Following the previous posts related to handset replacement, handset subsidy and SAC, I wanted to share one of our recent and more successful initiatives related to handset strategies in mobile operators with a significant handset base.
Our client was spending a huge amount of money on a year basis on handsets, managing replacement trends of 1.5 handset per client and year and with a client base of over 20 million clients (and growing). The important fact is that the operator decided to roll-out 3G over GSM while they were supporting the CDMA standard. The challenge of the inclusion of a new standard in the base was not only technical but also financial commercial.
Their handset spent was fully solving the commercial and marketing issues related to handset migration as a result of a acquisition, subsidy or retention program… but what about the handset financial performance? When we started the assignment we asked for the handset ROI KPIs and it seemed to us that that question was never asked before in that handset strategy department.
Handset ROI KPIs? It seemed that it was going to be easier asking questions:
- What was the Handset lifetime value (HLTV) per segment of the handset base?
- What were those vendor manufacturers and models that make the most (in terms of revenues, NPV, EBITDA contribution per client) of our customer base?
- Who were the winners and losers in the handset NPV war?
- What was the cost of increasing the presence of a specific handset vendor / model in the base in a 2 year term?
- What was the comparison in the financial key KPIs related to handsets (such as cost vs. HLTV, cost vs. revenues, cost vs. loyalty, etc.)
The solution: As you may imagine, no one was even thinking of this. The executives responsible for the handset strategy just adapted the homologation process to the new standard, contacted the vendors to revise the procurement estimations and assumed the cost of migration as part of the total handset cost.
But they found that thinking on the return of the investment in each vendor / model had sense. And it has sense cause they wanted to be as efficient as possible with the handset expenditure (avoiding non-justified costs), the wanted to monitor the total handset value and increase / decrease their spend depending on this value, and finally, the wanted to forecast this value on a two years timeframe to understand which vendor should be helped, pushed, thrown away in a mid-term to maximize the value of the base.
I though you might be interested in reading the case. Please take a look at the credential to understand our approach, methodology and results. Main highlights out of the analysis were that our client was able to:
- Measure, monitor and forecast the HLTV of the base, per segment, vendor and model
- Maximize the value of the base in a 2 years handset strategy program
- Support the purchasing decision with financial driven information coming from the handset base, never used before.
- Manage the handset ROI much more efficiently that done before.
As market conditions become increasingly competitive, the handset plays an integral role in the mobile industry’s value proposition. The importance of partnerships, content and services, innovative technologies and the generation of ROI cannot be underestimated, and this project helped our client to manage much more efficiently the changing relationships with their handset vendors. Please find the presentation here:
Enjoy the reading. Best regards, CVA. Flying to Madrid from Cairo.