Published: March 11, 2010

Research and Markets: Prepaid Mobile Services - Using New Business Models to Boost Profits - 2010 Examines the Success of Prepaid Operators in Developing Markets

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DUBLIN - (BUSINESS WIRE) - Research and Markets(http://www.researchandmarkets.com/research/14ea2a/prepaid_mobile_ser) has announced the addition of the "Prepaid Mobile Services - Using New Business Models to Boost Profits" report to their offering.

Prepaid Mobile Services examines the success of prepaid operators in developing markets. The prepaid platform has encountered resounding success around the world and is the preferred billing plan in most developing markets. Its success, however, goes beyond the mere adoption of a popular billing plan it is the outcome of a comprehensive rethinking of the mobile business model.

This report identifies the characteristics of successful prepaid players and suggests a number of core drivers for their profitability. It makes a number of observations on the impact of ARPS on profitability in a competitive prepaid market context as well as on the core strategies successful prepaid operators rely on to boost revenue. The report also looks at the dynamics of the cost base and trends emerging in the management of network opex. In terms of the next phase, selling mobile broadband, the report details trends in pricing schemes and discusses the challenges operators will face with subsidies. Finally, it examines in-depth the operator models of four prepaid players: MTS Russia, Safaricom Kenya, Turkcell Turkey and Grameenphone Bangladesh.

Key findings include:

The main conclusions of the report concerning prepaid and profitability include:

Prepaid platforms are not an obstacle to profitability. Nearly all operators in emerging markets are predominantly prepaid operations; many are profitable, and some boast some of the highest operating margins in the world.
There is more to the success of prepaid operators in developing markets than merely the popular adoption of a billing plan. It is the outcome of something larger a comprehensive rethinking of what the mobile business model has historically been and how it has historically worked.
Successful prepaid operators have scale. Because of the fluidity of the prepaid segment and the high churn inherent to prepaid, the ability to build scale quickly has become a critical part of profitability. The most profitable players generally have the largest networks and boast the widest distribution systems. They use their size to offer more flexible on-net pricing, using club strategies to attract and retain customers.
As for churn, they have above-average performance, using a variety of retention tools, from continuous demand stimulation to club-building through unique applications. In a context in which many customers move across networks or carry multiple subscriptions, the most profitable players manage to keep customers active on their networks for as long as possible.
They control the bulk of their traffic flows. The most profitable prepaid players generally control the entirety of the infrastructure on which their traffic is running.
They have superb data performance, with a focus on content and connectivity. With voice revenue already slowing, a strong performance on the data front can cushion the decline on the voice side and, optimally, keep revenue growth stable.
They are competitive without being the cheapest. They use their size and scale to stay competitive on pricing and complement aggressive pricing with attractive brands, extensive distribution networks and other assets to drive up subscriber acquisition.

Key Questions Answered

What are the key drivers of profitability in a prepaid-heavy context? What characteristics do successful prepaid players have in common?
How does ARPS affect profitability in a competitive prepaid market context? What new revenue pathways are mobile operators looking to as competition drives down ARPS?
What are the core strategies successful prepaid operators rely on to boost revenue?
What dynamics are at play in the cost base of a prepaid mobile operator? What trends do we see emerging in the management of these costs and in network opex?
What effect does churn have on mobile operator performance in a prepaid context? How do successful prepaid mobile players combat churn?
What sort of pricing schemes are operators relying on to sell mobile broadband? What challenges will they face in the evolution of mobile services?

Target audience

Mobile Operators:
Equipment Vendors
Investors

Case studies

MTS in Russia
Safaricom in Kenya
Turkcell in Turkey
Grameenphone in Bangladesh

Executive Summary:

Mobile network operators in key emerging markets are now enjoying relatively robust profit margins from prepaid services, a market sector originally associated with low-income, low-revenue users, according to a new report.

Prepaid Mobile Services: Using New Business Models to Boost Profits examines the success of prepaid operators in developing markets. This 57-page report identifies the characteristics of successful prepaid players and suggests several core drivers for their profitability. It makes several observations on the impact of ARPS on profitability in a competitive prepaid market context, as well as on the core strategies successful prepaid operators rely on to boost revenue. The report also looks at the dynamics of the cost base and trends emerging in the management of network opex. In terms of the next phase, selling mobile broadband, the report details trends in pricing schemes and discusses the challenges operators will face with subsidies. It also examines in-depth the operator models of four prepaid players: MTS Russia, Safaricom Kenya, Turkcell Turkey, and Grameenphone Bangladesh.

Concerns of operator viability are widespread as consolidation is becoming more of a reality, notes Guy Zibi, analyst at large for Pyramid and author of the report. "Operators with heavy prepaid user bases are at the forefront of these concerns, yet many operators are highly successful, boast strong margins, and have managed to withstand internal and external hurdles," says Zibi. "Initially characterized as a solution for low-income or poor customers, prepaid has encountered resounding success around the world, in both developed and developing economies," he adds.

The success of prepaid has been more palpable in emerging markets. "In most markets in Africa, Eastern Europe, and Southeast Asia, prepaid accounts for up to 99 percent of subscribers," Zibi explains. "Even in relatively developed markets, such as South Africa or Russia, prepaid still accounts for more than 80 percent of the subscriber base."

Prepaid is the preferred billing plan in most developing markets because it is convenient, it minimizes billing surprises, and it is the most appropriate choice when potential customers do not have a credit history, notes Zibi. "However, there is more to the success of prepaid operators in developing markets than merely the popular adoption of a billing plan it is the outcome of something larger: A comprehensive rethinking of what the mobile business model had historically been and how it has historically worked."

Key Topics Covered:

Acronyms and abbreviations
Executive summary
Section 1: Of prepaid and profitability
Section 2: The revenue side Rethinking subscriber acquisition, retention and ARPS
Section 3: Breaking down prepaid operator cost efficiencies
Section 4: Selling prepaid mobile broadband The next phase
Section 5: Summary profiles of prepaid operator models
Related resources
Table of exhibits

Companies Mentioned: