Branded airtime businesses can leverage established consumer brands to address small customer segments in a growing mobile market. An optimal model evolves a brand's core proposition by enhancing existing products and services. Key to viability are understanding how customer value, acquisition, usage, tenure and expenses impact profitability under various scenarios. An agile strategy balances commercial risks and profits over time through an operating model that focuses on customers and core business growth. Partnering with an enabler can further mitigate risks through scale, best practices and a predictable cost base.

1. !!
DETERMINING THE OPTIMAL MODEL FOR
YOUR BRANDED AIRTIME BUSINESS
TAKING THE
GUESSWORK
OUT OF AN
MVNO DECISION
M V N O A F R I C A S U M M I T • C A P E T O W N • 1 O C T O B E R ’ 1 3 • J I R I B A T E K

2. TODAY’S CONVERSATION
! Is there an opportunity?
– Yes. The Market is out there…and growing…
– Established consumer brands are best positioned to take an advantage of it …
– … and it makes business sense for them to seriously consider it
! It should be a natural birth …
– Branded mobile business should be an Evolution of, not Divergence from, your core business
! How to make it (relatively) painless:
– What you should always look for: Key drivers behind a mobile business
– Impact of real life: Scenarios and Sensitivities
– The great juggle: Designing MVNO Strategic Framework to influence all key drivers
– Turning PowerPoint into reality: Deriving an optimal operating model
– Bird Rand in Hand vs Two in a Bush: Balancing commercial risk and profitability over time
! Briefly unpacking the benefits of an enablement model
! Concluding remarks

3. The individualization of Customer Requirements is leading to the
fragmentation of the market into much smaller segments
THE MARKET IS OUT THERE…
… AND GROWING
Small segment services are an opportunity for established brands,
in partnership with MNOs
MNOs!are!not!
geared!to!serve!
smaller!segments!
• Tradi3onal!products!not!
a7rac3ve!enough:!too!
generic,!low!perceived!
value!
• MNO!product!
development!process!too!
slow!and!costly!
• Segments!too!small!to!
jus3fy!dedicated!MNO!
products!

4. ESTABLISHED CONSUMER BRANDS
ARE BEST POSITIONED TO ADDRESS SMALL
SEGMENTS
EXISTING
DISTRIBUTION
FOOTPRINT
EXISTING LOYAL
CUSTOMER BASE
EXISTING CREDIT
RELATIONSHIP
EXISTING
LOGISTICS &
WAREHOUSING
EXISTING
WELL-KNOWN
BRAND
Brands can bring
– Existing credit relationship and brand loyalty
– Better understanding of customer requirements
– Own (non-telecom) products and services
– Lower customer acquisition costs
– Lower incremental operating costs
Partnership with MNO(s) is essential
– MNO builds and operates the network
and provides Brand with wholesale
connectivity
– Brand develops, markets, distributes, sells
and supports the product(s)

5. COMPELLING REASONS EXIST FOR CONSUMER
BRANDS TO PURSUE GREATER OWNERSHIP OF
THE TELECOMS VALUE CHAIN
STAKEHOLDER
CUSTOMER
INTERNAL
OPERATIONS
PEOPLE &
CULTURE
IMPROVE
SHAREHOLDER
VALUE
REALIZATION
STRATEGICFOCUSAREAS
STRATEGICOBJECTIVES
GREATER
CUSTOMER
ENTANGLEMENT
LOWER
INTERNAL
COSTS
GREATER
KNOWLEDGE
MANAGEMENT
& COMPLIANCE
NON
TRADITIONAL
REVENUE
GROWTH
INCREASED
FOOT TRAFFIC
THROUGH
TRADITIONAL
CHANNELS
LOWER THE
COST TO SERVE
IMPROVED
BENEFITS
CREATE A
DEFENSIBLE
COMPETITIVE
POSITION
EXPLOIT
DIGITAL
CHANNELS TO
DRIVE REVENUE
GROWTH
IMPROVE
CUSTOMER
BEHAVIORAL
UNDERSTANDING
REDUCE
CUSTOMER
SERVICE
OVERHEAD
MARGIN
PROTECTION
IMPROVED
CUSTOMER
EXPERIENCE
BENEFIT CORE
BUSINESS
THROUGH DATA
OWNERSHIP OF
THE CUSTOMER
BASE

