1. www.arcgroup.com Copyright © ARC 2004 Understanding How To Develop and Deploy Cost-Effective Methods for Optimising Prepaid ARPU and AMPU

2. www.arcgroup.com Copyright © ARC 2004 PRESENTATION STRUCTURE THE PREPAID OPPORTUNITY AMPU AND ARPU – EFFECTIVE MEASUREMENT MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY SEGMENTATION AND PROFILING - IDENTIFYING AND DEVLOPING KEYMARKETING TARGETS MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND

3. www.arcgroup.com Copyright © ARC 2004 PREPAID OPPORTUNITY – SNAPSHOT OF AN EVOLVING INDUSTRY Prepaid seen poor relation to postpaid Failure European Telcos to migrate users to postpaid contracts Evolving Markets –China –Latin America –US ‘enlightenment’ Youth potential Mobile payments SVA potential

4. www.arcgroup.com Copyright © ARC 2004 GLOBAL PREPAID STATISTICS Figure 1: Global Prepaid Versus Postpaid Demand - 2004 – 2009 © Baskerville Global Mobile Prepaid Strategies 2004

5. www.arcgroup.com Copyright © ARC 2004 REGIONAL PREPAID STATISTICS © Baskerville Global Mobile Prepaid Strategies 2004 Figure 2: Regional Prepaid Percentage Growth Over Forecast Period – 2004 - 2009

6. www.arcgroup.com Copyright © ARC 2004 AMPU AND ARPU – EFFECTIVE MEASUREMENT

7. www.arcgroup.com Copyright © ARC 2004 Origin of revenue generation measurement metrics Problems measurement metrics AMPU AND ARPU – EFFECTIVE MEASUREMENT Figure 3: Selected Measurement Metrics and Related Operator Strategy

8. www.arcgroup.com Copyright © ARC 2004 AMPU explained –Low ARPU does not preclude positive AMPU Consideration of AMPU and ARPU Margin consideration – examples might include: –Marketing sales State of market development - impacts on cost of acquiring customer –Customer retention which can include: CRM and billing Support systems to run CRM and billing –Consideration factors such as debt risks Consideration of revenue versus margins – factors to consider might include –Services utilised minus the cost to provision for the services –The relative profit margin of a service e.g. voice telephony versus premium data services –Level of use – high/medium/low AMPU AND ARPU – EFFECTIVE MEASUREMENT

9. www.arcgroup.com Copyright © ARC 2004 Considering AMPU –Encourages proactive service development approach Fitting the measurement metric to the market and operator strategy Market development Balanced approach AMPU AND ARPU – EFFECTIVE MEASUREMENT

10. www.arcgroup.com Copyright © ARC 2004 MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY

11. www.arcgroup.com Copyright © ARC 2004 MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY Churn – the biggest threat to achieving maximum ARPU and AMPU Types Churn –Forced –Involuntary –Voluntary Enforced distance prepaid –Good CRM difficult –Historically low investment in support services –No binding contract –No handset lock-in –Number portability – TeliaSonera Recouping massive investment in 3G makes dissuading churn especially important

12. www.arcgroup.com Copyright © ARC 2004 MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY Churn and customer relationship Mechanisms of achieving maximum return –Incentive/bonus schemes –Loyalty Schemes –Sponsorship –Infrastructure Partnerships

13. www.arcgroup.com Copyright © ARC 2004 MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY CASE EXAMPLE - Incentive/bonus schemes Cellcom Talkman Bonus Scheme linked to recharge SMS utilised as key communication mechanism

14. www.arcgroup.com Copyright © ARC 2004 MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY CASE EXAMPLE – Loyalty Schemes Discourages churn number of ways –Gaining perceptional value (loyalty points etc.) –Engenders a sense of belonging Creates sense of aspiration/kudos – the platinum card effect –Tiered approach adds sense status and urge to aspire TMN Portugal –Pontos –TMN Star

15. www.arcgroup.com Copyright © ARC 2004 MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY CASE EXAMPLE – Sponsorship Interest from third party’s –Increasing capabilities of device make more attractive proposition –Requires careful handling of marketing process as to not dissuade end-user Incentive based approach with incentive cost covered by sponsor Bouygues Telecom’s Spot service offering –Company/service offering analysis

