4G Strategy - Successful Operators Show How LTE Can Improve KPIs Extract - November 2013

8/18/2019 4G Strategy - Successful Operators Show How LTE Can Improve KPIs Extract - November 2013

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4G Strategy: Successful operatorsshow how LTE can improve KPIs

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4G Strategy: Successful operators show how LTE can improve KPIs

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4G strategy: EE makes the most of itsfirst-mover advantage to show howLTE can improve KPIs23 October 2013Paul Lambert

Executive summary

• EE, along with other 4G leaders such as Verizon Wireless, AT&T and SKT, is defining andshaping what it means to be a successful 4G operator, and, like those other operators,provides a benchmark for other 4G operators, especially those yet to launch, to judgetheir strategy by.

• EE’s 4G pricing strategy has been to target the high-mid to high end of the marketat launch and then evolve its pricing to a broader base of users. The key factorsdetermining this approach have been encouraging higher-spending users and early

adopters to sign up to tariffs priced at a slight premium at launch, and deviceavailability.

• As the higher-spending users have been targeted, and as 4G device prices have comedown, EE has slightly reduced the prices of its 4G tariffs and/ or increased the amountof data included in them. It has also expanded its 4G tariffs to a broader base first byincluding shorter contract periods and then introducing prepaid 4G offers.

• EE’s bundling quality content and services into 4G tariffs is proving to be an effectiveway to increase usage when combined with a quality network experience. Theoperator says that subscribers that actively use its film and music content are muchless likely to churn, and much more likely to recommend EE to others.

• The pricing of the other UK operators looks high in comparison with EE at the moment,especially in light of its latest moves, and EE’S 4G rivals will need to closely evaluatehow likely their 4G rates are to encourage users to either migrate to them or join EE infavor of its lower rates. The rival operators will need to concentrate on the segments of

their existing user bases that are most ripe for profitable migration from 2G/ 3G to 4Gor potentially lose subscribers to EE’s more attractive offerings.

Overview

EE was the first operator in the UK to launch 4G, in October 2012, and held its position as sole4G operator in the market until Vodafone launched in August 2013.

EE has been extremely effective in educating the UK market about what 4G is, signing up 4Gusers and using its 4G network as a foundation to improve KPIs. It is one of the most successful4G operators in the world, judged by its overall impact on the market and the effect its 4Gservices have had on its KPIs. EE, along with other 4G leaders such as Verizon Wireless, AT&Tand SKT, is defining and shaping what it means to be a successful 4G operator, and, like theseother operators, provides a benchmark for other 4G operators, especially those yet to launch,

to judge their strategy by.

EE has been fully committed to rolling out its 4G network and signing up users withoutdiluting the potential value in the network by pricing services at a low level. The 4G networkrollout was the fastest in Europe in terms of coverage: It covered 10 cities at launch, increasingthis to 117 towns and cities by the end of September 2013.

EE’s network now reaches over 30Mbps, which puts it among the fastest in the world. It hadone million 4G users by October 2013, 12 months after launch, which is around 10% of itscustomer base – a 4G net adds rate on a par with other aggressive 4G operators such as Verizon,AT&T and SKT.

Broadly speaking, EE’s 4G success can be attributed not only to being the first 4G operator inthe UK, but also to:

• Offering a truly 4G network experience.

• Implementing an extremely effective pricing strategy.


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4G strategy: Etisalat sees 4Gsmartphones as chief tool forpreserving a high-value edge, butrevenue increase is a tough prospect25 July 2013Ismail Patel

Executive summary

• As a converged operator with an aggressive NGA strategy, Etisalat launched LTE in theUAE in late 2011 with a theoretical maximum download speed of 100Mbps.

• The operator is looking to target two segments: with 4G smartphones and tablets,high-ARPU UAE residents and expats; and with dongles, short-term expats who do notwant a fixed line.

• Etisalat competes with Du, which also offers 100Mbps LTE, in pricing and speed.Neither operator seems to have a clear advantage, because their plans are very similar.

• In terms of pricing, Etisalat by and large is only differentiating between 3G and 4Gwhen it comes to device sales, not data allowances or speed. Still, 4G take-up has notexceeded expectations, with about 15,000 dedicated 4G subscriptions and 25,000 4G-enabled smartphone subscriptions at end-1Q13.

• Etisalat began offering 4G smartphones in December 2012, and the LTE opportunityremains relatively untapped as Etisalat tries to figure out its retail and bundlingstrategy for LTE handsets. Among 4G-enabled devices, it discriminates only with theSamsung Galaxy S4, by charging a premium for access to LTE.

• The operator should consider bundling mobile broadband with its superfast fixedbroadband, for differentiation purposes and to make the most of its fixed and mobileassets, especially targeting those customers in its fixed-network footprint.

•With most major urban areas of the UAE blanketed with advanced fixed and mobilenetworks, it is high time for innovation that uses the capabilities of these networks,including partnerships in add-on services and content justifying the high investmentin NGA deployments.

Overview

Etisalat launched LTE in December 2011 in the UAE, a few months after the first regionallaunches in Saudi Arabia. When it first launched on nonsmartphone devices, the operator didnot differentiate between 3G and 4G pricing – like in advanced LTE markets, such as the USand South Korea – meaning that essentially all customers are 4G subscribers if they have a4G-enabled device. For LTE access on the Samsung Galaxy S4 handset, the company charges amonthly service premium for postpaid users and a device premium for prepaid users.

The UAE is one of the highest-data-consuming markets in the Middle East, and its smartphone

penetration has grown 21 percentage points in the past two years, to 80% (see fig. 1), makingthe market ripe for LTE networks, because their spectral efficiency is better than that of 3G.And Etisalat recently boosted its theoretical 4G download speeds from 100Mbps to 150Mbps.


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4G strategy: Global momentum to LTEaccelerates as successful strategiesemerge28 October 2013Paul Lambert

Executive summary

• Over 80% of the operators responding to Informa Telecoms & Media’s survey on LTElaunch strategies said that they believe that there is a viable business case to launchLTE today; one-third said that they plan to launch LTE this year.

• The main reasons given by the operator respondents pertain to gaining a competitiveadvantage by launching LTE: Current networks don’t offer sufficient capacity, userswant greater speeds and operators want to create new revenue streams using LTE.

• Operators are seeing changes in consumer behavior, and the initial signs are that LTE

users are consuming more data than 3G customers: 28% of the operator respondentsto the survey are seeing an increase in data usage of 11% or more when a subscribermigrates to 3G.

• While the majority of respondents believe that not charging a premium for LTE accessis the best approach to LTE pricing, around a third believe that a 6-15% premium issustainable. Evidence to date indicates that operators can most successfully drive LTEsubscription uptake if they don’t charge a premium over 3G services. Operators thatwant to charge a premium for LTE will need to work out how they can increase theoverall value of the 4G subscriptions to justify a premium over 3G.

• The majority of operators are in no hurry to launch either LTE-Advanced or VoLTE,which suggests that 2014 will be another year of preparing for these technologiesrather than actual market launches.

Market status

To gain a view of the status of the worldwide LTE service launches and operators’ strategiesfor positioning LTE in the market, Informa Telecoms & Media conducted a survey in 2Q and3Q 2013. The survey focused on the key areas surrounding LTE launch strategies, including:

• Timing of LTE network launches.

• How best to position LTE in the market.

• LTE network strategies.

• Effect of LTE on KPIs.

The overall sample was 444 respondents, including board level executives, sales andmarketing managers and technical experts. The largest proportion (33.5%) of the respondentsare based in Europe, 23.4% in Asia Pacific and the rest fairly evenly split between the Americas,the Middle East and Africa.

The first question 4G licensees need to address is when to launch LTE. Key factors influencingthis decision are:

• How well are current networks coping with the demand for data?

• How much competitive advantage can an operator gain from launching LTE?

• Does a rival’s LTE launch compel an operator to launch LTE?

The vast majority (83.4%) of the operator respondents believe that there is a viable businesscase to launch LTE today; 32.5% said they plan to launch LTE this year. The main reasonsgiven by the operator respondents pertain to gaining competition advantage by launchingLTE: current networks don’t offer sufficient capacity; users want greater speeds; and operatorswant to create new revenue streams using LTE (see fig. 1).


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Contents4G strategy: Successful LTE operators show that increasing usage is key to improvingKPIs..................................................................................................................................... 1

4G strategy: Successful operators show how LTE can improve KPIs.............................. 3

Fig. 1 Global, LTE subscriptions by region, 3Q11-3Q13...............................................................................................................3

Fig. 2: Global, number of LTE networks by region, 2Q13............................................................................................................4

Fig. 3: Top 10 countries worldwide by 4G penetration, 2Q13...................................................................................................4

Fig. 4: Top 20 LTE operators worldwide, by subscriptions, 2Q13............................................................................................. 5

Fig. 5: Key drivers for LTE networks launches and subs uptake...............................................................................................5

Fig. 6: LTE devices launched in 2013, by LTE mode, as at 2Q13.............................................................................................. 6

Fig. 7: Leading LTE operators, pricing approach............................................................................................................................. 7

Fig. 8: Netcom (TeliaSonera Norway), evolution of LTE price plans: Oct-10, Apr-11, Apr-12 and Sep-13..............8

Fig. 9: UK, Vodafone and EE monthly plans, Sep-13.................................................................................................................... 8

Fig. 10: US, AT&T and Verizon Wireless, each advertising that they offer the best 4G network............................ 10

Fig. 11: Vodacom – scaling the network and device availability......................................................................................... 10

Fig. 12: EE – expanding the network and the range of devices and evolving its pricing strategy......................... 11

Fig. 13: Verizon Wireless KPIs, 3Q11-2Q13.....................................................................................................................................12

Fig. 14: LTE-only service announcements, up to 3Q13..............................................................................................................13

Fig. 14: LTE-only service announcements, up to 3Q13 (cont.)............................................................................................... 14

Fig. 15: EE, 4G marketing, 3Q13..........................................................................................................................................................14

Fig. 16: Selected VoLTE deployments and plans, end-Sept 2013...........................................................................................15

Fig. 17: Global, LTE subscriptions, by region, 2013-2018.........................................................................................................16

Fig. 18: LTE subscriptions in selected countries, 2013-2018................................................................................................... 16

4G strategy: Emerging Asia operators market LTE to high-end users but need toevolve pricing models to make a return on investment.............................................. 19

Fig. 1: Asia Pacific, 3G as % of total subscriptions, key markets, 3Q12.............................................................................20

Fig. 2: Asia Pacific, in-service and planned LTE networks, emerging markets................................................................20

Fig. 3: Bharti Airtel, Smart, Globe, LTE subscriptions, 2Q12 and 3Q12.............................................................................. 21

Fig. 4: India, LTE (Bharti Airtel) and DSL/FTTH (BSNL) price comparison.........................................................................21

Fig. 5: Bharti Airtel India, LTE and 3G pricing comparison.....................................................................................................22

Fig. 6: Bharti Airtel, per-megabyte premium, 3G vs. LTE......................................................................................................... 23

Fig. 7: Philippines, Smart and Globe LTE and 3G pricing, Dec-12........................................................................................23

Fig. 8: Globe and Smart, per-megabyte premium, 3G vs. LTE................................................................................................24

Fig. 9: Bharti Airtel and Globe Telecom, additional LTE data-plan comparison............................................................24

Fig. 10: LTE Logos and branding..........................................................................................................................................................25

Fig. 11: LTE devices offered by Bharti Airtel, Globe and Smart..............................................................................................25

Fig. 12: Globe Telecom’s LTE-smartphone portfolio....................................................................................................................25

Fig. 13: Bharti Airtel’s LTE value-added services...........................................................................................................................26

Fig. 14: Asia Pacific, key LTE networks launched in/planned for 2013..............................................................................26

Fig. 15: 2G-prepaid-to-LTE-postpaid migration plan.................................................................................................................27

Fig. 16: LTE subscription forecast by region, 2013-2017..........................................................................................................28

Fig. 17: Asia Pacific, LTE subscriptions by country, 2013-2017.............................................................................................28

4G strategy: AT&T focuses on LTE-network quality and coverage in competition forUS 4G leadership.............................................................................................................31


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Fig. 1: Data-speed comparison by data protocol......................................................................................................................... 31

Fig. 2: US, average monthly data traffic, Dec-09 to Dec-12....................................................................................................32

Fig. 3: US, smartphone penetration by operator, 1Q11-1Q13............................................................................................... 32

Fig. 4: AT&T, WCDMA and LTE as % of total subsciptions......................................................................................................33

Fig. 5: US, LTE-plan comparison, unlimited talk, text and 2GB of data with iPhone 5...............................................35

Fig. 6: Example of AT&T marketing...................................................................................................................................................35

Fig. 7: AT&T, subscription trend by technology, 2Q11-1Q13..................................................................................................36

Fig. 8: AT&T LTE SWOT analysis.......................................................................................................................................................... 37

4G strategy: EE makes the most of its first-mover advantage to show how LTE canimprove KPIs....................................................................................................................39

Fig. 1: Comparison of EE's 24-month pricing plans....................................................................................................................41

Fig. 2: UK operators 4G price comparison, Oct-13......................................................................................................................41

Fig. 3: EE 4G network marketing, Oct-13........................................................................................................................................42

Fig. 4: EE KPIs 2Q12-2Q13......................................................................................................................................................................43

4G strategy: Etisalat sees 4G smartphones as chief tool for preserving a high-valueedge, but revenue increase is a tough prospect...........................................................46

Fig. 1: UAE, smartphone penetration, 1Q11-1Q13..................................................................................................................... 47

Fig. 2: UAE, operator postpaid market share, 1Q13................................................................................................................... 48

Fig. 3: Etisalat UAE, mobile coverage by technology..................................................................................................................49

Fig. 4: Operator 4G dongle stand-alone prices..............................................................................................................................49

Fig. 5: Etisalat, Du, monthly data pricing, per gigabyte...........................................................................................................50

Fig. 6: Etisalat iPhone 5 pricing........................................................................................................................................................... 50

Fig. 7: Etisalat 4G subscriptions, 4Q11-1Q13................................................................................................................................ 51

Fig. 8: Etisalat LTE SWOT analysis...................................................................................................................................................... 51

4G strategy: Sprint supercharges LTE with launch of Spark tri-band services as USraces to LTE-Advanced.....................................................................................................54

Fig. 1: Sprint Spark marketing..............................................................................................................................................................54

Fig. 2: Sprint's enhanced spectrum position...................................................................................................................................55

4G strategy: Verizon Wireless rides aggressive LTE strategy to stellar results butneeds to innovate to retain US and global leadership.................................................57

Fig. 1: US, mobile broadband subs as % of total mobile subs, 1Q11-4Q12...................................................................... 58

Fig. 2: US, smartphone connections and penetration, 2011-2017......................................................................................58

Fig. 3: Verizon’s four strategic network platforms...................................................................................................................... 59

Fig 4: Verizon’s LTE business model................................................................................................................................................... 60

Fig. 5: Verizon Share Everything plans............................................................................................................................................. 61

Fig. 6: Verizon's LTE marketing.............................................................................................................................................................62

Fig. 7: Verizon Wireless selected service changes, Nov-09 to Apr-13.................................................................................. 63

Fig. 8: Verizon Wireless subs by technology, Dec-10 to Jun-13............................................................................................. 64

Fig. 9: US, LTE subs by operator, Dec-10 to Jun-13 (mil.)..........................................................................................................64

Fig. 10: Global, top 15 LTE operators by subscription count, end-Jun 13.........................................................................65

Fig. 11: US, market share of top four mobile operators, 2009-2012...................................................................................65

Fig. 12: US, monthly ARPU of top four mobile operators, 3Q10-2Q13..............................................................................66

Fig. 13: Verizon Wireless selected results, 2010-2012................................................................................................................66

Fig. 14: Verizon Wireless LTE SWOT analysis................................................................................................................................. 66

4G strategy: Vodafone’s pricing puts faith in the value of premium content ............ 69


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UK, Vodafone and EE monthly plans, Aug-13.............................................................................................................................. 69

4G strategy: Global momentum to LTE accelerates as successful strategiesemerge............................................................................................................................. 71

Fig. 1: Why is now the right time to deploy LTE?........................................................................................................................72

Fig. 2: How can operators best differentiate LTE from 3G? (Please choose two options)........................................... 72

Fig. 3: Which service or application is driving/ will drive the greatest volume of traffic on LTE networks?(Please choose one option)......................................................................................................................................................................73

Fig. 4: If you have launched LTE, what increase in ARPU are you seeing when a subscriber migrates to LTE?.....................................................................................................................................................................................................................73

Fig. 5: If you have launched LTE, what average increase in LTE data usage are you seeing compared with3G?......................................................................................................................................................................................................................74

Fig. 6: What variant of LTE do you intend to deploy?...............................................................................................................74

Fig. 7: Which spectrum bands do you intend to use to deploy LTE? (Tick any that apply)....................................... 75

Fig. 8: In your view, what is the likely future role of Wi-Fi for operators deploying LTE in the next two to three years?.................................................................................................................................................................................................................75

Fig. 9: What percentage price premium do you think is right for LTE?.............................................................................76

Fig. 10: Do you plan to offer any 4G-only content free over LTE to encourage uptake?............................................76

Fig. 11: When do you expect LTE-Advanced to be deployed?................................................................................................ 76

Fig. 12: When do you plan to go live with VoLTE services?.....................................................................................................77

Fig. 13: Do you think it’s possible to charge a premium for LTE voice?.............................................................................77

Fig. 14: When do you expect LTE small cel ls to be deployed?................................................................................................78

Fig. 15: Where do you expect widespread commercial public-area LTE small cells to be deployed first?............78

Fig. 16: Operators are better prepared to offer roaming services across LTE networks in 2013 compared with2012................................................................................................................................................................................................................... 79

Fig. 17: What do you see are the main barriers to LTE roaming?........................................................................................79

Fig. 18: Do you plan to extend 2G/3G roaming agreements to 4G, or strike new agreements?............................80

Fig. 19: A hubbing approach is better for LTE roaming compared with a bilateral approach.................................80


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4G Strategy - Successful Operators Show How LTE Can Improve KPIs Extract - November 2013

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