6. EVOLUTION, NOT DIVERGENCE
A KEY DRIVING PRINCIPLE BEHIND MVNO STRATEGY
! MVNO Value Proposition should be an Evolution of Brand’s core
proposition
– Clear synergies with current business
– Sales / Service Channel for existing products
– Enhancement/Extension of current products: location
awareness, use of phone camera, etc.
! Measurable Commercial Benefits for Core Business
– Growth in core business revenues thanks to own branded
mobile offering: mobile drives foot-traffic to retail stores, etc.
– Cost savings in core business thanks to own branded mobile
offering: lower customer acquisition / service costs, workforce
management & mobile information access, …
CURRENT'
VALUE'
PROPOSITION'
NEW'TELECOMS'
SERVICES'
VALUE'
PROPOSITION'
IMPACT'ON'
COST'TO'SERVE,'
COST'TO'
ACQUIRE'AND'
OPERATIONS'
Mobile services (Voice/SMS/Data) must be profitable but cannot be the only
element of the Branded Mobile Business

7. KEY BUSINESS DRIVERS BEHIND MVNO VIABILITY
Branded Telecoms Business Viability Drivers
1. Customer Value Proposition: Devices, In-Bundle
Services, Out-of- Bundle Tarriffs, Non-Telco
Services and Once-off and Recurring Charges
2. Customer Acqusition Marketing, Distribution and
Sales Costs vs applicable Once-off Charges;
Activation and Dormancy…
3. Customer Usage & Spend actual Voice, SMSs,
Data usage vs Bundle Charges, Out-of-Bundle
Spend
4. Indirect Revenue: Revenue not directly originating
from Customer: Interconnect, Advertising, …
5. Customer Tenure: Length of a committed
contractual relationship
6. Customer Retention: Percentage of Customers
renewing at the end of their Tenure
7. Incremental Expenses: Incremental cost of
setting-up and operating a Mobile Business within
the Brand
8. Impact on Core Business: Cost & Revenue
changes caused by Mobile Business to the existing
(core) business, including savings & incremental
costs.
Customer
Usage &
Spend
Customer
Value
Proposition
Customer
Acquisition
Customer
Tenure &
Retention
Incremental
Expenses
MNO Terms
and
Relationship
Impact on
Core
Business
Indirect
Revenue

8. SCENARIOS AND SENSITIVITIES
IMPACT OF KEY DRIVERS ON THE BUSINESS
Customer
Usage &
Spend
Customer
Value
Proposition
Customer
Acquisition
Customer
Tenure &
Retention
Incremental
Expenses
MNO
Relationship
& Terms, SLA
Impact on
Core
Business
Indirect
Revenue
!R#100.00M#
!R#50.00M#
R#0.00M#
R#50.00M#
R#100.00M#
R#150.00M#
R#200.00M#
M1# M3# M5# M7# M9#M11#M13#M15#M17#M19#M21#M23#M25#M27#M29#M31#M33#M35#
!R#100.00M#
!R#50.00M#
R#0.00M#
R#50.00M#
R#100.00M#
R#150.00M#
R#200.00M#
M1# M3# M5# M7# M9#M11#M13#M15#M17#M19#M21#M23#M25#M27#M29#M31#M33#M35#
!R#100.00M#
!R#50.00M#
R#0.00M#
R#50.00M#
R#100.00M#
R#150.00M#
R#200.00M#
M1# M3# M5# M7# M9#M11#M13#M15#M17#M19#M21#M23#M25#M27#M29#M31#M33#M35#
+10% ASPU
+10% SAC
+25% breakage
-10%
-0.5% churn
+R8.00/cust
-10% ASPU
-10% SAC
-25% breakage
+10%
+0.5% churn
-R4.00/cust

9. Customer
Usage &
Spend
Customer
Value
Proposition
Customer
Acquisition
Customer
Tenure &
Retention
Incremental
Expenses
MNO Terms
and
Relationship
Impact on
Core
Business
Indirect
Revenue
A FRAMEWORK FOR A VIABLE AND SUSTAINABLE
MVNO STRATEGY
Leverage'
Exis,ng'Base'
Be'Original'and'
Relevant'
Grow'Your'
Core'Business'
Proac,vely'
Manage'Risks'
Focus'on'
Customers'
Stay'Agile'and'
Efficient'
– Leverage Existing Base: Use the knowledge of
and access to your customers: historical data,
loyalty programme, credit relationship…
– Be Original and Relevant: Design CVP appealing
to your customer niche: relevancy and value
must compel your customers to switch their
mobile service to you
– Grow Your Core Business: Make sure your mobile
business saves costs and/or grows revenues for
your core business
– Proactively Manage Risks: Balance profitability
and commercial risk; Share/outsource non-core
operational activities
– Focus on Customers: sales and service are key;
constant, proactive evolution of your offering
– Stay Agile and Efficient: Keep costs low and
decision-making swift
Brand’s Mobile Strategy must positively impact all Key Drivers

10. MVNO OPERATING MODEL
TURNING A STRATEGY INTO REALITY
! A reliable and efficient blend of
– Business Processes
– Relationships
– Resources and
– Systems
which enables the Brand to optimally execute on its
strategy
! Derived from the Customer Value Proposition and
Customer Journey (lifecycle customer experience)
! Taking into account the Brand’s core business and the
related operating model
The diagram on the left indicates some of the aspects that an MVNO may
need to include in its operating model
BUSINESS
ELEMENTS
CUSTOMER SEGMENTS
CHANNELS & DEALERS
PRODUCTS & SERVICES
OPERATINGELEMENTS
ORGANIZATIONAL DESIGN
BUSINESS PROCESS LAYER
SYSTEMS & TECHNOLOGY
INFORMATION MANAGEMENT
LOGISTICS
ENGAGEMENT&CUSTOMEREXPERIENCE
CUSTOMER AWARENESS
ACQUISITION
FIRST USE
RECHARGING & PAYMENT
CUSTOMER SERVICE
LEAVING

11. BALANCING RISK AND PROFITABILITY
BLENDING OF TWO COMMERCIAL MODELS IN ONE
PRODUCT
! As a lower-risk approach “retail-minus” commercial
terms can be applied to reduce the commercial risk
of products and services that are new to the
brand’s proposition in the early phases of the
business
! Once sufficient customer behavioral data has been
collected and business model assumptions
validated, a more profitable cost-plus commercial
terms can be blended into the model to improve
overall profitability and differentiation of the
customer value proposition
Usage&Revenue&
curve&over&.me&&
Proposi.on&
profitability&curve&
Blending!of!commercial!models!may!
assist!in!mi3ga3on!of!commercial!risk!
whilst!not!limi3ng!strategic!growth!&!
posi3oning!

12. BRIEFLY UNPACKING THE BENEFITS OF AN
ENABLEMENT MODEL
Aggrega3on!of!mul3ple!
MVNOs!brings!
economies!of!scale!
faster!
O"
O"
Volume Discount Points
Marginal!CAPEX,!flat!
OPEX!in!startup!phase,!
greatly!reduced!risk!of!
unpredictable!cost!base!
Predictable Cost Base
Apart from access to scarce
telecommunications resources and
skills, an enabler can also offer various
operational and commercial benefits
which aid the Brand in mitigating the
risks during its Mobile Business launch
and evolution:
– Best practices, processes and
procedures
– Predictable cost base
– Economies of scale

13. CONCLUDING REMARKS
In conclusion, I’ll leave you with the following thoughts with regards
to determining the optimal model for your branded airtime business
– A mobile proposition should complement and enhance your
existing business
– The scale of a mobile business implies risk and therefore a clear
vision of the customer value proposition, go-to-market strategy,
key commercials and operating model are a pre-requisite
– On-going, accurate business intelligence and insight, and the
ability to act on these, are key prerequisites for growing your
business – always evolve
– A good plan is no substitute for experience, ensure your team
includes experts with local telecoms experience to guide your
business
Leverage!your!exis3ng!
base,!distribu3on!
footprint!and!credit!
rela3onship!
Be!original!and!be!
relevant!
Seek!to!benefit!your!
core!business!
Proac3vely!manage!risks!
Stay!agile!and!efficient!
Always!evolve!

14. !!
THANK YOU