1. Pricing mobile services: Trends and tactics Dr Tim Kelly, International Telecommunication Union (ITU) Workshop on settlement reform and the costing and pricing of telecom services, Vientiane, 16-18 November 1999 Note: The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the ITU or its membership. Dr Tim Kelly can be contacted by e-mail at Tim.Kelly@itu.int.

2. 2 Pricing mobile services Pricing mobile services: Agenda A Mobile Revolution Worldwide Sub-region Pricing Mobile Options Price comparisons Price trends Average revenue per user (ARPU) Pricing mobile relative to fixed-line services A Mobile Future

3. A Mobile Revolution Source: ITU World Telecommunication Indicators Database. More than 300 million users 250000 new users added each day Users double every 20 months Competitive markets Worldwide mobile cellular subscribers (millions) 55 34 23 16 11 91 144 215 318 38% 9% 6% 4% 13% 3% 2% 20% 27% 19909192939495969798 Mobile as % of fixed-line telephone subscribers

4. 2'200 1'957 1'595 1'066 187 61 9 6 Malaysia Thailand Philippines Indonesia Viet Nam Cambodia Myanmar Lao P.D.R. Mobile subscribers (000s) Year-end 1998 Sub-region Source: ITU World Telecommunication Indicators Database.

5. Mobile subscribers per 100 inhabitants Year-end 1998 Sub-region 3.2 2.2 0.6 0.5 9.9 0.24 0.12 0.02 Malaysia Thailand Philippines Cambodia Indonesia Viet Nam Lao P.D.R. Myanmar Source: ITU World Telecommunication Indicators Database.

6. Mobile subscribers as % of total telephone subscribers Year-end 1998 Sub-region 37.1 33.4 28.0 18.5 71.7 16.1 8.6 3.6 Cambodia Philippines Malaysia Thailand Lao P.D.R. Indonesia Viet Nam Myanmar Source: ITU World Telecommunication Indicators Database.

7. Regulating Mobile Source: ITU World Telecommunication Indicators Database. A relative lack of regulation <1% of world market under monopoly Key issues: Coverage and interconnect Number of countries with mobile cellular competition 28 38 49 61 72 93 199319941995199619971998

8. Mobile Access Source: ITU World Telecommunication Indicators Database. Mobile can enhance access Pre-paid has given access a major boost, esp. in Europe Mobile is becoming preferred form of access in many developing countries Pre-paid mobile cellular subscribers, 1998, as % of total Total pre-paid (m) 15.2 2.0 1.6 1.3 0.4 0.8 0.7 0.6 74% 60% 53% 50% 40% 37% 35% Italy Mexico Portugal S. Africa Indonesia Austria Greece Philippines

9. 9 Pricing mobile services The secret of mobile success Why is mobile currently growing ten times faster (~55% p.a.) worldwide than fixed lines networks (~5.5% p.a.)? Why is the average mobile user much younger than the average fixed-line user? Why do users make calls using a mobilephone even when a fixed-line telephone is available and cheaper? What is the secret of the success of mobile? Price Options

10. A selection of price options From Orange (UK) Source: http://www.uk.orange.net/kit/index.html.

11. Pricing Mobile Note: Price basket based on monthly subscription plus 50 mins peak and 50 mins off-peak use. Source: ITU World Telecommunication Indicators Database. High prices stunt network development Specialist mobile companies doing better than integrated fixed/mobile Prices falling by around 4% p.a. Relationship between mobile price and density in Western Europe Mobile density (per 100 inhabitants) Price per 100 mins per month (US$) 0 10 20 30 40 50 60 70 102030405060 Switzerland Austria UK Ireland Finland Sweden Norway Germany Greece Spain Bel. Franc Italy Port. Neth. Denmark Iceland Lux.

12. 010203040 Cambodia Viet Nam Malaysia Lao P.D.R. Thailand Philippines Indonesia 50 mins off-peak 50 mins peak rate Subscription Basket of 100 minutes mobile calls per month US$, July 1999 Note:For Philippines, the price is based on a pre-paid scheme with 90 minutes included in subscription. -Source: ITU World Telecommunication Development Report 1999: Mobile cellular.

13. Declining prices for mobile access, global average, in US$, 1992-98 Note:CAGR = Compound Annual Growth rate. Source: ITU World Telecommunication Development Report 1999: Mobile cellular

14. Average revenue per user (ARPU) Bell Mobility (Canada) 0 20 40 60 80 100 120 909192939495969798 Revenue/cost per subscriber per month (US$) 0 200 400 600 800 1'000 1'200 1'400 1'600 Subscribers ('000s) Revenue per sub/month Cost per sub/month Subscribers Source: ITU World Telecommunication Development Report 1999: Mobile cellular

15. Cultivate the high-spenders Source: Price Waterhouse Coopers, based on Canadian data.

16. Mobile ARPU converging with Fixed-line ARPU, Japan (Yen 000s p.a.) 0 50 100 150 200 250 300 19901991199219931994199519961997 Mobile ARPU Fixed-line ARPU Source: ITU World Telecommunication Development Report 1999: Mobile cellular

17. Pricing mobile and fixed: Monthly subscription charges (US$) 0 5 10 15 20 25 Malaysia Indonesia Cambodia Thailand HK Sar Sri Lanka Residential fixed-line Digital cellular 3.0 2.4 1.1 5.0 1.7 5.0 Ratio: Cellular/fixed

18. 0.0 0.2 0.4 0.6 0.8 1.0 HK Sar Sri Lanka Cambodia Malaysia Thailand Indonesia Residential fixed-line Digital cellular 18.2 6.7 10.0 3.07.5 Ratio: Cellular/fixed 0 n.a. Pricing mobile and fixed: Price of 3 minute local calls (US$)

19. A mobile future Source: 1990-1998 data from ITU World Telecommunication Indicators Database. 1999-2010 ITU projections. Mobile has overtaken fixed-lines in Cambodia, Finland, Italy, Korea Mobile subscribers to overtake fixed-line worldwide before 2010? Mobile revenue to overtake fixed-line after 2004? Fastest growth in developing countries Actual and projected subscriber growth, fixed-lines and mobile, millions, 1990-2010 0 500 1'000 1'500 2'000 199020002010 Fixed Mobile

20. The race for 3rd Generation mobiles: IMT-2000 0 32 64 9.6 128 144 384 2,000 1G 2G 3G Voice Text Messaging Video Streaming Still Imaging Audio Streaming Data Transmission Speed - kbit/s Electronic Newspaper Remote Medical Service (Medical image) Video Conference (High quality) Telephone (Voice) Voice Mail E-Mail Fax Electronic Publishing Video on Demand: Sports, News Weather Karaoke Video Conference (Lower quality) JPEG Still Photos Mobile Radio Video Surveillance, Video Mail, Travel ImageAudio Voice-driven Web Pages Streaming Audio Data Weather, Traffic, News, Sports, Stock updates Mobile TV E-Commerce Time Source: Adapted from Motorola.

21. For more information... Publication launch: 10 October 1999 (TELECOM 99) Available on paper and online (PDF format) World Telecom Indicators Database available online Website: http://www.itu.int/ti Other reports launched at TELECOM 99 Direction of Traffic 1999: Trading Telecom Minutes Trends in Telecom Reform 1999: Convergence Internet for Development (updated with latest data)