Australian telco 2018 v1.0

4. The budget component of the market will grow fast:
• Users are increasingly sophisticated when
considering the mobile costs they face.
• And they’re prepared to try smaller brands
although some need reassurance to do so.
• Telstra is particularly exposed to customer loss,
given this trend.
5. Optus and Telstra have content strategies. They
appear flawed :
• Content can good for acquisition of a
passionate fan base at reasonable cost in small
phone companies.
• It’s not a good way to retain a large base. Only
10% of people will watch TV on their phone.
6. People want their telco to treat them fairly :
• This presents an opportunity for any telco.
• However, given the direction of the bigger
phone companies, it seems smaller telcos are
most likely to use this information to their
advantage.
• TPG will launch Unlimited Data Plans.
2. Analysis Effect on the marketSummary – The Plan Tier 1 Telcos Are Working On Is Not As Effective As It Might Be. Focus On ‘Fair.’
1. It’s getting tougher to be a telco :
• Profits are down for the tier 1 telcos.
• The challenge, as always, is to retain and
grow the customer base.
2. SIM Only is taking over :
• Now two thirds of the market, SIM Only is
reducing contracts volumes and thereby
the control Tier 1s have.
• Telstra stand to lose the most from the
change in the status quo.
3. Consumers really don’t understand data :
• Their data usage is growing 70% per year.
• Many are too busy to compare plans.
• As a result, lots are charged overage.
• This may be reducing the levels of trust in
the industry.
• The maths of exponential growth makes
this a self exacerbating problem.

It’s Getting Tougher To
Be a Telco

• In July 2017, the Australian
Bureau of Statistics reported a
3.8% fall in prices for
telecommunications services in
the year to June 2017.
• This doesn’t count the increase
in service inclusions (customers
were given more data for the
same cost) which happened at
he same time.
2. Analysis Effect on the marketTelecommunications Services Prices For Consumers Are Falling Quickly In Australia
Consumer costs for telco services fell nearly 4% last year in Australia.
Cost of Telecommunications Services in Australia
3.8%Down Year To July ‘17
Source:
https://www.businessinsider.com.au/telstra-is-entering-the-low-cost-mobile-market-with-its-budget-brand-belong-2017-
8#v6d0U3cQH4AL1iWC.99

• Telstra’s full year profit declined
33% last year to $3.9bn.
Source : http://www.abc.net.au/news/2017-08-
17/telstra-result/8815342
• Optus’ profit declined 12% in
the last financial year. Note,
they still made a profit!, too.
Source :
http://www.theaustralian.com.au/business/technology/
tighter-competition-dents-optus-full-year-results/news-
story/89fe7778064a049d9babd54bbe74f6d9
• Vodafone lost $242m last year.
• Source :
https://www.vodafone.com.au/media/vha-2016-results
• Quote “lower cost bases, and
agile, innovative business
models’ from Andy Penn, Telstra
CEO.
• Source : https://www.businessinsider.com.au/charts-
telstras-mobile-business-is-under-fire-2017-8
2. Analysis Effect on the market
ProfitReductionFY‘17
It’s Getting Tougher To Be A Telco. Tier 1 Profits Are Declining.
Telstra’s profits fell 33% last year ; Optus’ 12%. Competition from smaller phone companies with "lower cost bases, and agile, innovative
business models“ is driving the change says Andy Penn, CEO of Telstra
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
Vodafone made a loss last
year. The profits of Optus
and Telstra were reduced.
Fall In Australian Telco Profits FY ‘17

• Prepaid + SIM Only (Postpaid) +
PAYG is now 66% of consumer
connections and rising. Why ?
1. It is often cheaper to buy
outright and add a SIM.
2. Cheaper Chinese phones ( 8 of
the top 22 phones sold in 2017
were Chinese.)
3. Strategic movement away from
telcos as primary sales channels
for phone OEMs.
4. Device tenure is increasing (see
next slide.)
So what
• SIM Only is likely to continue
and potentially trivialize the
number of phones sold under
contract – and therefore reduce
the control tier 1 telcos have to
prevent their customer base
leaving.
Kantar : All Telco No ContractAnalysis SIM Only Plans Are Already Two Thirds Of the Market
This is a huge change which has occurred over the last 4-5 years, replacing contracts and moving power to consumers
Responses grouped.
SIM Only variants are
already two thirds of the
Australian market.
Below : What Sort Of Agreement Do You Have With Your Phone Company ?
Source : WhatPhone Survey
http://www.trustedreviews.com/news/iphone-or-samsung-most-purchased-phone-in-first-half-of-2017-revealed-3303959

