About SK Telecom Established in 1984, SK Telecom is the largest mobile operator in Korea by both revenue and number of subscribers. As 5G penetration scales and newer use cases emerge, especially around consumer IoT applications, operators will need to go beyond smartphones and related accessories and expand into connected devices. While this performance shows the power of the Apple brand, it is still lower than the peak of Q4 2020 when its revenue share reached a staggering 50%, up from 28% in Q3 . Though securitization of handset receivables has been around for years, most global operators have only scratched the surface in using the vehicle to gain immediate cash and employ their capital more efficiently. We already know how the telecom industry is performing. However, with the large overhead costs of asset recovery and fraud, leasing appears to be a less attractive model. As a result, due to the financial benefits of leasing, Sprints lease revenues could increase going forward. Thanks for sharing..Cybonetic Technologies IT & Software Development Company in Patna, focusing on the development of software, mobile app, e-comm, web hosting, bulk sms, Digital Marketing services. 0000001016 00000 n At least in the wholesale market, the minimum residual value for premium smartphones can be predicted well in advance and used to inform an operators game plan. U.S. wireless operators posted their strongest subscriber gains and service revenue growth in several years during 2021, rebounding from sluggish operating performance due to the COVID-19 pandemic. which in this case is smaller as compared to other business models that could be employed. 0000028733 00000 n However, a mid-size European operator increased smartphone accessory sales by 150 percent within eight months by changing its online buy flow and sales incentives to improve bundling and cross-sell. 6 Excluding Airtel, however, net profit was down 3%. This is where democratizing technology with smartphone financing comes in. iii. By Anna Arlorio January 4, 2013. One gets to upgrade phone after a year or two (depending upon the plan), and keep up with the latest developments in the smartphone technology. The principal impact of the move to handset financing for mobile operators relates to differences in the accounting treatment of the various handset financing models, relative to the subsidy model. Another capital-infusing avenue involves operators off-loading portfolios or tranches of their smartphone-related balance sheet to a financing company, which in turn sells bonds secured on the smartphone receivables to private investors. 0000008593 00000 n In the developing world, however, this seems like uncharted territory. As a result, they can upgrade or add devices as needed. With subscribers' thirst for data seemingly insatiable, these should be heady times for mobile network operators. Prepaid subscribers are considered to generate minimal revenue for the telecom company. new units per year due to multiple factors. Of course, there was the year of the one-off with the . Under a subscription model, consumers would pay lower monthly amounts to effectively rent devices over a predetermined contract period. Strategy-Consulting-Virtual-Experience-Program. This includes registration of devices,, Device financing or procuring devices on a contract/ pay-as-you-go model has been a norm since the last decade, We are excited to have joined hands with Angaza, a leading provider of software technology designed specifically for, democratizing technology with smartphone financing, How to Effectively Promote Device Leasing, Democratizing Technology with Smartphone Financing, SIM-based Locking: How NuovoPay Makes Device Financing Lucrative for Telcos. We expect continued weakness from the mobile segment in the medium term. Your first task today is to do some research and identify markets in which handset leasing . 217 0 obj <> endobj Spurred by smartphones, 4G networks, and bandwidth-intensive applications like video, global mobile data traffic grew 81 percent in 2013, according to Cisco's Visual Networking Index.And no slowdown is in sight: by 2018, traffic is expected to be nearly eleven times greater . Between 2014 and 2021, the FDI inflows in the Telecom sector rose by 150% to . Elisse wants an email with your recommendation on whether the team . By having a work phone and a personal phone, you can unlock a wealth. 