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5th February 2012

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Obtaining 'Value for Money' from Mobile Handset Subsidies

March 2006 (34 pages)

As a handset subsidy represents the single largest cost item for most operators, and as margins are being squeezed, it is critical for operators to get value for money from subsidising handsets. This means an operator must ensure there is payback within the contract, or in the case of prepaid, in the estimated lifetime of a customer. In this paper we discuss the reasons why operators utilise handset subsidies and the impact they have on payback. This is supported by specific examples of handset subsidies used by operators across a variety of handset models and a comparison of subsidies and how they vary according to tariff plan and contract length. In addition we set out the strategies operators may adopt to maximise the impact of handset subsidises and identify more effective ways to re-deploy the amount allocated to incentivise customers. Specifically, the paper answers the following questions:

Why must operators subsidise handsets?
How is subscriber payback defined?
What handset subsidy levels exist and how do these differ by handset type by operator and country?
How do handset subsidies differ between direct operator led sales and indirect sales?
How can operators optimise handset subsidy spend?
What innovative subsidy models can operators implement?

Price: EUR 2,500.00 / GBP 2,100.00
if you would like learn more about this report, or our other work in this topic area and how to subscribe, please contact us

Table of Contents

1 Introduction 1

1.1 Overview 1

1.2 Objectives 1

2 Defining the Role of Handset Subsidies 2

2.1 What is the role of handset subsidies? 2

2.1.1 Mix of SAC 3

2.1.2 The role of handset subsidies in subscriber payback 3

2.2 Importance of handset and cost in the purchasing decision 4

3 The Size of Handset Subsidies 5

3.1 Size of handset subsidies, in-country comparison one operator 5

3.2 Size of handset subsidies, in-country comparison between operators 6

3.3 Size of handset subsidies and impact of contract length on subsidy levels 8

3.4 Structure and Size of Commissions in Dealer Channels 10

4 The Role of Handset Subsidies Optimising Payback 13

4.1 Difficulties with reducing handset subsidies 13

4.1.1 T-Mobile Germany Case Illustration 13

4.1.2 KPN Mobile Netherlands Case Illustration 14

5 Optimising Handset Subsidy Spend 15

5.1 SIM-only strategy 17

5.1.1 Operator sales via resellers or MVNOs 18

5.2 Focus on segments 19

5.3 Differentiated/unique handsets 19

5.4 Zero per cent finance on phones 19

5.5 Introduce longer contracts 19

5.6 Optimise customer service 20

5.7 Introduce new tariffs 20

5.8 Converged services 20

5.9 Volume discount from suppliers 22

5.10 Loyalty based subsidies 22

5.11 New upgrade structures 24

5.12 Improve quality of dealers, introduce streaming 24

5.13 Rebate deals 25

5.14 Cross sell strategy 26

5.14.1 Insurance 26

5.14.2 Accessories 27

5.15 Online sales strategy 28

5.16 A bespoke approach versus upgrades only 28

5.17 Shop led sales 29

5.18 Advertisements 29

6 Conclusion 31


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Obtaining 'Value for Money' from Mobile Handset Subsidies

Price: EUR 2,500.00 / GBP 2,100.00if you would like learn more about this report, or our other work in this topic area and how to subscribe, please contact us

Price: EUR 2,500.00 / GBP 2,100.00
if you would like learn more about this report, or our other work in this topic area and how to subscribe, please contact us