• Research suggests that
the average amount of
time people are holding
on to their phone is
increasing.
• Our survey reveals the
same thing. Plateauing
specification
improvements and rising
device costs mean people
are holding on to their
device longer, fueling the
SIM Only market.
• So what ? This is another
factor which will drive the
uptake of SIM Only plans.
Q2. Analysis 30% of Australians Have Owned Their Phone 3 Years Or More
ProportionofRespondents
The Move To SIM Only Trends Is Exacerbated by LackLuster Device Increments
30% of Australians have owned their phone for 3 years or more this average tenure is rapidly rising
This group is growing.
Below : Q : How Long Have You Owned Your Phone ?

• We asked “Now You know
The Australian price, do
you intend to upgrade To
The New iPhone 8 (from
$1079) / iPhone 8 Plus
(from $1229)
/ iPhone X (from $1579) ?”
• 50% of those upgrading
will buy outright and add a
SIM.
• So what ?
• The most recent data we
have shows that even the
most expensive phones are
being bought out of
contract.
Analysis
14% of iPhone Users Intend To Upgrade To The
iPhone 8 / iPhone 8 Plus / X
ProportionofupgradingiPhoneusers
Both charts show
proportion of iPhone
respondents
These Trends Were Underlined By The Latest iPhone Launch.
Only 14% of iPhone Users Intend To Upgrade To The iPhone 8 / 8 Plus / X. Of those that will upgrade, the majority will buy outright +
Add SIM
14% Average
Below : Q : (Of iPhone Users) Will You
Upgrade to The 2017 iPhone ?
Below : Q : (Of Upgrading iPhone Users) Will You Buy
Outright or Take A Contract ?
Source : WhatPhone Survey Sept 2017

Consumers Really Don’t
Understand Data

• It is extremely unlikely these
people are correct in their
estimation of their data needs
next year.
• On average, people use
between 70% and 100% more
data per year. (See next slide.)
So what ?
• This is a fundamental
misconception which leads to a
lack of trust in telcos. (See 2
slides on. )
Here’s One Example Of Why People Don’t Think It’s ‘Fair’ At The Moment.
Customers don’t understand the trends in their data usage.
70% of people got this question wrong.
‘More’ is the right answer.
Below : Q : Do you think you'll use more data this year than last year or less?

• People it really hard to
anticipate exponential growth in
any circumstance - including
their phone usage.
So What ?
• Few people realize their data
usage is growing fast but it’s
rising at 70% per year. This
mismatch of expectations cause
unforeseen charges on
customer bills and may fuel a
lack of trust between user and
telco.
• Cisco : Source :
http://www.cisco.com/c/en/us/solutions/collateral/serv
ice-provider/visual-networking-index-vni/mobile-white-
paper-c11-520862.html
• ACCC : Source: https://www.accc.gov.au/media-
release/demand-for-data-driving-changes-in-telco-
market
Analysis
Whatever People Think, Average Data Usage Is Rising Fast
The ACCC and Cisco report that personal mobile data usage is rising At 70% per year. People will almost certainly use more data next
year than this
ActualGrowthRateinMobilePhoneDataUage
The ACCC and Cisco
estimate growth in
mobile data is
running around 70%
CAGR
Below : Q : What Do You Want Most ? A Phone
Company Which ..”
Below : How Would That Growth Look To A
User ?
Over 5 years,
individuals’ data usage
grows 1300% from 1GB
to 14.2GB (@70% p.a.)
GBOfDataPerMonth

• We asked “When did you last
compare your phone plan's
cost & features?”
• The most common answer we
received was ‘I can’t
remember’. To be fair, we
received a range of answers,
and more than 30% of people
had compared in the last 12
months.
So what ?
• When your data usage is
rising (as shown on the last 2
slides) and you don’t compare
the competitiveness of your
plan, you will be charged
overage you’re not expecting.
( See next slide.)
xv
Many People Are Too Busy To Compare Phone Plans
Nearly 20% of people can’t remember the last time they compared plans
Most common
answer ‘I can’t
remember.’
Below : Q : When did you last compare your phone plan's cost & features?

• As we’ve seen, average data
usage is increasing for normal
users at a rate of 70% plus a
year in our region.
• That means that unless your
data plan increases, you will
start to exceed your data
inclusion and incur a $10 fee per
GB for overage.
So What ?
• This wouldn’t feel very fair for
consumers – they don’t
understand why it’s happening.
6. Analysis
28% of people have
been charged $10 or
more in the last
month for extra data.
Below : Q : Have You Been Charged $10 or More For Data In The Last Month?
When Data Use Rises and You Don’t Compare Plans, You Get Charged Data Overage Fees
28% of phone users have been charged for extra data in the last month

• Complaints to the TIO ( The
Telecommunications Industry
Ombudsman, the telco
regulator) about mobile services
rose substantially over the last
year. The most common were
billing enquiries. (Likely related
to users being on the wrong
data plan-see previous slides.)
So What ?
• Customers lack of
understanding about data
trends and time required to
make sure they have a
competitive inclusion package
may be eroding trust with their
provider.
3. AnalysisThese Factors May Be Contributing To Very Low Levels Of Trust In The Industry
The most common answer in our survey was that people don’t trust their telco at all
• Most common answer ‘not at all’
• 40% are in the bottom 3
Below : Q : How Much Do You Trust Your Telco?

• In both scenarios, the user
begins their contract with a data
bundle twice the size of their
current usage need.
• In scenario 1 – the data usage
shown in the calculation is
about the current average.
Overage charge is $330 during
the course of the contract.
• In Scenario 2 – a fictitious time
in the near future - the user
starts with a need of 12 GB per
month and a bundle of 24GB
but ends with a charge of $610.
So what ?
• Levels of trust are likely to fall
further over time as data usage
rises. We have already seen it
will.
GBOFDataInPlan
3. Analysis
Advanced! The Maths Of Exponential Data Growth Makes The Decline In Trust Issue Self Exacerbating
With a standard charge of $10 per GB for excess data use, exponential growth in data transacted raises excess bills from
>$300 to > $600 in time over the course of a contract
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
0 2 4 6 8 10 12 14 16 18 20 22
Scenario 2 : User buys Contract
with starting usage of 12GB and
data allocaiton of 24GB
Usage (GB) Plan Inclusion
Excess Data Used
GBOFDataInPlan
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
0 2 4 6 8 10 12 14 16 18 20 22
Scenario 1 : User buys Contract
with starting usage of 6GB and
data allocaiton of 12GB
Usage (GB) Plan Inclusion
Excess Data Used
Excess Charge
$610 over 2 year
contract at $10 /
GB.
Excess Charge
$330 over 2 year
contract at $10 /
GB.
Exponentially
rising data usage
makes excess
charging self
exacerbating.
In scenario 1,
user is charged
$330. In scenario,
they are charged
more than twice
that, despite
starting with a
bundle of twice
their usage in
each scenario.
Source : WhatPhone Analysis

The Budget Component
Of The Market Will
Grow Fast

• MVNOs have been a pretty
consistent part of the market.
• To be fair, there appear to be
multiple measures of MVNOs
market share and I have seen
some showing MVNO market
share is rising.
• It’s probably around 20% now.
Kantar Market Share
ShareofAustralianMarketMadeUpByMVNOs
Analysis This Is The Current MVNO Market Share
MVNOs have been a consistent 20 – 15% of the market for the last few years
Australian MVNO Market Share
Source:: Kantar
MVNO market share is
around 20% at the
moment.