0000011673 00000 n Furthermore, there are operational advantages for operators in doing away with handset retail. Impacts of a handset leasing model on mobile telcos . Users spend an average of two hours and 22 minutes per day on social media platforms, based on the Digital 2022 Global Overview Report. And who better than telecom carriers to take a plunge in the device financing market. Im thinking about the topic of strategic responses to emerging events at the moment because of the seeming inevitability of a recession this year or next, which will doubtless bring with it many similar situations. After a discussion with your team, you have identified the need to do some market research and find out the impact of handset leasing on telco profitability in other markets. Seeing this, consumers and firms realize the advantages of handset leasing as a valid way to avoid paying exorbitant prices for handsets while still allowing for their use. Sprint will get $1.1 billion in cash from a handset leasing company that has been set up by parent company SoftBank and other investors designed to put the financing of leased devices off of . Technology leasing companies can now empower millions of people with access to smartphones irrespective of their credit history. In 2015, global carriers lost $2.55B in subscription fraud, a number which would only increase if leasing was prioritized. What impact will 5G . At best, the head of procurement or the head of the wireless business will possess tangential oversight on all things smartphone. 0000001319 00000 n NuovoPay streamlines the intricate process of mobile phone leasing & requisition. and find out the impact of handset leasing on telco profitability in other markets. Impacts of a handset leasing model on mobile telcos. Elisse wants an email with your recommendation on whether the team should explore this idea further for the client. NuovoPay streamlines the intricate process of mobile phone leasing & requisition. On a personal level he thinks a nice sandwich is all that the world needs!!. But only by employing fully an E2E approach and using all the levers together can operators achieve the maximum return. The growth in mobile data traffic has driven the development of 5G networks, and yearly release of new phone models with improved features has amplified the demand for handset leasing plans. 0000001586 00000 n Market Research The Principal, Elisse, held an initial team meeting to discuss the various initiatives, including handset leasing. And financing costs can be lowered even further using analytics. Thus, the first step to an E2E device life-cycle management approach involves establishing a shadow smartphone P&L overseen by a committed senior executive that reflects the different drivers of revenue and costs associated with smartphones. Further growth potential is constrained by industry fragmentation and associated value loss, as supply takes on average seven touchpoints to find corresponding demand. Case study: the United States 5.3. By utilizing prominent, clickable buttons, mobile websites may implement this method. You ultimately end up paying much greater amount than the retail price of the phone over the life of the contract. From there, operators must invest in innovation as well as execution against key levers for driving profitability, such as securitization, re-commerce, and insurance. Thanks for sharing your knowledge with us. Guide to Integrated Telecom KPIs for Investment Professionals. I remember saying something like "I feel a bit lightheaded; maybe you should drive" And suddenly there was a terrible roar all around us and the sky was full of what looked like huge bats, all swooping and screeching and diving around the car, which was going about a hundred miles an hour with the top down to Las Vegas. Hunter S Thompson, Fear & Loathing In Las Vegas Since the earliest days of human civilisation, people have used narcotics to escape everyday life and enter new and exhilarating worlds. %%EOF Proactive Suppliers may have even recycled your handsets as apart of the contractual renewal, and cashed out a re-sign bonus or provided a discount on your new devices. ii. The answer depends on the strategies that the telecom companies employ. In the telecom industry leasing has been available for expensive equipment to enterprise and business clients for many years, but the concept of offering leased handsets to consumers is relatively new. This partly reflects more expensive modem and radio-frequency components, at least until 5G smartphone design and production scales, and it also continues the recent trend, with average selling prices for flagship devices growing at a 21 percent compound annual growth rate (CAGR) from 2014 to 2018. In the 2019 fiscal year, the Sprint Corporation's revenue amounted to 33.6 billion U.S. dollars, 21. . One South American operator worked with its insurance provider to partner with a countrywide network of repair stores to fix 65 percent of phones within five hours to avoid costly smartphone replacements and reduce insurance costs by 25 percent. 0000022615 00000 n Rising smartphone subsidy expenses already are starting to become unsustainable, with one North American operator experiencing a 30 percent increase in four years, and further increases would generate a substantial need for additional capital just as operators require more funds for their 5G network build-out. Handset leasing works by renting new phones to customers for a monthly fee instead of selling phones to customers at a discounted upfront cost. 0000000016 00000 n Lots of clouds, but what's the weather like? 6. Its take rate of leasing plans reached ~43.0% that quarter. With the high price of handsets, carriers offering leasing plans might face enormous hurdles pertaining to. Nice Blog.. Indeed, as a form of consumer debt, smartphone-backed securities are often viewed as higher-quality investments than corporate bonds and incur comparatively lower financing costs. As the equipment rental payments plus the expected liquidation value of the device equal the cost to acquire the device from the manufacturer, the company provides the customer with a discounted service rate plan. 0000003300 00000 n For consumers, access to the latest smartphone becomes more affordable and seamless, and they can use the remainder of their telecom wallet on services and accessories. With prices for premium 5G smartphones expected to be up to $1,000 for millions of customers, this applies significant pressure on the balance sheet. But this has also resulted in a major digital divide that can be observed between populations that do not have access to the best telecom network or the best mobile technology. Chinas surge into 5G will push the worldwide smartphone market back to growth in 2020, according to IDC, IDC, November 26, 2019. 8 As of December 2017, the company holds around 50 percent of the market, with 30.2 million mobile subscribers including 22.87 million LTE subscribers. Similarly, there is a huge population that is drawn towards constant upgrades to the latest technology handsets. 0000004317 00000 n 5 The take rate of Sprint's (S) leasing plans continued to surpass its installment plans in fiscal 3Q16. At most, procurement has assumed a broader role to deliver consistently bigger rebates from OEMs, and the finance team incrementally improves cash holdings through better payment terms and receivables factoring. Leasing in the telecoms industry will be worth billions over the next few years, says Daniel Proctor, commercial director of Henry Howard Finance. TPG Telecom reported service revenue of $4,439 million in FY22, up 1.5 per cent on FY21,while earnings before interest, tax, depreciation and amortisation (EBITDA) was $2,135 million, up 23.6 per . Following yesterday's post, here's some related thinking on the impacts on operators of handset leasing. hb```b``c`e`bf@ a C)O @R#tC4dGabA"yD3 Phone: OnePlus 6T (Released 18~ months ago) Initial cost to consumer: $549. The first half of Budget Session 2023 was held from January 31, 2023 to February 13, 2023 (10 sitting days). Impacts of a handset leasing model on mobile telcos. As you can see in the chart, net leased devices were valued at ~$4.5 billion at the end of fiscal 3Q16. For example, if the marketing team ensures broad awareness of planned smartphone-related promotions, procurement can get OEMs to bid competitively for promotional slots or negotiate with them to co-fund campaigns. It delivered significant churn improvements and market differentiation. Published by S. O'Dea , Jul 30, 2020. 0000001499 00000 n Maximizing the contributions of smartphones to the overall profits and losses (P&L) isnt always top of mind for each or possibly any single function. However, industry analysts expect that 5G will reverse this trajectory and push new phone sales growth for top-tier OEMs by 25 percent. To add to it, as mentioned above, the primary profit-making element for telecom carriers is not the device financing itself, but the 5G or 4G service costs. In 2021, SK Telecom's sales revenue amounted to around 16.75 trillion South Korean won. The results of the study indicated that, ie 39 40 offGbalance sheet financing do not increased profitability and leverage ratios of businesses. They are uniquely capable of generating both used-phone supply and demand. D. Handset leasing and telecom industry . dubai online shopping online shopping uae cash on delivery. Also leasing removes the upfront cost barrier that may have delayed a purchase, or even prevented the purchase at all. Get in touch with us now. KPIs and potentially debt covenants of telecom operators, the Standard significantly impacts lessees' systems and controls as more lease data will need to be tracked by bringing operating leases onto the balance sheet. Additionally, the subsidy challenge is expected to extend beyond smartphones to other connected devices that form part of the 5G ecosystem. One of the hypotheses under consideration is the introduction of handset leasing. 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