Abstract
Since prepay mobile phone plans were introduced and facilitated massive
expansion of mobile markets into consumer and lower value commercial sectors,
MNOs have been looking for ways to migrate prepay customers to postpay
contracts, where the perception is they will generate more ARPU and profits.
If prepay is a gateway to mobile use for new customers, then the more quickly
the MNO can take a customer through that gateway, the greater the lifetime
value of that customer. In developing markets, many new customers will be new
to mobile and the gateway logic holds. Once the market reaches saturation
levels, as in Europe, most customers totally new to mobile are likely to
children that have only just attained the age where a phone (usually prepay)
is purchased on their behalf. These customers already know all about mobile
phones and are not using prepay as a gateway to a contract; they are prepay
because of economic limitations. In such circumstances, is it worthwhile
incentivising migration to postpay contracts, or can MNOs obtain more profit
by continuing to serve them through prepay relationships, where the cost of
provision is much lower?
In a mature market, there is also the possibility that certain customers may
be encouraged to spend more through innovative prepay offers (such as prepay
BlackBerry functionality) and so MNOs continuing to focus on migration may
actually reduce the total potential revenue they may earn from the market.
This report examines some examples of MNO prepay to postpay migration
strategies and explores the profitability issues surrounding migration in
markets where penetration has already exceeded 100% and concludes with some
concrete recommendations for MNOs to help them make decisions about their own
migration approach.
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