Monday, January 8, 2018

Tarifica's 2018 Telecommunication Pricing Predictions


Mobile Plans and Pricing

Following another eventful year for the mobile industry it’s time to start looking ahead to what’s in store for 2018. In this Spotlight we provide a summary of our predictions for this year in relation to mobile plans and pricing. Later in January we will produce a detailed report in which we review major industry developments during 2017, provide examples of companies innovating in each of those areas, discuss our 2018 predictions in detail and assess the implications for mobile network operators (MNOs). In the meantime the following is a summary of our predictions for each of the eight categories we will cover in detail in our Predictions report.

  • SIM-only becomes a critical battleground

We expect recent growth in demand for SIM-only mobile services to continue during 2018. SIM-only will be an increasingly important part of the market for MNOs as customers become more comfortable separating their handset and service contracts. Related to this, we also expect MNOs to introduce more comprehensive smartphone financing arrangements to enable customers to upgrade their handsets without incurring significant upfront costs. Smartphone financing is therefore likely to become a more important differentiator for MNOs.

  • Flexibility is a key differentiator

There will be increased commercial activity around mobile plans that deliver improved levels of flexibility. MNOs will compete to offer customers greater control over their plan features and expenditure. Operators will also introduce more comprehensive self-care applications that enable customers to manage their subscriptions and make frequent changes to data allowances, value-added features and monthly expenditure.

  • Personalization makes a breakthrough. 

Related to the previous prediction, personalized plans will become a strong feature of the mobile market next year. As data analytics capabilities improve MNOs can tailor more plans and offers to the needs of individual customers. The factors that should be taken into consideration as part of the customization process include customers’ spending and usage patterns, handset capabilities, network performance, content preferences, value-added features, roaming requirements and any other information that is relevant and available to the MNO. However it will be important for MNOs to gain customer approval for the use of this data, preferably on an opt-in basis.

  • Zero-rated data proliferates

The number and variety of zero-rated data plan features will increase significantly. Assuming regulators continue to allow such practices more MNOs will begin to experiment with zero-rated content to differentiate their price plans. As customers become more familiar with the concept of zero-rated data we expect more content providers and online companies to avail of zero-rating and sponsored data to drive customers’ usage of their sites and applications. This should have a snowball effect and drive an increase in the proportion of overall mobile data use that doesn’t count directly against customers’ monthly data allowances. MNOs are likely to respond by adjusting price plans, potentially introducing some unlimited data options.

  • Content takes center stage

We expect most MNOs in advanced markets to expand their content portfolios and offers, to the point where content plays a central role in customers’ buying decisions. The key content categories will be TV, video and music. Bundling premium content is already common practice among MNOs in some markets and has become a key differentiator of mobile plans. Landline and mobile telecom operators appear more willing than ever to make large investments to secure content. This includes acquiring media companies, purchasing rights to major sports or entertainment events and in some cases even commissioning original content optimized for viewing on mobile devices. We expect to see continued activity in each of these areas during 2018.

  • Multi-play dominates the high-end

There will be increased commercial momentum around multi-play bundles. This will lead to more sales promotions and short-term offers designed to capture high-spending households
Multi-play activity has expanded to such an extent in advanced markets that it’s relatively uncommon today to find operators offering only mobile services. With low subscriber churn rates and relatively high average revenue per user (ARPU) multi-play can deliver significant commercial benefits for operators. Convergence is also likely to drive more mergers and acquisitions between landline and mobile operators during 2018, at least in markets where regulators are willing to approve such deals.

  • MNOs launch digital sub-brands

More MNOs will launch sub-brands to address the needs of digital-savvy customers, and these new identities will be kept separate from the main operator brands. For the new brands smartphone-based self-care will be central to customer engagement. By launching new brands to address specific customer segments incumbent MNOs can experiment with new innovations without risking reputation damage to the main brand. They can also offer lower-priced services via the new brand while maintaining premium prices for the existing brand. This is usually achieved by operating a no-frills, digital-first model with lower costs associated with customer care and retail operations.

  • Consumer IoT gathers momentum

There will be several high-profile consumer IoT launches during 2018. The focus for MNOs is on connecting new wearable technology and in-home devices. Dedicated price plans will be introduced to support relatively low-ARPU connected device categories. Though the IoT opportunity has generally been over-hyped in recent years, there is steady momentum building especially in the consumer category. We expect to see more consumer product companies experimenting with embedded wireless capabilities during 2018. In many cases this will require partnerships between these companies and one or more MNOs to create connected device features and offers that appeal to large numbers of customers.

Long-term Implications 

These predictions are not intended to be an exhaustive list of everything that will occur in relation to mobile plans and pricing strategies during 2018. However it does represent the areas in which we anticipate the most strategically significant developments. We focused intentionally on categories where there is potential for significant impact on MNOs’ commercial and financial performance during 2018.

It’s important to note also that in each case we expect the impact of new innovations to continue well beyond 2018. The issues highlighted here essentially represent the platforms upon which MNOs and MVNOs will innovate and compete over the next 3-5 years at least. Topics like multi-play, zero-rated data, service personalization and Consumer IoT will be central to MNOs’ strategies for several years. New winners and losers will be determined based on their performance in these categories. It’s critical that MNOs move quickly to address the opportunities identified and to ensure they remain at the forefront of innovation.

Through our Mobile Plan Innovation research program Tarifica helps MNOs identify key innovations in mobile propositions and pricing. We look forward to analyzing the major innovations during the next 12 months and helping our clients understand the implications and opportunities for their own businesses.

Tarifica is the global leader in monitoring and analyzing telecom pricing. Covering hundreds of operators in every region of the globe, Tarifica’s databases of mobile and fixed line data and voice tariffs are among the largest and most in-depth in the world. Tarifica is also a leading publisher of benchmark and other pricing reports, and its analysts are recognized authorities in the telecom industry, relied upon by operators and businesses worldwide for pricing insight and guidance.  

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