Final PPT for my presentation at the IBC VAS Mobile Forum 2009, "Finding Opportunities In A Year Of Economic Uncertainty"

1. Mobile VAS Forum
2009
Finding
Opportunities
In A Year Of
Economic
Uncertainty
Raúl Castañón M.

2. Agenda
o Telecom Industry Outlook
o Industry Trends
o Latin America Market Outlook
o Finding Opportunities In A Year Of Economic Uncertainty
o Market Segmentation Analysis By ARPU And Usage Behavior In LATAM
o Can Operators Generate More Revenue From The Low ARPU Segment?
o Understanding Subscriber Usage And Opportunities Of The Low ARPU
Segment
o How To Adapt VAS Offering Using Market Segmentation And Usage Trends
o Summary And Conclusions

3. Industry Trends
and
Latin America
Market Outlook

4. Expected growth rate for 2009 for the Telecom equipment market, compared to
the year before (IDATE). ABI Research forecasts 1.5% to 3.7% growth through
the end of 2010.

5. Expected negative growth rate for 2009 for mobile phone shipments, compared
to the year before (IDC).

6. Nortel will cut 3,200 positions on top of previous cuts, Nokia will cut another
1,700 jobs and Microsoft will cut 5% of its workforce over the next 18 months.

7. Mobile apps
and Smart
phones
will drive
growth in
2009.
Apple's AppStore reached 25,000 applications in March and is expected to
become a $1B business in 2009. Palm, RIM, Nokia, Windows, Android, Sony
Ericsson will launch app stores in 2009.

8. New
players will
benefit
from new
opportunities.
Traditional infrastructure vendors will continue to struggle through the recession but
2009 will be a big year with opportunities for Smart phones and Mobile
Applications.

9. Operators face
delayed
investments, re
duced CAPEX
and slower
growth rates.
Pricing might be an option to grab new subscribers but in a year of
economic hardship and with subscriber growth coming mainly from
lower ARPU segments, price discounts can only get them so far.

10. Operators
will limit
CAPEX to
maintain
healthy cash
flows.
Since the region is still expected to grow in total number of
subscribers, expanding capacity of existing network infrastructure will
be their top priority.

11. Despite the
downturn, some
operators still
expect 10%
subscriber
growth for 2009.
With mobile penetration reaching saturation in major markets and
slower growth rates this year, the only way they can achieve this is via
churn from other operators.

12. LATAM To Grow At Slowest Pace In Seven Years
LATINFOCUS expects Latin America to grow at the slowest pace in
seven years. Industry analysts estimate wireless subscriber growth in
2009 to be between 5% (Yankee Group) and 8% (Moody's), down from
double digit growth in previous years.

13. Even as subscribers
limit spending
there are
opportunities
to generate
revenue,.
Opportunities can come from increased MOU or SMS, introducing SMS
based services in countries with low voice usage or new data services
where usage and ARPU show potential for rapid adoption.

14. There are still
opportunities
to generate
more
revenue
from voice.
Call Completion practices in Latin America focus on “B” party solutions:
Voice Mail and Missed Call Alert. Slam down at voice mail or regulatory
prompt in Latin America is between 70% and 80%.

15. Market
Segmentation
Analysis By ARPU
And Usage
Behavior In LATAM

16. Voice Mail Revenue Generation
Approximately 50% of voice mail subscribers generate no
revenue but do generate significant traffic in the network.
This does not include an additional ~30% of subscribers
that are not provisioned in the voicemail system.

17. Voice Mail Revenue Generation
Approximately 50% of voice mail subscribers generate no
revenue but do generate significant traffic in the network.
This does not include subscribers that are not
provisioned in the voicemail system.

18. Can
Operators
Generate More
Revenue From
The Low ARPU
Segment?

19. The Low ARPU
Segment
represents
approximately
half of total
subscribers.
This segment includes a majority of young, prepaid subscribers that generate
traffic but no significant revenue. Most calls end in slam down with no billable
SOU.

20. Understanding
Subscriber
Usage And
Opportunities
Of The Low
ARPU Segment

21. Regulation
plays an
important role
in user
behavior.
The introduction of regulation prompt had a major impact in call
completion. Slam down on calls diverted to voice mail on Unreachable /
Busy / No Answer in Latin America is between 70% and 80%.

22. Regulation also
impacts
technical
deployment of
solution.
Operators can play regulation prompt at the switch or use the voice
mail platform; when calls are not forwarded to the voice mail system
call information used for missed call alert is usually lost.

23. Voice Mail Revenue Generation
Busy/Unreachable – calling party tends to hang up and
redial. Ring No Answer - user might send SMS; less likely
to redial. Busy with call waiting – this scenario overlaps
with No Answer.

24. Opportunities Of The Low ARPU Segment
Approximately 25% of subscribers bring in 95% of total
revenue. This means that 75% of subscribers generate
almost no revenue.

25. How To Adapt
VAS Offering
Using Market
Segmentation
And Usage
Trends

26. User behavior can
be used to
segment the
market and define
the right service
for users.
VAS managers have followed the strategy of deprovisioning low usage
subscribers. This looks good on paper but translates into playing with
financial formulas instead of providing services to increase revenues.

27. A
B
Criteria
- MCA for B party
- MCA for A party (optional)
-Traffic capacity VS storage (license per user)
- Call handling
- Platform optimization (Mailbox on the Fly)

28. Incoming Call
No 30%
Answer?
Yes 70%
Yes 70%
VM user?
End
No 30% Yes 70%
Slam down?
End
30% Missed Call
No
Alert
Billable
event
End
End

29. 100
Connected 70% 70
Not Connected 30% 30
No Answer 15% 15
Unreachable 10% 10
Busy 5% 5
Yes 70%
VM
User?
No 30%
Yes 70%
Non Users 30% 9
Slam
No Answer 4.5 down?
Unreachable 3
Busy 1.5
No 30%
Billable
VM Deposit 30% 6.3 event Missed Call
Alert
End
Slam down 70% 14.7
End

30. Usage
Behavior ARPU Segment Plan Solution Goal
A and B Missed
“A” Party services, price
No VM Low Youth Prepaid Call Alert, A Party
sensitivity.
voice to SMS/MMS
A and B Missed
Light Call Alert, A or B
Low Youth Prepaid
Users Party voice to
SMS/MMS “A” Party services
New and exciting, trendy
services.
A and B Missed
Mass
Medium Youth Prepaid Call Alert, B Party
Market
voice to SMS/MMS
New services that don’t
A and B Missed
require high end handsets.
Mass Young Call Alert, Voice
Medium Prepaid Make traditional services
Market professionals Mail delivery to
exciting and trendy, increase
MMS, E Mail.
VM usage.
A and B Missed Loyalty, for subscribers that
Heavy Young
Medium/High Postpaid Call Alert, VVM, may want the iPhone but
Users professionals
Voice To Text. don’t want to switch.
A and B Missed Corporate solutions such as
Heavy Corporate
High Postpaid Call Alert, VVM, Blackberry or high end
Users Users
Voice To Text handsets like Nokia N95.

31. Summary and Conclusions
By analyzing end user behavior, traditional services can be
repackaged and launched as new services, leveraging existing
VAS infrastructure and reducing CAPEX normally required for
new services.
Repackaging existing services is a smart strategy in an
economic downturn.
Operators can introduce new services with minimal CAPEX,
providing a faster ROI for new investments and increasing
productivity by utilizing existing infrastructure.

32. Raul Castanon
http://telcolatam.blogspot.com/
http://www.linkedin.com/in/rcastanon
http://latamtelecom.net/