So what ?:
• This is a substantial industry
change forecast to happen in
only 2 years.
• The MVNO market is around
20% now. A movement to 30%
of the total market by 202
requires a 50% growth from
current levels.
Andy Penn – Telstra exemplify ‘You wouldn’t want to
be a big telco.
Analysis
“By 2020, budget
conscious will be 30%
of the market”
Andy Penn CEO Telstra
Source : https://www.businessinsider.com.au/telstra-is-entering-the-low-cost-mobile-market-with-its-budget-brand-belong-2017-8#v6d0U3cQH4AL1iWC.99
It’s Going To Get Worse For Tier 1 Telcos
MVNO Share could grow by up to 50% in the next 2 years (from around 20% of the market to around 30%

Phone Buyers Are Increasingly Sophisticated When It Comes To Comparing Costs
50% of people know ‘it depends’ and they have to do the maths.
• The good news is that 50% of
people reaslise that a small
amount of maths is involved
in calculating the most
effective way of getting a
phone.
So what ?
• People are increasingly
sophisticated about the best
way to manage their costs.
That’s important as the
market moves to SIM Only
and picking a budget
provider which is right for
them.
• Smaller phone companies
often offer more data for the
same price and use the same
networks as the big telcos.
This is the
right
answer.
Below : Q : What’s the Best Way To Minimise The Cost Of Your Phone ?

• We asked : Would you
consider buying a phone
plan from an unknown /
lesser known brand if it was
cheaper and offered the
same service and benefits?
• Around 45% of people
would consider buying from
a smaller phone company
(those with lesser known
brands.)
So What ?
• This is a key finding. Smaller
phone companies often
offer better SIM Only deals
than those available from
the ‘tier 1’ phone companies
we’re used to.
10. Analysis
Would you consider buying a phone plan from an unknown / lesser known
brand if it was cheaper and offered the same service and benefits?
When People Move From Contracts To SIM Only, They Are Prepared To Consider Smaller Brands
43% of People Are Prepared To Try Lesser Known Phone Company Brands
Below : Q : Would you consider buying a phone plan from an unknown / lesser known brand if it
was cheaper and offerd the same service and benefits.
Note, some would
need reassurance
before they
considered a smaller
phone company.

• Telstra’s retail brand performs
relatively poorly in the new
world.
• Telstra are not as appealing to
customers in the world of SIM
Only Plans as they were in the
world of contracts.
So What ?
• The problem for Tier 1s,
especially Telstra is retaining
customers as the market moves
to SIM Only and budget plans.
• Telstra could lose a quarter of its
base during the transition.
Telstra’s Problem
(Source : Kantar)
Analysis
Telstra’s Problem : They Don’t Perform As Well Where The Market Is Going
Telstra have 42% of the Phone and Contract Market and only 31.9 % of the SIM Only Market. They stand to lose around 25% of their
base as customers migrate to SIM Only.
This gap represents
around 25% of
Telstra’s customer
base.
Below : Telstra Market Share In Phone + Contract and SIM Only Markets
Telstra’s %age Market Share In Each Category
Source : Business Insider

• Kantar release quarterly market
share information of MVNOs by
Service Provider.
• This chart shows the sum of
operator shares by network.
• Optus are clearly focusing on
MVNOs strategically.
• Telstra’s recent launch of Belong
Mobile / SIM Only is likely a
reaction to this information.
So What ?
• While Telstra struggle to retain
their customers who are moving
to SIM Only and budget
providers, Optus stands to do
relatively well, through
wholesale connects.
Kantar Market Share – MVNO Split
MarketShareSplit
Analysis
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
All Telstra All Optus All Vodafone
MVNO Split By Network
As the market moves to SIM only and considers budget MVNO brands, Optus take around 50% of those connections as things stand
Conversely,
Optus stand to
win big as the
move to SIM
Only and
Budget Plans
happens. They
have about
50% of MVNO
connections.
Below : MVNO Market Share By Network Partner.
Source : Kantar

People Wand Their
Telcos To Treat Them
Fairly

After the basics,
people want their
phone company to
treat them ‘fairly.’
• After the basics of price and
reliability – Australians want
their phone company to treat
them ‘fairly’. There have been
some examples of the desire for
fairness expressed in customer
needs throughout this pack.
So what ?
• There are many examples of
behaviors undertaken by the
phone companies which would
appear unfair to the average
user. Unforeseen charging for
data is just one.
• We suggest how fairness could
contribute to strategy in the
‘Implications’ section of this
deck.
One of the Key Unmet Needs In Telco is ‘Fairness’
Fairness is the biggest unmet need in Australian telco – around 3 times as important as ‘innovation’ like content
Below : Q : What Do You Want Most ? A Phone Company Which ..”
Fairness is around 3 times as important as entertainment in
plans. We will return to this later in these slides.
These are the
basics

Optus and Telstra Have
Content Strategies.
They Appear Flawed.

• Telstra and Optus are
focused on content /
entertainment in plans for
both retention and
acquisition as users seek
budget SIM Only plans.
• Optus spent $160m over 3
years for the EPL rights.
So what ?
• Parallel data (see next
slides) suggest that this may
not be the most effective
strategy.
Andy Penn : By 2020 : 30% of the mobile market will
be driven primarily by price. (May 2017)
Analysis
http://www.adnews.com.au/news/qanda-optus-ceo-allen-lew-assesses-
impact-of-premier-league
Current Tier 1 Strategies : Content For Acquisition & Retention
As seen in the press, both Telstra and Optus are using content to attract and retain customers
How do you monetize content plays
like this?
a) Getting more customers coming
across to us,
b) increasing loyalty and higher spend
from our existing customers and
c) the sort of brand image, the halo that
we get, beyond just being a pure telco.
The telco giant hopes that
offering unmetered access to
premium live sports will convince
customers to stick with its plans,
which are typically more expensive
than those of its rivals.
http://www.smh.com.au/business/media-and-marketing/telstra-offering-free-
live-nrl-and-afl-streaming-to-entice-mobile-customers-20150509-ggy2vu.html

• The reality is there are some
niche content properties which
do appeal. The problem is that
Tier 1 telcos are trying to solve a
problem for their entire
customer base with a niche
solution.
• It’s worth noting that selling
video in plans involves
explaining what ‘data free’ (zero
rating) means which might be
the hardest job in telco at the
moment.
So What ?
• The proportion of people who
will watch free video streaming
on their phones is quite small.
85% of Even the most tech savvy age groups don’t
watch TV on their phones
Analysis Not Many People Use or Want Content On Their Phones
Only 10% of Australians want free video access on their phones
Only 10% of people want
free video streaming in
their phone plans.
Below : Proportion of Australians who Want These Services In A Phone Plan.
Source : Source : Australian Edition :
Deloitte Global Mobile Comsumer
Survey July 2016

• There are some niche content
properties which do appeal to
Australians.
• You will note the EPL is not on
this chart.
So What ?
• There are some Australians who
are passionate about some
sports. For this fact to wok to
the advantage of phone
companies, they need to
identify customers / prospects
who both like these sports AND
who will watch them on their
phone.
Analysis Even The Biggest Sports Are Niche
The AFL is the most watched sport in Australia. Around 40% of people regularly tune in
Source :
http://www.roymorgan.com/finding
s/5488-sports-viewing-on-tv-
201403140213
Even the AFL is a (big)
niche. Less than 40% of
people watch it. OVO used V8 Supercars
to target fanatical fans
on mobile at an
affordable price.
Proportionofpeopleregularlyviewingthesportc
Below : Do You Regularly Watch These Sports ?

• Figuring out the proportion
of people who will be
retained by content offered
free on phone plans involves
multiplying those who are
interested in the sport, by
those who will watch it on
their phone.
So What ?
• Video sport on a mobile is
currently very niche and not
a good way to retain half
the market.
AnalysisEven The Biggest Sports Do Not Have The Broad Appeal To Retain Telstra’s Huge Base
10% of people will watch sport on their phone. 40% like the AFL. Telstra may retain 4% ( = 15% x 40%) of their base with this content
People who :
• Watch AFL a lot = 42%
x
• Want free video = 10%
SO : People who want the
AFL + free video
= 4.2%
Notionally, approximately 4%
of Australians are likely to be
swayed in their choice of
phone company by free AFL
video on their phone plan.
Telstra’s base is around 50%
of the market. A Value Add
which appeals to 4% of the
population is not a good tool
for retaining the majority of
their base or attracting new
customers to Telstra.
Source : WhatPhone Estimate

