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Pricing mobile services: Pricing mobile services: Trends and tacticsTrends and tactics
Dr Tim Kelly, International Telecommunication Union (ITU)Workshop on settlement reform and the costing and pricing of
telecom services, Vientiane, 16-18 November 1999
Note: The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the ITU or its membership. Dr Tim Kelly can be contacted by e-mail at Tim.Kelly@itu.int.
2Pricing mobile servicesPricing mobile services
Pricing mobile services:Pricing mobile services:AgendaAgenda
A Mobile Revolution Worldwide Sub-region
Pricing Mobile Options Price comparisons Price trends Average revenue per user (ARPU) Pricing mobile relative to fixed-line services
A Mobile Future
A Mobile RevolutionA Mobile Revolution
Source: ITU World Telecommunication Indicators Database.
More than 300 million users250’000 new users added each dayUsers double every 20 monthsCompetitive markets
Worldwide mobile cellular subscribers (millions)
553423161191
144
215
318
38%
9%6%4%
13%
3%2%
20%
27%
1990 91 92 93 94 95 96 97 98
Mobile as % of fixed-line telephone
subscribers
2'200
1'957
1'595
1'066
187
61
9
6
Malaysia
Thailand
Philippines
Indonesia
Viet Nam
Cambodia
Myanmar
Lao P.D.R.Mobile subscribers Mobile subscribers
(‘000s) (‘000s) Year-end 1998Year-end 1998
Sub-regionSub-region
Source: ITU World Telecommunication Indicators Database.
Mobile subscribers Mobile subscribers per 100 inhabitants per 100 inhabitants
Year-end 1998Year-end 1998Sub-regionSub-region
3.2
2.2
0.6
0.5
9.9
0.24
0.12
0.02
Malaysia
Thailand
Philippines
Cambodia
Indonesia
Viet Nam
Lao P.D.R.
Myanmar
Source: ITU World Telecommunication Indicators Database.
Mobile subscribers Mobile subscribers as % of total as % of total
telephone telephone subscribers subscribers Year-end 1998Year-end 1998
Sub-regionSub-region
37.1
33.4
28.0
18.5
71.7
16.1
8.6
3.6
Cambodia
Philippines
Malaysia
Thailand
Lao P.D.R.
Indonesia
Viet Nam
Myanmar
Source: ITU World Telecommunication Indicators Database.
Regulating MobileRegulating Mobile
Source: ITU World Telecommunication Indicators Database.
A relative lack of regulation<1% of world market under
monopolyKey issues: Coverage
and interconnect
Number of countries with mobile cellular competition
2838
49
6172
93
1993 1994 1995 1996 1997 1998
Mobile AccessMobile Access
Source: ITU World Telecommunication Indicators Database.
Mobile can enhance access
Pre-paid has given access a major boost, esp. in Europe
Mobile is becoming preferred form of access in many developing countries
Pre-paid mobile cellular subscribers, 1998, as % of total Total
pre-paid (m)
15.2
2.0
1.6
1.3
0.4
0.8
0.7
0.6
74%
60%
53%
50%
40%
37%
35%
35%
Italy
Mexico
Portugal
S. Africa
Indonesia
Austria
Greece
Philippines
9Pricing mobile servicesPricing mobile services
The secret of mobile successThe secret of mobile successWhy is mobile currently growing ten times faster
(~55% p.a.) worldwide than fixed lines networks (~5.5% p.a.)?
Why is the average mobile user much younger than the average fixed-line user?
Why do users make calls using a mobilephone even when a fixed-line telephone is available and cheaper?
What is the secret of the success of mobile?
Price Options
Plan name Monthlycharge for
single phone
Standard talktime included(per month)
Peak timecall charges(per minute)
Off-peakcall charges(per minute)
Chat 60 £17.63 60 off-peakminutes
40p 5p
Talk 30 £17.50 30 minutes 30p 5p
Talk 120 £25.00 120 minutes 24p 5p
Talk 400 £58.75 400 minutes 22p 5p
Talk 1300 £176.25 1’300 minutes 17p 5p
Talk 3700 £470.00 3’700 minutes 15p 5p
Talk 7500 £940.00 7’500 minutes 15p 5p
Everyday 50 50p/day 50 minutes/day 40p 1p
A selection of price optionsA selection of price optionsFrom Orange (UK)From Orange (UK)
Source: http://www.uk.orange.net/kit/index.html.
Pricing MobilePricing Mobile
Note: Price basket based on monthly subscription plus 50 mins peak and 50 mins off-peak use.Source: ITU World Telecommunication Indicators Database.
High prices stunt network development
Specialist mobile companies doing better than integrated fixed/mobile
Prices falling by around 4% p.a.
Relationship between mobile price and density in Western Europe
Mobile density (per 100 inhabitants)
Price per 100 mins per month (US$)
0
10
20
30
40
50
60
70
10 20 30 40 50 60
Switzerland
AustriaUK
Ireland
Finland
Sweden
Norway
Germany
GreeceSpain
Bel.Franc
Italy
Port.Neth.
Denmark
IcelandLux.
