BYOD – A great profitability driver
Carriers and virtual carriers in most regions have experienced steady erosion in ARPU since 2010 according to analysts Strategy Analytics. Despite a collective $700 billion investment in infrastructure over the past ten years, revenue growth has been almost flat since 2007.
Subscriber acquisition and retention costs (SAC/SRC) take 27% of a Western European operator’s operational expenses (OPEX). Out of that, 69% goes to device subsidies and can take as much as 19% of a typical operator’s OPEX. Forward profitability is therefore threatened due to combined flat revenue and increasing subsidy costs.
Today, when seeking OPEX savings and higher profitability, device subsidies are gradually being replaced with other kinds of customer acquisition tools such as device finance, cashback and extended contract lengths. But the biggest route to profitability growth for carriers is capturing the growing number of BYOD users. For carriers, success in winning this segment of the market is the number one initiative that could ultimately lead to the end for subsidized phones.
Current subscriber acquisition cost (SAC) business models would no longer be applicable by attracting BYOD users into a network, leading to lower SAC per user. If BYOD becomes mainstream, high street network shops would no longer need to have massive stocks of devices at the point-of-sale thereby reducing logistics and warranty handling costs.
Today, the drive towards capturing more BYOD users in a carrier fleet is accelerating. In August 2015, Verizon Wireless introduced a new set of data plans that requires customers to pay for their smartphone in monthly instalments or buy it outright. This represents a radical change in how Verizon operates and signals a broader shift away from smartphone subsidies and service contracts.
Customers are increasingly paying for their devices in exchange for lower service fees – a trend started by T-Mobile two years ago. The change has resulted in heightened awareness of their smartphone and service costs.
Telefonica also decided to remove handset subsidies, but that came with a short term sacrifice. Its revenues from handsets in Spain, for example, halved between January and September 2012 to EUR149 million while its mobile data revenues dropped by EUR13 million over the same period to EUR400 million. Yet, despite this short term hit, the operator’s OIBDA margin increased from 42.8% in Q1 2012 to 47.5% in Q3 2012 as its recurring mobile revenues increased by 4.8% between January and September 2012 to EUR1.4 billion.
However, attracting BYOD users to a network is not without its problems. The more BYOD users, the less control the operator has over the device fleet. This poses three main challenges to carriers:
- deteriorated device detection and configuration accuracy
- longer customer care handling time for calls that relate to device specific questions, which generally form 50% of all customer care calls
- reduced ability for targeted real-time customer engagement which reduces the effectiveness of promotion and loyalty campaigns
Simply put, a carrier looking to drive profitability through BYOD has to solve the challenges of losing control over the device fleet or the benefits will be offset by slow customer on-boarding, reduced customer satisfaction and increased customer care costs.
With diminishing control over the device fleet, the importance of accurate and up-to-date device intelligence becomes the single most important requirement for device management, customer engagement and device support solutions.
The higher the device detection accuracy in whatever device management solution, the more efficient and smooth on-boarding of highly-profitable BYOD customers becomes.
The benefits of accurate device intelligence extend also to customer care. With BYOD, any operators’ device support solution must offer customers and customer care agents intuitive how-to-use guides for many more devices compared to a non-BYOD scenario.
In BYOD, device intelligence accuracy has the most direct revenue impact in an operators’ real-time customer engagement process. It is of the utmost importance to accurately detect device models and combine that with precise device capability specifications and subscriber profile to increase the relevancy of promotional engagement messages.
According to Lars Houbak, general manager of Mobilethink, “BYOD users bring a breath of fresh air to wireless operators in all regions and every effort must be made to encourage growth in this segment of the market. If the era of subsidized phones can be brought to an end, the benefits for carriers and virtual carriers will be substantial and will significantly lower OPEX costs.”
Answering the BYOD User Challenges
Mobilethink runs a unique in-house device intelligence development process and offers the only solution that answers the BYOD challenges. Mobilethink Device Management solution has the largest database of verified device detection data, device capability specifications with over 150 data points per device and intuitive how-to-use guides for 98% of the devices in actual use.
Through test agreements with over 100 device manufacturers, we develop and certify over the air (OTA) settings for practically all commonly used devices before they are launched. We are on an average adding three devices per day to the device database, providing mobile operator customers the highest device database update frequency on the market.
Mobilethink Device Management solution also contains a unique algorithm for detecting and configuring up to 80% of GSMA unapproved devices – a rapidly growing smartphone segment of the market in many fast growth markets such as Africa and the Middle East.
In a nutshell, due to the growing share of BYOD subscriptions in a network, having accurate and up-to-date device intelligence data and settings are becoming more important than ever before. Once Mobilethink-enabled, MNOs and MVNOs need no longer be concerned about the problems or support costs associated with attracting BYOD users to a network. The user will be online in a handful of seconds generating highly profitable data revenues.
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For more about Mobilethink Device Intelligence Suite visit https://enghousenetworks.com/mobilethink