16. www.arcgroup.com Copyright © ARC 2004 CASE EXAMPLE –Infrastructure Partnerships Access to end-user –Drive recharge at POS –User in retail environment –Impulse buy Does not necessarily reduce churn but improves user convenience Convenience equals user retention Trusted retail brands increase comfort and use of topup mechanisms MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY

17. www.arcgroup.com Copyright © ARC 2004 MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY The power of content/data services –Compelling content is sticky (another reason to encourage prepaid data service rollout) –Youth glue –Requires walled garden –Expensive approach Churn as mechanism of achieving maximum ROI –Customer value –Usage model –Costs for set-up and ongoing provision

18. www.arcgroup.com Copyright © ARC 2004 SEGMENTATION AND PROFILING - IDENTIFYING AND DEVLOPING KEY MARKETING TARGETS

19. www.arcgroup.com Copyright © ARC 2004 Identification key user segments particularly important prepaid –Resource allocation for churn reduction strategies Legacy profiling and segmentation tactics of little use – difficult to track and engage users who are unknown What other solutions are available SEGMENTATION AND PROFILING – IDENTIFYING KEY MARKETING TARGETS

20. www.arcgroup.com Copyright © ARC 2004 SOLUTION APPROACHES 1.Incentives/CRM/registration 2.Modified incentive schemes e.g. combined marketing infrastructure partnerships 3.Handset segmentation 4.Behavioural analysis (profitability analytics) Segmentation by spend, Recharge propensity, Type of content used SEGMENTATION AND PROFILING – DEVELOPING KEY MARKETING TARGETS

21. www.arcgroup.com Copyright © ARC 2004 Importance of youth segment –Size market/data usage metrics –Captivating potential postpaid audience Developing the key segment of youth Virgin demo - handset segmentation, content attraction, differentiation SEGMENTATION AND PROFILING – DEVELOPING KEY MARKETING TARGETS

22. www.arcgroup.com Copyright © ARC 2004 MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND

23. www.arcgroup.com Copyright © ARC 2004 The billing process and other BSS allow access to the consumer Leveraging CRM at this point allows strategies to be implemented proactively e.g. churn management Proactive strategy and user account management capabilities require support of advanced real-time content billing solutions –Industry reliance on near-real-time and Hot Billing solutions –Real-time for data technical and financial challenge –ROI for such systems justified by identification of data usage patterns/potential MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND

24. www.arcgroup.com Copyright © ARC 2004 Education to the importance of CRM in prepaid Advantage good CRM –Increased likelihood use data services (time user retained greater the potential –Reduced cost of CRM versus acquisition –Greater potential recoup investment from user for 3G implementation costs Increasing prepaid user spend is the antithesis of prepaid for some users MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND

25. www.arcgroup.com Copyright © ARC 2004 Legacy CRM approaches –Contact centres –Data warehouse applications –Management tools –Complaint/enquiry However such approaches prohibitively expensive if applied to all prepaid users moreover some users do not warrant such attention due to low ROI Self-care mechanism to reduce CRM costs MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND

26. www.arcgroup.com Copyright © ARC 2004 Unique prepaid approaches to incorporation of CRM elements with customer interface technologies Vodafone incorporation of incentives CRM and complex user analysis Profitability analytics MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND

27. www.arcgroup.com Copyright © ARC 2004 MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND © Terradata/Vodafone Rule/effect of event on customer DetailsCost Categorisation in terms of cumulative s-curve type customer i.e. early adopter, laggard etc. Targeting of specific users at specific times in customer/market lifecycle Cost dependent on marketing expended Identify purchaser by purchase history e.g. early adopters of WAP, MMS Not always a good indicator CRM experienceAnalysis of whether CRM experience has been good or bad? Were problems resolved? Impact of cost of CRM balanced against potential for customer to be profitable/churn Call behaviourCustomer propensity to call at peak and off-peak times Calls to CSR at peak times are a revenue drain Recharge behaviourLevel of recharge – decrease in recharge rapidity Figure 4 : Selected Rules-based Analysis Used in Customer Lifetime Expectancy

28. www.arcgroup.com Copyright © ARC 2004 Figure 5 : Selected Rules-based Analysis Used in Customer Lifetime Expectancy © Terradata/ARC Group MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND

29. www.arcgroup.com Copyright © ARC 2004 Figure 6 : Vodafone Prepaid Churn Management CSR GUI MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND