Intensifying market consolidation over the last decade has enabled telcos to push fixed-mobile convergence (FMC). While this has enabled them to drive customer growth, sustainable value creation remains elusive. FMC propositions tend to prioritize discounts over non-monetary aspects, emphasizing the importance of promoting value-driven features.
Service preferences are constantly evolving, driven by innovations and changing offerings in telco portfolios. In the concluding chapter of our Global Telecommunications Study, we focus on how telcos can “lock in” customers through FMC propositions and telco apps as platforms, while also looking at potential value-added services that can be added to a portfolio.
Key insights on service preferences and their implications
- Fixed-mobile convergence (FMC) and telco apps can help telcos to “lock-in” customers
Across all the countries that were surveyed, around 50 percent of all customers already have an FMC offering, while the other half indicates high interest, if the offer is right. Furthermore, app penetration is already on a very high level with 75 percent of customers already using their operator’s telco app. This underlines the potential to also use them as an engagement and sales tool rather than just a service channel. - Highest willingness to pay for OTT platform bundles, green tariffs, and device-as-a-service
We analyzed the willingness to pay for all eight value-added services covered in the study to assess their potential for monetization. The top rated choices were TV packages bundled with OTT services, sustainable “green” tariffs and smartphones offered as a subscription (also known as “device-as-a-service”). - Increased interest in speed-based tariffs, 5G, and mobile cybersecurity
We observed a growing interest in speed-based tariffs, 5G tariffs driven by higher speed requirements and dedicated 5G smartphones, and mobile security bundles among customers looking to purchase value-added services.
FMC and telco apps enable telcos to improve customer loyalty
Based on our survey, half of the respondents already have FMC, while 70 percent of the remaining half are interested in obtaining it. While a 10 percent discount can already attract new customers, the revenue-optimal scenario is achieved with a 20 percent FMC discount when comparing take-rates with revenue. However, in order to build a value-driven FMC proposition, telcos must prioritize non-monetary benefits, as 62 percent of customers expressed a preference for them over purely monetary incentives.
Telco apps show a similar “lock in” potential for telcos to investigate. Although they have a high penetration rate (76 percent of customers actively use it), they are still heavily used for administrative tasks rather than as a sales channel. Telcos can boost customer engagement and increase sales through up- and cross-selling by providing personalized, usage-based offers, sharing valuable content, and promoting exclusive deals.
Customers are most willing to pay for green tariffs and OTT platforms
Green tariffs, OTT platforms, and DaaS are among the value-added services customers show the highest willingness to pay for in future service offerings. Consumers’ rising concern for the environment means the demand for green and sustainable telco offers is also growing. Over the last two years, trust in telecommunication operators has more than doubled, with approximately a third of customers showing concrete interest in purchasing such an offer. Furthermore, over half of them would be willing to pay more than a 10 percent premium.
The popularity of streaming was further boosted by the pandemic, making it an attractive add-on. At present, customer subscriptions are concentrated on a small subset of OTT platforms, with Netflix, Amazon Prime Video, and Disney+ accounting for almost 50 percent market share.
However, local OTT players have a sizable share of users, too: The combined user base of Viaplay, OSN+, and other top regional players in Europe and the Middle East amounts to 32 percent. Telco operators can use these regional players as an alternative option to differentiate the offering and gain a competitive advantage.
Our research shows more than half of consumers express strong interest and intent to purchase, especially when paired with a TV set-top box. Consumers are prepared to pay between 11-22 dollars per month (based on the Van Westendorp recommended price range).
Surge in interest for mobile cybersecurity and 5G
When looking at services with the strongest surge in purchasing interest, mobile security solutions, 5G, and speed-based tariffs top the list.
According to our research, every fifth consumer has been impacted by cybercrime, resulting in almost 50 percent interested in a mobile security solution. Consumers are prepared to pay between 6-11 dollars per month for a package that offers virus and threat protection, along with anti-spam capabilities. When offering mobile cybersecurity packages, telcos should present the features and benefits clearly, supported by use cases, to resonate with people’s cybercrime experiences.
Lastly, 5G tariffs continue to grow in relevance, with 14 percent planning to upgrade within the next 12 months, mainly driven by customers’ need for higher speed and the abundance of 5G capable smartphones on the market. Telecommunication providers should leverage this demand and continue to promote 5G as a key aspect of their value proposition.
Our Portfolio ValueOptimizer tool for a value-driven approach to success
For many telco operators, the key questions remain: Which services should telcos be offering in the future to satisfy customer demands? How can I best set up my portfolio to drive sales through up- and cross-sellings?
Our experts have created a tool specifically designed to address these questions and identify the most suitable approach for each operator. Simon-Kucher’s Portfolio ValueOptimizer helps to identify a value-driven portfolio approach that combines packaging and pricing expertise with behavioral economics and margin analyses.
Download our Portfolio ValueOptimizer tool for free here.
Read part one of our 2023 Global Telecommunications Study here:
Read part two of our 2023 Global Telecommunications Study here:
