Analysys Mason presentation: Why do operators partner with OTT voice providers?

RefNo | Commercial in confidence

Why do mobile operators partner with

OTT voice providers?

OTT Voice Forum

6 October 2014 • Stela Bokun


Introduction: In 2005, this was operators’ nightmare scenario

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Source: http://www.economist.com/node/4401594


Introduction: In 2014, the telephony business is alive, but the threat from OTTs still exists

Skype: 300 million active monthly users, more than a billion sign-

ups

Viber: more than 200 million active users

WhatsApp: 400 million active monthly users; is adding a calling

functionality

Facebook (now owner of WhatsApp): more than 1.4 billion active

monthly users

Kakao Talk: more than 100 million registered users

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Sources: Analysys Mason, WhatsApp, Facebook, Viber


Introduction: Meanwhile, the industry is still asking the same question

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Source: http://www.trefor.net/2014/05/09/will-ott-voip-apps-

destroy-the-telecoms-industry/


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Strategy Examples

Block OTT services EITC (du), Etisalat

Orange, T-Mobile

Stimulate usage Orange, SingTel

T-Mobile, Telefónica, Vodafone

Partner with OTT players 3 Hong Kong, DiGi (Malaysia)

Etisalat, Globe Telecom, Nawras

Mobily, Telkomsel, Verizon

Launch IMS-based services MetroPCS, Orange, SK Telecom

T-Mobile, Telefónica, Vodafone

Launch ‘telco OTT’ services Bouygues, LG Uplus, Orange

Rogers Wireless, T-Mobile

Tele2, Telefónica

Operators’ response: Operators are responding to OTT with different approaches


Why partner: Operators may partner with OTT players for many reasons

1. It is a proactive way of engaging with new models for

voice services

2. It may drive data usage

3. It may help with customer acquisition/retention

4. It may work as a temporary solution

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Reason 1: If VoIP matches the success of messaging, the threat is grave for operators

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Users of non-operator OTT voice

on smartphones

SMS traffic on mobile handsets

and global SMS retail revenue

Source: Analysys Mason, 2014

0

15

30

45

60

75

90

0

5

10

15

20

25

30

2010 2011 2012 2013 2014

Re

tail

reve

nu

e f

rom

SM

S

Me

ssa

ge

s

OTT IP Messaging

SMS

Retail revenue from SMS

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2013 2014 2015 2016 2017 2018

Use

rs

Middle East and Africa Asia-Pacific

Latin America North America

Europe


Reason 1: Blocking and emulation have not been particularly effective

Generally seen as a negative

strategy

Can result in increasing churn as

customers demand IP based

services

Declining numbers of operators

that opt for this in the last 2 years

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Few prominent attempts (TU Go,

One Number, Libon, YiChat)

Often tentative and ad hoc

initiatives, and not far-reaching

Blocking Emulation

VoLTE and RCS

May be too late and/or too little Stimulate usage

Limited time to act “Slow-motion machine” – David

Artunedo Guillen, TU Core Chief

Architect, Telefonica


Reason 2: May increase data usage and smartphone penetration Effective in emerging markets

Effective with market challengers

Serves to educate people on the

usefulness of data plans

Serves to move users from

featurephones to smartphones

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* Between May and July 2014, Analysys Mason interviewed 14 operators

and five OTT providers to understand the drivers and strategies for

developing partnerships

“There are two parts to our OTT strategy,

drive data use and attract subscribers.”

MNO in an Asia–Pacific emerging market

Examples of operators who

partnered with Viber in 2013


Reason 3: May improve or stabilise churn rates Effective differentiation strategy

in developed markets

Can help with customer

acquisition/retention

Can be particularly effective if

part of a larger strategic effort

(bundling, smartphone

penetration)

Does not need to cannibalise

voice revenue

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Sources: http://gigazine.net/news/20101018_kddi_skype/;

http://vinko.com/blog/2010/10/18/skype-calls-kddi-japan

Skype and KDDI entered into a

partnership in 2010 and

stemmed the ‘leakage’ of high-

end subscribers from KDDI


Reason 4: Doing nothing while waiting for VoLTE and RCS can be too risky

Delayed launches – only 10

commercial launches so far

Hong Kong, Japan, Singapore,

South Korea and the USA

Issues with LTE coverage (and

the support for VoLTE outside of

the coverage area)

Limited international roaming

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Delayed launches - RCS has

been launched by 20 operators in

14 countries

Limited device support

Apple was not supporting RCS

Limited feature set

Limited interoperability

VoLTE RCS

Source: Global mobile Suppliers Association, Evolution to

LTE report, September 2014

A year ago, joyn (T-Mobile and Vodafone) was used

by around 4% of the customers and the mean daily

usage was 0.7 minutes. (Source: Nielsen and

Analysys Mason, 2013)


Final thought: One size does not fit all

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Penetration of VoIP services*

*n=1447

Source: Analysys Mason and Nielsen, 2014

0%

10%

20%

30%

40%

50%

% o

f su

bscrib

ers

th

at u

se

Vo

IP

Different combinations of strategies may work differently for different

operators in different markets. Partnership is an option worth trying


Contact details

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Stela Bokun

Manager, Custom Research

[email protected]

Technology

Analysys Mason presentation: Why do operators partner with OTT voice providers?