No Strings Attached!
|Did the wooden doll Pinocchio swap his mobile subscription to a subscription-free service from a discount mobile service provider after he had been brought to life and cut off his strings? The Danish mobile market is full of “Pinocchio” customers that are cutting their strings to their “dormant” operator subscriptions that they were tied to – a trend that is now costing the Danish mobile operators 48 – 64 million Euro a year.
More information “”The Moment Of Truth” – A Portrait Of The Discount Mobile Service Providers Success”
|In one of Walt Disney’s most classic fairy tales, a blue fairy appears on a starry night and brings to life Gepetto’s beloved wooden doll Pinocchio. “I’ve got no strings” the happy Pinocchio sings after he cuts himself loose from his puppet strings that up till now had been used by Gepetto to control his movements – and suddenly Pinocchio’s loyalty to his puppet maker is put to the test as Pinocchio now can move as he pleases and seek new adventures.
Just like Pinocchio suddenly gains his freedom – the Danish mobile customers are also gaining more and more freedom at the moment, enabling them to freely move between the mobile operators and discount service providers that have the cheapest and best mobile offerings. Findings in a new mobile rapport from Strand Consult document that more and more customers are switching to those discount mobile service providers that use the Internet as their sales and distribution channel for selling mobile telephony. In this connection it is interesting to see that the two Danish discount mobile service providers Telmore and CBB Mobil in the period 2H 2000 to 1 H 2003 had attracted no less than 43,7% of the new customers entering the mobile market. In reality, many of the new customers the mobile operators are attracting are actually discount customers looting the mobile operators.
The discount mobile customers lust for adventure has become a nightmare for the mobile operators – their customers are simply not loyal to the mobile operator during their mandatory subscription period – the period that is meant to ensure both a close relationship and stable earnings for the mobile operators.
The reason for the operator’s nightmare is amongst other things that they can only bind their customers to a subscription for a maximum of 6 months. When a customer purchases an operator-subsidized mobile phone, that customer has to sign up for a 6-month subscription. But the only thing that would justify giving the customer a subsidy on a new mobile phone is if that customer then has a sensible usage of mobile telephony with that operator. But the customers are just not grateful for the subsidy and not loyal at all to the operator that just helped them finance their new mobile phone.
The Pinocchio customers are instead taking their 6-month subscription and putting it at the bottom of their drawer and not using it at all. These dormant “drawer” subscriptions are never used again by the customer. Instead the customer immediately has his SIM-lock unlocked – which is legal in Denmark – and starts using it with a discount mobile service provider.
The Pinocchio customers most often choose the discount mobile service providers, where they can signup and pay online, where he gets much cheaper mobile telephony and on top of that, where he does not have to pay any subscription. Add to this that the customer can even port his old mobile number with him to the discount mobile service provider and you begin to see why the customers find the move very easy to make indeed! Even with the cost of the original 6-month subscription and the cost of getting the phone SIM-unlocked – the customer still saves lots of money, gets cheap mobile telephony – and all using the latest new mobile phone available on the market – subsidized by an unhappy mobile operator.
And there is good reason for the mobile operators to be unhappy. The dormant “drawer” subscriptions are very bad business. Each new subscription the operator acquires costs around 160 – 200 Euro (subsidies, distribution, commissions etc). Out of the over 1 million new subscriptions the mobile operators acquired, around 300 – 350.000 are put in a drawer and never used – costing the operators between 48 and 64 million Euro a year.
The mobile operators have a great number of customers in the customer base that are in reality not generating any ARPU at all for the operator. These disloyal Pinocchio customers are also the main cause of the 25 – 30% churn that the Danish mobile operators are experiencing every year – forcing the operators to drastic measures to attract a corresponding number of customers so as not to loose their position on the market. Measures that include subsidising new expensive mobile phones – that the Pinocchio customers gladly buy and then continue their new adventures with the discount mobile service providers…
The new business area of discount mobile telephony has just been thoroughly analysed in Strand Consults latest comprehensive report “The Moment Of Truth – A Portrait Of The Discount Mobile Service Providers Success”. This report has examined the Danish mobile market, where discount mobile telephony has in a very short period of time, managed to turn the whole mobile market upside down, completely changing the competitive parameters that were until recently governing the market.
The report focuses on how the two Discount Mobile Service Providers (Telmore and CBB Mobil) have managed to acquire no less than 43.7% of all new mobile customers from 2H 2000 to 1H 2003! This is an outstanding achievement considering these two companies were both launched at the end of 2000. Add to this that around 20% of the total Danish mobile customer base is using a Discount Mobile Service Provider today and you just have to be pretty impressed. The report also analyses the development of the end-user prices for voice and SMS messages. In the past 10 months alone the price has dropped by around 50% so a discount mobile customer can today talk on his mobile phone for just 0.091 Euro and send SMS messages galore at only 0.026 Euro pr. message. It is only a question of time before we see a similar trend on all the other Western European mobile markets.
Having an added expense of around 50 – 60 million Euro a year due to these dormant subscriptions is just not economically acceptable in the long run. Loosing that kind of income can affect the mobile operators ability to invest in new mobile technology, licenses and services. The point is not to put the strings back on the Pinocchio customers, but just ensure that their newly found freedom is not financed by the mobile operators.
|More information “”The Moment Of Truth” – A Portrait Of The Discount Mobile Service Providers Success”