• On the other hand, phone
companies for which 2.3% of the
market would be a good level of
acquisition could do well,
especially if, like OVO, they
target multiple niche sports and
acquire the rights at a
reasonable cost.
So What? :
• Lesser known sports with
passionate audiences could be
cheaper ways to attract new
customers to a brand. E.g. OVO.
• Used correctly, this could be a
useful acquisition tool.
AnalysisThe Right Sort Of Video Content Might Be Great For Acquisition
The 2.3% of V8 (or similar sports) fans who are passionate about it may be prepared to move to a new telco based on this fact
People who :
• Watch V8 a lot = 23%
x
• Want free video = 10%
SO : People who want the
V8s + free video
= 2.3%
On the other hand :
Notionally, approximately
2.3% of Australians are likely
to be swayed in their choice
of phone company by free V8
Supercars video (or similar
sport) on their phone plan.
For an MVNO, this can be a
cost effective acquisition tool.
Source : WhatPhone Estimate

• This is Porter’s classical view of
telco’s strategy situation.
• Tier 1s, as we’ve seen, are
focusing on broad scope (mass
market) differentiation using
mobile entertainment content.
• MVNOs are shown at the
bottom of this quadrant. Some
have (sometimes extremely) low
costs and are differentiating by
being the lowest cost provider.
• TPG seem likely to pursue low
cost broad offering. Lower cost
and operational efficiency could
be an opportunity for Vodafone.
So what ?
• The ideal would be a low cost
method of differentiating your
telco product in a way that was
valuable to customers. (See
implications slides, next. )
• Belong’s launch hints at what
others may do.
Andy Penn : By 2020 : 30% of the mobile market will
be driven primarily by price. (May 2017)
Analysis What Strategies Could Phone Companies Employ?
The ideal strategy would be a cheap way to differente, which was of more value to consumers than content in phone plans
Source : https://www.mindtools.com/pages/article/newSTR_82.htm
Below : Porter’s Classical View Of Strategy
Belong recently launched a
SIM Only product suite which
has a fair way of managing
data. It’s more valuable to
consumers than
entertainment in phone plans
and cheaper to implement,
especially since they’ve done
it from launch.

• TPG will launch in Australia
in early 2018. They will
have built a metro network
and will need to build a
customer base quickly.
• The biggest unmet
customer need is not free
video in a plan, it’s
unlimited data.
• This service is hard for
MVNOs to offer because
they are charged by the GB
and do not own the
network. TPG will own their
own network.
• The simplest way to
articulate ‘fair data
management’ is to offer
unlimited data.
PredictionsAnalysisWho’s The Fairest Of Them All ? : The Simplest Way To Say ‘Fair Data’ is to offer Unlimited
TPG are uniquely placed to launch unlimited
Below : Porter’s Classical View Of Strategy
Q : What Phone Plan Feature Would
You Like To See ?
From an earlier slide. 10% of
people want free video. 35%
want unlimited data.

• TPG’s strategy has been
released to shareholders.
They will be.
• Bundling their new
mobile services with
fixed services.
• ‘Have no existing
customer revenue to
protect.’
• http://www.asx.com.au/asxpdf/20170412/p
df/43hgrdhpfm7jq0.pdf
• They need to gather around
just 500k customers to
break even on their
network.
• http://www.smh.com.au/business/media-and-
marketing/tpg-to-build-own-mobile-network-after-
12b-spectrum-splurge-20170404-gvd6xr.html
• There are around 32m SIOs
in Australia as of June 16 :
https://www.acma.gov.au/~/media/Research%20and%
20Analysis/Report/pdf/ACMA%20Communications%20
report%202015-16%20pdf.pdf
PredictionsAnalysis
TPG: Unlimited Plans
TPG may launch unlimited data on a handset plans at $50 per month. This could help them attract half of the customers they need
(they only need about 4% of the market to break even.) The ripples for the industry will be noticible
Below : Key Facts – TPG Unlimited Plans
TPG Only Need a Tiny Share – about 4% of the
customers available to them to break even
TPG
need
only 4%
of the
market
available
to them
to break
even.

• These data management ideas
are expensive to do for
incumbents – especially things
like automatically optimizing
plans. The ARPU reduction they’d
sustain applies to all customers
while each year, only a few will
churn if they don’t do it. That’s a
problem which will linger for the
Tier 1s and a version of the
conundrum expressed in ‘The
Innovator’s Dilemma’.
So what ?
• Data management facilities are
an acquisition opportunity for
MVNOs, especially those with
small customer bases.
• Ideally the ‘fair data ‘schemes
employed would encourage
usage. E.g. The first GB when you
reach your limit is free. That’s
essentially a marketing change
that drives usage and feels fair.
Analysis
The Ideal Strategy ? Making Telco Products Fairer For Consumers
Helping customers manage their usage is a valuable way to make things fairer from a customer point of view. T
here are a number of data value adds which MVNOs can build quickly.
Below : Some Data Management Ideas To Make Things Fairer From A Customer View Point
Set hard
stop data
use limit on
postpaid
Automatically
move
customer to
most cost
effective plan
Data vault
Share Mobile
Broadband
Bundle Over
Multiple
devices
Recommend
best plan in
app–
customer has
to choose it.
Unlimited
data.
Source: WhatPhone analysis and
https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma
User can set
3G
threshold.
E.g.
downgrade
connection
to 3G at
80% of
bundle
Dynamic
pricing –
cheaper
data
overnight.
$10 auto
added
data
carried to
next
month.
Data
gifting
Refund
unused
data
Complexity of implementation
CustomerValue
These are
easy to
build and
highly
valuable to
customers.
They’re
likely to be
built first by
smart
MVNOs.
Data vault
already has
been.
Blackspot
notification.
Throttle to
free 3G at
data
bundle
limit

• The tier 1s are about to
enter a difficult time.
• Tier 1 customers don’t
understand their data
needs. They’re getting
charged overage which is
eroding trust and that’s a
self exacerbating problem.
• Content is likely not the
best way to retain such a
large base.
• As the market moves to
SIM Only plans and is
prepared to consider
smaller phone companies,
Telstra stands to lose a lot.
• Optus owns the MVNO
space now (see slide 24) so
won’t be hit as hard.
PredictionsAnalysis
• Focus on retention not content :
• It’s harder for tier 1s to retain customers when the market is
SIM Only and trending towards budget providers.
• Free included video is a niche and so not an effective way to
manage retention of such substantial customer bases
• Make the management of data ‘fairer’ to build trust :
• Provide data management tools
• They’re cheaper and more effective than content
• Have a plan for what you’ll do when TPG launch unlimited data
• Telstra and Vodafone invest more in MVNOs :
• To be fair, Telstra just launched Belong – probably for this very
reason
Implications for the tier 1s :
A focus on retention, not acquisition appears more worthwhile than the content approach

• Smaller phone companies
are likely to experience
rapid growth between now
& 2020.
• Data management is cheap
to do, MVNOs can execute
it faster and more cheaply
than big phone companies
and could build a brand out
of the ‘trust me’ promise.
PredictionsAnalysis
• Also focus on data management tools & marketing ‘fairness’
• It’s 3 times as effective as alternatives (slide 26)
• Negotiate an ‘Unlimited Data’ deal and check legals.
• Keep this in a drawer.
• Accentuate lowest cost advantage:
• Some Australian MVNOs have very low cost bases
• We know 2 MVNOs with less than 10 people working in them
• Educate and reassure to reduce user feelings of risk in moving to
lesser known brands
• Yes, you can keep your phone number
• Use advertising to reassure the m MVNOs use the same
network
• Offer try before you buy – transfer your number later
Implications for Smaller Phone Companies :
It seems MVNOs are likely to grow fast in the next 2 years. Offer fair data products and minimize costs. Have a backup plan and
negotiated wholesale pricing as contingency in case TPG launch unlimited.

PredictionsAnalysis
• More depth + less PC content on to these ideas will be added to my personal blog :
• https://aitkenblog.com.au/
• Coverage of all of these trends and more to help people find the right SIM Only plan
• Whatphone.com.au
More Information

Australian telco 2018 v1.0

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