Insights and trends influencing Australian telco in 2017

1. Australian Telco 2017

2. Australian Telco 2017
Exec Summary : Soon, almost the whole Australian
telco market will be like SIM Only / prepaid is now

3. Executive Summary 1 of 4 : Telco is already 60% SIM Only /
prepaid, fueling MVNOs and ‘tiered’ content to value add
People
keeping
phones
longer
Cheaper
to buy
phone
outright
and add
SIM
Data
included
in plans
rising at
similar
rate
Individual
data
usage
rising
90% YOY
4G
Network
Coverage
Parity
A number of factors are driving SIM
Only and Prepaid Sales
These factors are accelerating SIM
Only sales in Australia.
Big telcos (+OVO) seek to differentiate
with content in their plans
MVNOs win as the market moves to
SIM only. MVNO market share has
nearly doubled in the last 2 years.
SIM Only ‘taking over’ is Stimulating the
growth of Australian MVNOs ( Network
Resellers )
Optus and Telstra have content to
differentiate in a no contract market
but it’s not helping them sell plans.

4. 2 of 4 : eSIMs + phone leasing will further distrupt telco &
their phone contracts - before 5G rocks the industry again
Below : ( Actual eSIM screenshot )
The eSIM will explode the SIM Only and
MVNO market
Users will be able to pick their plan & telco
from settings in 2017
The eSIM will remove friction in the
changing process – increasing churn.
Above : Credit : CNet
Below : ‘5G arrives in 2020. It will
become hard to charge for data in ‘GB’.
Leasing phones allows users to avoid the
up front cost of a phone without tying them
to a particular telco.
Below : ‘Unshakled’ just launched in the
UK, allowing people to lease phones.
Telcos will have to charge per service /
for time periods. Per GB will be
meaningless when data capacity is
infinite.Leasing options, alongside the eSIM disintermediate telcos from their customers.
Users experience ‘unlimited bandwidth’
entire seasons of TV shows can be
downloaded in seconds.
The eSIM will remove friction in the
changing process – increasing churn.

5. 3 of 4 : Soon, the whole of telco will look like prepaid / SIM
Only ; Forced by the economics & the removal of friction
As individual data usage
grows 90% per year, people
have to shop around more.
Nearly everyone now has a
SIM Only / prepaid plan.
The fact that 4G networks are
all similar reduces fear of
moving from Telstra / Optus.
SIM Only & prepaid month to
month agreements provide
50% more data each year.
They move plans more often to
get the data they need to match
their usage.
Once out of contract, moving
SIMs is not hard as things
stand..
Extra data charges in phone
contracts ( up to $300 ) deters
uptake these agreements.
MVNOs, SIM Only plans, keeping
phones longer and choosing
refurbished devices lowers cost of
ownership 50%.
Phone leasing helps avoid up
front cost of devices
disintermediating telcos.
MVNO SIMs can save $100 -
$200 per year for the same
network as some big telcos.
Big Telcos rationalize their
plan ranges to make it easier
– using the Amaysim model.
eSIM in phone means
people can move telcos
from settings.
People care less about their 4G
network because the 4G
networks are much the same.
Holding phones 6 months
longer & using refurbs saves
users $250 more
Government enforced national
roaming agreements and an end to
Telstra’s USO further reduce
network difference.
Economic burning platform drives users to
month to month agreements.
How the new world looks.
Many obstacles, hurdles and friction points of
the current system have been removed.

6. 4 of 4 : So, what do you do ? Users & small telcos are sweet.
Big telcos must educate on the value of content before 5G.
Awareness and interest is actually
quite good for the telco content.
Education and firm up the bottm of the
funnel.
Small telcos – Educate on segment,
acquire through affordable, well
qualified traffic. OVO do well as Optus
and Telstra educate the market on
content.
Users – buy the phone outright and
move around a lot. They love it. Any
tool which helps this will succeed.
Below : Life is great for consumers.
Everything is getting cheaper quick.
Below : Small telcos can sit back and
enjoy the ride. They just need to
maintain a reasonable CPA.
Below : Big telco need to focus on
Education to stimulate Desire and Action
now that they have the rights to content.
• Get to an affordable CPA for sales
and increase tenure.
• Focus on table stakes with big data
inclusions.
• Work with partners who help target
segmented traffic.
• Enjoy the ride : Most of the structural
trends currently operating in telco
work in their favor.

7. Australian Telco 2017
The huge economic incentives driving the market
to SIM Only & Prepaid plans

8. Above ; Cisco report that average data usage
on a mobile phone increases around 93% per
year in our region. This is not well understood
by the public.
People use twice as much mobile data each year. If this
happens while youa re under contract, it can cost you $300
Above ; Users trapped in a
contract while their data usage
grows can be charged $100 - $300
for out of bundle data utilization.
Being stuck in a
contract as your data
usage rises can cost
$100-
$300
in overage.

9. Conversely, outside contracts, every network raises their
data inclusions 50%-100% per year –with no charge
Above : SIM Only plan data inclusions rise by at least 50% each year, irrespective of network. Users who are prepared to
take SIM Only and move around get this data for ‘free.’
Data inclusions in non
contract plans rise
between
50%-
100%
per year. With no
additional cost.

10. Factors driving BYO Sales. People keep phones longer. All
the 4G networks are now the same. ( Not well understood. )
LEFT : People are holding on to their phones longer,
reducing the total cost of ownership. For the ‘extra
months’ they need a SIM Only plan. This is not well
understood by the public.
Click to find out more about how holding on to your phone will cut your phone costs.
Extending your phone contract 6
months can save you
$250

11. As SIM Only Plans ‘Take Over’, users are moving to MVNOs.
Same network, more inclusions, lower price.
MVNOs only sell SIM Only / Prepaid plans. Companies like Kogan, Amaysim,
Yatango and Lebara use the entire Optus or Vodafone network – now including 4G
– but are often cheaper.
That Growth is Stimulating the growth of
Australian MVNOs ( Network Resellers )
Below : Side to side comparisons make it easy
to see what’s happening in the SIM Only
market. Who would choose Optus here ?
SIM Only ‘taking over’ rising from ‘less
than 20%’ to more than 45% in 4 years.
These from the SMH show the
aggregate effect of the factors shown
in earlier slides.

12. Factors driving BYO sales. SIM Only plans save a lot of
money. Up to 25% when taken in place of a contract.
Left : iPhone 7 users who bought their phone
outright and added a SIM saved at least 25% over
the course of their contract.
Click to find out more about buying your phone outright ad saving 25%.
Click to find out more about saving another 25% by avoiding overage.
Buying an iPhone 7 this year and
adding your own SIM Only plan
could save you
$500

13. Australian Telco 2017
3 factors could remove remaining friction and put
an end to all but a few phone contracts

14. 1 ) You don’t need to stick to a particular telco to get a quality
network – the 4G networks are all the same
Unless you live on the geographical fringes of
Australia, the 4G networks are all about the same
quality, This is not well understood by the public.
Click to find out more about Australian coverage.
Click to find out more about why we should not have 3 parallel Australian networks.
0
100
200
300
400
500
600
700
800
900
1000
Telstra Optus Vodafone
Networkscore/1000
December 2016 - Another report shows
near network parity
Source : The Australian
Multiple sources confirm this. National roaming
agreements and an end to Telstra’s USO funding are
likely to accentuate this trend.

15. 2 ) You don’t need to sign a 2 year agreement with a telco to
get a ‘free’ phone ( if leasing is launched here. )
Source Source Source
Above : Telstra recently
announced a consumer
leasing scheme.
Below : Telstra’s Leasing Scheme Below : Apple’s Leasing Scheme Below : Samsung’s Leasing Scheme
Above : Apple’s scheme
operates in the USA.
Above : Samsung may be
testing their scheme in
South Korea.
Left : In Nov. 2016, an independent UK company started leasing phones
• Such a leasing scheme in Oz would separate the phone from the telco and
remove the last incentive to sign a contract :
• Leasing schemes provide a phone without an up front cost, too.
• It appears only a matter of time until independent leasing schemes land here.

16. 3 ) You don’t need to go to the shops to get a SIM when the
eSIM launches – you just change providers in settings
The eSIM lets pick a plan
from settings
• Thee eSIM has been operating in a small number of
devices in the USA and UK for the last 18 months.
• It is likely that both Samsung and Apple are testing the
eSIM
• Notably, some eSIM implementations are half and half
solutions.
• On Apple’s iPad for example, the user inserts a physical
SIM which then downloads settings over the air.
• Note – the eSIM sign up experience is really bad – one
of the reasons it is forecast to roll out slowly.
Picking a plan requires the user to select
an operator and then select a plan.

