CommsMEA takes a look at some of the factors that will have an impact on the mobile tariffs of tomorrow
The power of a mobile operator's tariffs to define the company is perhaps best illustrated by Zain's ‘One Network' borderless roaming proposition. It has become synonymous with the Kuwait-based operator, and it is a strategy that other operators are starting to incorporate into their tariff structures. At the end of last year, MTN allowed its customers in Cameroon, Ghana, Nigeria and Benin to make calls without being charged roaming fees, and it expects to introduce "seamless roaming" across all its operations in 21 countries in Africa and the Middle East by the end of this month.
Zain is also working with two other operators, one in the Middle East and one in Africa, towards a deal that will see the rivals admitted to its network. The concept has also been picked up by operators further a field and last month, UK-based Vodafone announced that in the summer it will suspend roaming charges for its customers that travel around the various European countries it has a presence in.
One of the key figures behind Zain's tariff, director of products and innovation, George Held, says that ‘One Network' provides the substance to Zain's brand.
"A brand isn't just about nice colours and what goes on a billboard," he says. "It is about what is actually inside the brand. Creative products with pricing elements within them can be a perfect example of the brand building and bring in actual volume."
Although the tariff has been a useful tool for promoting customer loyalty and acquisition, the loss of fees from roaming charges were significant. "There is always a trade off - are you in the business for the short term, or do you have a long term agenda? Are you looking to take money right away from the direct revenue stream or are you looking to get more customers?" Held says.
"When we started One Network we understood that the impact on roaming revenues would be huge, and it was huge. But there are other places where we are able to drive revenue so we are able to afford it."
He says that "other revenue" has just managed to balance the loss of roaming revenues, with benefits to churn levels and acquisition of new customers.
Convincing customers not to leave a network is a priority at the moment, according to Margrit Sessions, managing director of consultancy firm Telecoms Pricing. "ARPU is always a worry, but it is becoming more stable and what we are seeing in Europe is that it is being compensated with the take up of mobile broadband. Churn is less stable than ARPU and is more of a concern," she says.
Getting rid of roaming charges not only helps operators convince customers to stay with their network, it also helps with the task of conveying a clear and simple message about what the operator offers; local roaming charges are part of a drive towards simplifying tariffs. Not only can too many mobile tariffs have the effect of confusing a customer, they are also expensive to maintain. Simplifying tariffs is a key proposition of virtual network operators, with easy to understand deals championed by both of the networks to recently launch in Oman.
"Some operators in Europe are going toward less tariffs," Sessions says. "We have seen them go from one extreme and then back again. Quite a few operators have gone to very simplistic pricing, because of the influence from the MVNO market; their key message is about being easy to understand, with one price.
"A lot of operators in Europe have moved back to less schemes. It costs a lot to maintain lots of tariffs. And when you bring in new tariffs, in some countries you are not allowed to move customers across tariffs, so you have to maintain all of the old tariffs, which become very costly for operators," Sessions says.
Held says that tariffs of tomorrow could be simplified with the removal of hidden costs and complexities. "I think maybe it will head in the same direction as in the United States, where the tariff is a big bundle of convenient and simple to understand offers.
"Convenience is key, because it's going to drive revenues and mobile operators to success, particularly in data," he says. "People in real life don't understand the data tariffs. We know this from market research. We cannot expect our customers to understand it. It all drives towards simplification and convenience with unlimited data packages, or unlimited email, SMS, MMS, where customers don't need to think twice before accessing the service. Email is one of the most popular data applications right now, people don't think twice about checking their emails on the BlackBerry device, for example."
All-you-can-eat mobile data plans are one way for operators to make tariffs more palatable for customers, as they do away with the need for calculations about how many web pages can be viewed, or the number of emails that can be looked at.
However, such pricing policy can be limiting for an operator. Unlimited downloads will usually be highly priced in order to recoup the costs involved. But this can exclude a large part of the customer base. However, if it is priced too low there may not be a sufficient return on the investment that has been made in the network.
Sessions says: "Some operators are shying away from the all-you-can-eat model; it is a risky business because you set a price and it doesn't allow you to make any extra revenue anywhere. I think an all-you-eat deal should not include all traffic. If it does then you need to look at a very high price."
Unlimited plans are also open to abuse. Nawras' chief commercial officer, Tore Solberg says that the Omani operator has measure in place to restrict the impact of heavy usage of its broadband services.
"When you hit the data volume you are paying for, for example 2GB, we won't charge extra for additional data consumption, but we will reduce your speed. So instead of having 1Mbps speed you'll be dropped down to 64Kbps until the next billing period.
"We started with an all-you-can eat package ourselves and it is fine when you have spare capacity and don't have too many customers on your network, but it's not a sustainable model for the future," he says. "There must be some mechanisms in place to avoid extreme users from driving costs far beyond what they pay themselves, as well as clogging up the network and causing a worse experience for ‘normal' customers," he says.
"That's our prime focus going forward. Customers should know how much they are going to pay on a monthly basis and they can consume as much as they want, but if you exceed your usage threshold then we will reduce your consumption speed."
With rival operators looking to ape its offering, Zain is currently working on ways to increase its own borderless roaming tariffs. Held says that Zain is currently talking to regulators about the possibility of allowing users to take their local tariff with them when they travel to another country that Zain is present in.
"Domestic offering is extremely important, and maybe in the close future we will make sure that we will be able to extend the domestic offering across the One Network," Held says.
"Why should I be treated differently in Iraq when I am a Bahraini customer versus when I am at home? It's all about removing geographical borders."
Held says that in terms of the technology, implementing such a change is straightforward. The main challenge is on the regulatory side. "There are a lot of restrictions at that level, he says. "But we are working very successfully with a number of regulators in many countries to make sure that we will be able to export whole country tariffs to the new countries," he says.
Indeed, regulators are heavily involved in all aspects of tariffs in the Middle East and in Africa. The effect of such intervention has been seen recently in Lebanon, where government targets for the government-owned operators and government led reductions to tariffs have helped the two networks to add an extra 400,000 subscribers so far this year.
The introduction of MVNOs to the region is expected to have an impact on tariffs, as operators look to match deals offered by their virtual counterparts. But Tore Solberg of Nawras does not think the effect will be particularly large, in part because regulators will not allow established MNOs to put the upstarts out of business.
"Prices may slide but it will not be a steep fall as such," he says. For their part, Solberg says that Nawras does not want to enter into a price war with its competitors. "We will leave them a little bit of space as long as they are focusing on segments that we are not focusing on ourselves. However, if they try to attack our own target segments then we will fight back and make sure we don't lose those customers."
Another impact of MVNOs has been to prompt the operators in Oman to pay more attention to the segments of the market their tariffs appeal to. Oman Mobile now has two virtual operators to weed out some extra customers, and last year Nawras launched its Shababiah tariff for the under 25s. Further segmentation by other operators in the region looks likely. In April, Du unveiled a new tariff that it hopes will target a section of the market that had always been catered for by incumbent Etisalat.
As well as combining a prepay ‘wallet' with a postpaid tariff significant part of its ‘Elite' promotion is the option to pay for a desirable number, and it is a thoughtful way of extracting the most value out of an asset that might otherwise have been passed over.
The network is another of the operators' assets that tariffs can help to target. Just as commuters tend to use the same roads at the same times of the day, so mobile usage tends to occur in bunches.
At the end of last year, Etisalat launched a cheap off-peak international calls tariff, with the proviso that calls are made late at night and early in the morning, between 1am and 7am.
"It's important to try to evenly distribute the traffic throughout the day," says Solberg. "Going forward, we will definitely consider introducing some price plans on voice and data where we will try to shift customers' usage during the day to avoid network congestion and reach a better utilisation of our network."
The vast majority of mobile phone users in the Middle East and Africa use prepay accounts, and analysts and industry experts don't expect that to change significantly in the near future. However, features of postpaid billing could be incorporated into prepaid deals, with text or data packages bought as standalone packages.
"I think that people are still quite keen on keeping cost control, but I think it will become more common to buy bundles on prepay in the future," Solberg says.
"Customers could pay $25-30 a month and then have free data usage and voice nationally, and pay for international calls through VoIP. That's what I would expect to happen in the future, maybe not in the next couple of years, but that's where I would expect to see it moving," he says.
Sessions agrees that there will be more of a focus on the incorporation of postpaid deals. She also expects to see more promotions rewarding customers for the money they spend topping up.
"There has to be an element of loyalty in there somewhere," she says. "That has to be built in and we are seeing more and more loyalty programmes rewarding customers through long term discounts."
1287 days ago
An interesting article, I agree with simple honest pricing. There are too many games in LTE / 4G data pricing in the USA.