

Basket of 100 Basket of 100 minutes mobile minutes mobile

calls per month calls per month US$, July 1999US$, July 1999

Note: For Philippines, the price is based on a pre-paid scheme with 90 minutes included in subscription.-Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”.

Declining prices for mobile access, Declining prices for mobile access, global average, global average, in US$, 1992-98in US$, 1992-98

547

410

231180

1992 1994 1996 1998

Connection charge, US$

CAGR, 1992-98 = -16.9% p.a. 547

410

231180

1992 1994 1996 1998

Connection charge, US$

CAGR, 1992-98 = -16.9% p.a. 44.9

38.134.2

31.3

1992 1994 1996 1998

Monthly subscription, US$

CAGR, 1992-98 = -5.8% p.a. 44.9

38.134.2

31.3

1992 1994 1996 1998

Monthly subscription, US$

CAGR, 1992-98 = -5.8% p.a.

Note: CAGR = Compound Annual Growth rate.Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”

Average revenue per user (ARPU)Average revenue per user (ARPU)Bell Mobility (Canada)Bell Mobility (Canada)

0

20

40

60

80

100

120

90 91 92 93 94 95 96 97 98

Rev

enu

e/co

st p

er s

ub

scri

ber

p

er m

on

th (

US

$)

0

200

400

600

800

1'000

1'200

1'400

1'600

Su

bsc

rib

ers

('00

0s)

Revenue per sub/month

Cost per sub/month

Subscribers

Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”

14%

22%

24%

40%

53%

36%

8%

3%

Customers

Average revenueper user (ARPU)

Exp

end

itu

re p

er m

on

th

40 per cent of low-spending customers

generate 3% ofrevenue

14 per cent of high-spending customers

generate 53% ofrevenue

Cultivate the high-spendersCultivate the high-spenders

Source: Price Waterhouse Coopers, based on Canadian data.

Mobile ARPU converging with Fixed-line Mobile ARPU converging with Fixed-line ARPU, ARPU, Japan (Yen ‘000s p.a.)Japan (Yen ‘000s p.a.)

0

50

100

150

200

250

300

1990 1991 1992 1993 1994 1995 1996 1997

Mobile ARPU

Fixed-line ARPU

Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”

Pricing mobile and fixed:Pricing mobile and fixed:Monthly subscription charges (US$)Monthly subscription charges (US$)

0

5

10

15

20

25

MalaysiaIndonesia

CambodiaThailand

HK SarSri Lanka

Residential fixed-line

Digital cellular3.0

2.4 1.1 5.0 1.7

5.0

Ratio: Cellular/fixed

0.0

0.2

0.4

0.6

0.8

1.0

HK SarSri Lanka

CambodiaMalaysia

ThailandIndonesia

Residential fixed-line

Digital cellular

18.2

6.7

10.03.0 7.5

Ratio:Cellular/fixed

0

n.a.

Pricing mobile and fixed:Pricing mobile and fixed:Price of 3 minute local calls (US$)Price of 3 minute local calls (US$)

A mobile futureA mobile future

Source: 1990-1998 data from ITU World Telecommunication Indicators Database. 1999-2010 ITU projections.

Mobile has overtaken fixed-lines in Cambodia, Finland, Italy, Korea

Mobile subscribers to overtake fixed-line worldwide before 2010?

Mobile revenue to overtake fixed-line after 2004?

Fastest growth in developing countries

Actual and projected subscriber growth, fixed-lines and mobile, millions, 1990-2010

0

500

1'000

1'500

2'000

1990 2000 2010

Fixed

Mobile

The race for 3rd Generation mobiles: The race for 3rd Generation mobiles: IMT-2000IMT-2000

0

32

64

9.6

128

144

384

2,000 1G 2G 3G

VoiceVoice

Text MessagingText Messaging

Video StreamingVideo Streaming

StillStillImagingImaging

Audio StreamingAudio Streaming

Dat

a T

ran

smis

sio

n S

pee

d -

kb

it/s

ElectronicNewspaper

RemoteMedicalService(Medicalimage)

Video Conference(High quality)

Telephone (Voice)

Voice Mail

E-MailFax

ElectronicPublishing

Video on Demand:Sports, News Weather

Karaoke

Video Conference(Lower quality)

JPEG Still Photos

Mobile Radio

Video Surveillance,Video Mail, Travel

Image

AudioVoice-driven Web PagesStreaming Audio

DataWeather, Traffic, News,Sports, Stock updates

Mobile TV

E-Commerce

TimeSource: Adapted from Motorola.

For more information ...For more information ...Publication launch:

10 October 1999 (TELECOM ‘99)

Available on paper and online (PDF format)

World Telecom Indicators Database available online

Website:

http://www.itu.int/ti

Other reports launched at TELECOM ‘99Other reports launched at TELECOM ‘99 Direction of Traffic 1999: Trading Telecom Minutes Trends in Telecom Reform 1999: Convergence Internet for Development (updated with latest data)

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