17. Australian Telco 2017
The problem with telco’s content approach

18. The big telcos have invested heavily in content rights. The
result is a complicated, tiered system that few people ‘get’
Critically, entertainment / content is often
‘zero rated’ –users are not charged for the
data employed in accessing the content.
sdf
Optus, Telstra and Virgin all have
some form of Entertainment option in
their mobile phone plan
The pricing is changing regularly and
varies from free to charged for..
Below : Multiple different sorts of
content are offered. Some ‘free’,
others charged for
sdf
Below : These entertainment
offerings are actually simple to
understand
Existing messaging falls short of actually
helping customers understand
sdf

19. The rights were expensive. Telcos had every right to believe
entertainment would be adopted quickly. It hasn’t been.
• Optus spent an astonishing
amount of money, ($A200m) over
three years.
• Optus experienced a slight
decrease in its total mobile subs
• 9.3 million for the Sept. quarter,
• Down slightly from 9.4 million in
the same period last year.
Below : Consumption spreads faster each yearBelow : Optus spent a lot of money
on the EPL right and have not yet
seen a sales benefit
Optus has not seen the service taken up in the way that a ) They would have hoped
or b ) is now common.
Despite having spent a lot of money
on football rights
The questions are why is this happening and what can be done about it ?
Chart source : http://www.theatlantic.com/technology/archive/2012/04/the-100-year-march-of-technology-in-1-graph/255573/

20. And the phone companies need to solve the adoption
problem before 5G arrives
• Typical agreements between an
individual and their phone
company include voice minutes,
SMS and data.
• We are about to enter a world
where data speeds are so fast
that networks will feel infinitely
empty.
• Since value flows to things that
are scarce, how will telcos charge
for the data they use ?
• And didn’t this happen with
international fibre optics 20 years
ago and crash the price for
international calls, putting a lot of
companies out of business ?!
Below : From Cnet – 5G will offer ‘Limitless bandwidth’
When 5G data is essentially limitless, how can phone companies charge for a
GB of data ? They will need to charge for services – for example, 1 week of
access or ‘unlimited data and ABC iViewer access on your phone.’
Find out more about data charging in a post scarcity world here.
Below : The problem in a nutshell’

21. Australian Telco 2017
What can each party do?

22. Appendix

23. Given these circumstances, what can small telcos do ?
WhatPhone is designed specifically for small telcos.
Small telcos know what they need to do :
• Get to an affordable CPA for sales and increase tenure.
• Focus on table stakes with big data inclusions.
• Work with partners who help target segmented traffic.
• Enjoy the ride : Most of the structural trends currently
operating in telco work in their favor.
OVO Mobile are a good example of focus on the core of what
makes MVNOs successful.
Segment :
Be smart – content and segment like OVO.
CTA Tenure
WhatPhone.com.au is designed to assist segment, qualify and direct shoppers who are about
to buy. We convert 70%+ of those who choose a partner to MVNOs.

24. What can big telcos do? Educate people as part of the SIM
buying process. Win hearts & minds before 5G arrives.
• Awareness of the new content rights is actually pretty good.
• Big telcos need to focus on Desire and Action elements.
• Be at point of research with as much detail as is needed.
• E.G. Explain what ‘zero rated’ means !
• They have limited time to act.
• Charging per GB will be meaningless @5G speed.
• There is a limit to the time big telcos can waste in
helping users as part of their research process.
Clock source : http://quoteaddicts.com/topic/clock-ticking-emoticon-moving/
5G
Below : AIDA is a standard marketing framework. The telcos
now have content rights. They need to work through the rest of
this process.
Below : 5G will be released in 2020 in Australia. ( in
Approx 3 years. ) 5G will offer users the perception
of infinite bandwidth.
WhatPhone.com.au is present for 1m visitors – educating and informing them about which SIM
Only plans to buy.

25. For the user, things are great. WhatPhone can assist users
with tools to make it easier to find the right network for them.
Wait, so if I buy the phone outright, and add a SIM Only
it’s up to 25% cheaper over the life of the phone ?
And I can avoid extra data costs as my usage increases
because I am not trapped in a contract ?
And they give me 50% more data each year on a SIM
Only plan anyway if I am not in a contract ?
And WhatPhone.com.au has an app which tells me the
best plan to get ?
And the 4G networks are all on a par now anyway so I
can switch it doesn’t matter what network I am on ??
And I can keep my phone longer than 2 years ? Because
that’ll make it cheaper, too.
Maybe I’ll be able to lease the phone soon, too. That’ll be
even better for me.
Smart consumers have taken advantage of the move to SIM Only for good
reason. There is every reason to believe these trends will continue.
Below : What real users say about SIM Only plans
And what they need to help
manage them
WhatPhone.com.au has
tools to assist users in
moving between telcos
may do well.

26. Apple have filed a multi SIM patent. Could the first version be
a hybrid physical / eSim to educate the market ?
• Left : In December 2016 it was
reported that Apple had filed yet
another patent.
• The suggestion in the article was that
Apple might launch the iPhone 8 with
dual SIM capability : One eSIM and one
physical SIM
• This would seem to be in line with the
tests they have performed in the UK
• And a stepping stone for the market
giving the benefit of both SIMs without
excluding the ‘tried and tested’ way of
adding a SIM.
Industry stories suggest that Apple might release the eSIM
in the iPhone 8 – September 2017
How could the eSIM experience be improved for
customers ?