0 10 20 30 40
Cambodia
Viet Nam
Malaysia
Lao P.D.R.
Thailand
Philippines
Indonesia
50 mins off-peak
50 mins peak rate
Subscription
Basket of 100 Basket of 100 minutes mobile minutes mobile
calls per month calls per month US$, July 1999US$, July 1999
Note: For Philippines, the price is based on a pre-paid scheme with 90 minutes included in subscription.-Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”.
Declining prices for mobile access, Declining prices for mobile access, global average, global average, in US$, 1992-98in US$, 1992-98
547
410
231180
1992 1994 1996 1998
Connection charge, US$
CAGR, 1992-98 = -16.9% p.a. 547
410
231180
1992 1994 1996 1998
Connection charge, US$
CAGR, 1992-98 = -16.9% p.a. 44.9
38.134.2
31.3
1992 1994 1996 1998
Monthly subscription, US$
CAGR, 1992-98 = -5.8% p.a. 44.9
38.134.2
31.3
1992 1994 1996 1998
Monthly subscription, US$
CAGR, 1992-98 = -5.8% p.a.
Note: CAGR = Compound Annual Growth rate.Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”
Average revenue per user (ARPU)Average revenue per user (ARPU)Bell Mobility (Canada)Bell Mobility (Canada)
0
20
40
60
80
100
120
90 91 92 93 94 95 96 97 98
Rev
enu
e/co
st p
er s
ub
scri
ber
p
er m
on
th (
US
$)
0
200
400
600
800
1'000
1'200
1'400
1'600
Su
bsc
rib
ers
('00
0s)
Revenue per sub/month
Cost per sub/month
Subscribers
Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”
14%
22%
24%
40%
53%
36%
8%
3%
Customers
Average revenueper user (ARPU)
Exp
end
itu
re p
er m
on
th
40 per cent of low-spending customers
generate 3% ofrevenue
14 per cent of high-spending customers
generate 53% ofrevenue
Cultivate the high-spendersCultivate the high-spenders
Source: Price Waterhouse Coopers, based on Canadian data.
Mobile ARPU converging with Fixed-line Mobile ARPU converging with Fixed-line ARPU, ARPU, Japan (Yen ‘000s p.a.)Japan (Yen ‘000s p.a.)
0
50
100
150
200
250
300
1990 1991 1992 1993 1994 1995 1996 1997
Mobile ARPU
Fixed-line ARPU
Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”
Pricing mobile and fixed:Pricing mobile and fixed:Monthly subscription charges (US$)Monthly subscription charges (US$)
0
5
10
15
20
25
MalaysiaIndonesia
CambodiaThailand
HK SarSri Lanka
Residential fixed-line
Digital cellular3.0
2.4 1.1 5.0 1.7
5.0
Ratio: Cellular/fixed
0.0
0.2
0.4
0.6
0.8
1.0
HK SarSri Lanka
CambodiaMalaysia
ThailandIndonesia
Residential fixed-line
Digital cellular
18.2
6.7
10.03.0 7.5
Ratio:Cellular/fixed
0
n.a.
Pricing mobile and fixed:Pricing mobile and fixed:Price of 3 minute local calls (US$)Price of 3 minute local calls (US$)
A mobile futureA mobile future
Source: 1990-1998 data from ITU World Telecommunication Indicators Database. 1999-2010 ITU projections.
Mobile has overtaken fixed-lines in Cambodia, Finland, Italy, Korea
Mobile subscribers to overtake fixed-line worldwide before 2010?
Mobile revenue to overtake fixed-line after 2004?
Fastest growth in developing countries
Actual and projected subscriber growth, fixed-lines and mobile, millions, 1990-2010
0
500
1'000
1'500
2'000
1990 2000 2010
Fixed
Mobile
The race for 3rd Generation mobiles: The race for 3rd Generation mobiles: IMT-2000IMT-2000
0
32
64
9.6
128
144
384
2,000 1G 2G 3G
VoiceVoice
Text MessagingText Messaging
Video StreamingVideo Streaming
StillStillImagingImaging
Audio StreamingAudio Streaming
Dat
a T
ran
smis
sio
n S
pee
d -
kb
it/s
ElectronicNewspaper
RemoteMedicalService(Medicalimage)
Video Conference(High quality)
Telephone (Voice)
Voice Mail
E-MailFax
ElectronicPublishing
Video on Demand:Sports, News Weather
Karaoke
Video Conference(Lower quality)
JPEG Still Photos
Mobile Radio
Video Surveillance,Video Mail, Travel
Image
AudioVoice-driven Web PagesStreaming Audio
DataWeather, Traffic, News,Sports, Stock updates
Mobile TV
E-Commerce
TimeSource: Adapted from Motorola.
For more information ...For more information ...Publication launch:
10 October 1999 (TELECOM ‘99)
Available on paper and online (PDF format)
World Telecom Indicators Database available online
Website:
http://www.itu.int/ti
Other reports launched at TELECOM ‘99Other reports launched at TELECOM ‘99 Direction of Traffic 1999: Trading Telecom Minutes Trends in Telecom Reform 1999: Convergence Internet for Development (updated with latest data)
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