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Mobile Broadband ‑ It’s no longer just about increasing usage, but about managing profitability

Mobile broadband remains high on the agenda of the region’s leading operators in 2013 and Deloitte predicts that 2013 will see operators focusing increasingly on driving data profitability as opposed to usage. With flat voice revenues, operators will continue to see mobile broadband as a key driver for future growth. The challenge for operators in the region, as in other mature markets, has been to manage the explosion in data traffic in a manner which ensures profitable growth of data services. The major regional operators have been seeing growth rates of over 30% in data revenues in 201222, but more significantly fast-growing mobile broadband has caused operators to fall into a profitability trap. LTE launches across the GCC will serve as a further catalyst to the discussion on data profitability. In 2013, Deloitte expects regional operators to be more rigorous in measuring and monitoring the cost and profitability of data services.

Regional data plans – “The end of all-you-can-eat”

For many smartphone users, all-you-can-eat is a prerequisite to using mobile data and a key reason for this is billing predictability. Metered mobile usage can cause headline-generating bill shock, as shown with voice and SMS. However the potential for bill shock in data services is arguably higher as there is little connection between time used and charges. A few years ago, the majority of mobile data subscriptions in developed countries were marketed as unlimited. In fact, according to the Deloitte Global Mobile Survey, even today, a third of smartphone owners we polled and that use a mobile network to connect to the internet say they subscribe to an all-you-can-eat data package. That represents 16 percent of respondents that own or have access to a smartphone –some do not use the internet at all, and others use the internet via the Wi-Fi network.

The results of the Global Mobile Consumer Survey suggest that data users are receptive to hybrid plans, comprising unlimited data with limitations around the type of service used. Approximately 40 percent of the smartphone users polled prefer to purchase unlimited access to specific services such as email and social networks. Respondents are generally uninterested in paying on a per megabyte basis - only nine percent of respondents would do so. ‘Pay-per-usage’ internet is unlikely to be suitable for the future mass market smartphone consumer. Operators would need to consider the peculiarities of individual markets, a one size fits all model will no longer be applicable.

In 2013 and beyond, operators in developed markets and in the region are likely to move increasingly away from unlimited data plans. Operators are likely to spend more time on smart segmentation of their customer base, in identifying usage patterns and if necessary in reshaping traffic to manage more effectively peak data usage. If at all offered, unlimited data is likely to be available for short durations (e.g. 1 day or 1 week) or during off-peak periods25.

All-you-can app

Globally, Deloitte predicts that between 50 and 100 mobile operators will offer all-you-can-eat services with unlimited access to specific applications. All-youcan- app (AYCA) will, for a fixed monthly subscription, offer unrestricted use of each service’s content, with connectivity charges bundled in. In 2013, AYCA services will be aimed primarily at customers interested in, but hesitant about, mobile data usage, due to worries about running up large data charges. AYCA services will complement existing data tariffs.

Some operators may offer AYCA services for free for a limited period to stimulate usage. In Q4 2012, Telefónica offered free usage and subscription to Joyn, a messaging application26. Some AYCA services may be offered for free to encourage usage of an indirectly monetized service. For example, Google has launched a service in partnership with Globe Telecom, in the Philippines, offering free access to Google products such as search, Gmail and Google+27. Users are able to access websites that show up in Google’s search results for free. Accessing a site outside those results prompts an invitation to subscribe to a mobile data plan.

Further, AYCA may be popular in countries with low income levels, where the aim will be to stimulate usage of mobile data services. The preference towards “unlimited access to services they use the most” ranges between 29 and 54 percent of smartphone owners among the countries surveyed. Unlimited access to the services they use most would give customers greater charging clarity. Most popular AYCA services would likely be for social networks, email, video and Instant Messaging (IM) services

In the region some operators have already launched allyou- can-app services. Mobily’s WhatsApp plus package provides unlimited access to browse all WhatsApp external links up to 1GB per month and to enjoy unlimited WhatsApp chatting, sharing location, images and videos. However AYCA may not be suitable for all markets. For some operators in the region, apps-related traffic accounts for close to 80% of data traffic, making AYCA a proxy for all-you-can-eat, a pricing approach, which operators are keen to stay away from.

Monetizing data – Customer Analytics drive tactical strategies

Apart from re-engineering existing data plans, operators are likely to focus increasingly on the analytics around data profitability. Investigating why certain data plans are profitable can provide useful insights into risky data usage patterns exposing operators to potential losses as customers churn towards data plans which match closely their needs or increase utilization. Deloitte’s analysis for operators in the Middle East revealed that certain data plans were profitable largely because of excessive underutilization, even though at headline prices, the plans are unprofitable. Therefore matching customers to the right plan is a critical element of longterm management of data profitability.

Bundling of high-end smartphones with prepaid data plans is another tactical approach to stimulate usage from first time data users while ensuring billing predictability. An operator in Kuwait recently launched a smartphone offer together with free internet of 200 MB per month for one year with outstanding success. In markets where there is a lack of understanding of pricing options and fear of overspending, such as markets in Africa, operators will do well to educate customers about data usage and associated costs through the introduction of data calculators. Data calculators help customers to predict their monthly data spend and thus avoid billing shock.

The advent of LTE is likely to see innovative pricing models emerge. Pricing of LTE as a premium extension to 3G may be justified if operators can demonstrate the value proposition of LTE versus 3G. As in other markets such as the US, operators might resort to shared data plans that provide more affordable means for tablet owners to use data in mobile environments29.

At the other end of the spectrum, operators continue to be plagued with the issue of how best to monetize out-of-bundle usage30. In some regional markets, the issue is so severe that between 20% to 40% of profits of certain data plans are being eroded by excessive out-ofbundle usage. Traditional techniques, such as throttling of speeds, hinder the customer experience and have yielded limited results due to poor implementation in many cases. Operators are likely to gradually explore new means of monetizing out-of-bundle usage including the launch of snack packs, which enable customers to have greater visibility on costs after they have exceeded the package limit. Our research revealed that at least 17% of respondents that own a smartphone and use the mobile network to connect to the internet prefer to pay for a fixed amount of data and then pay additional usage charges after reaching the limit.


Bottom line

Confusion over data pricing benefits none of operators, consumers or content creators. While initial data users may have had a reasonable understanding of file sizes, mainstream users are more likely to get bill shock through inadvertent downloads of large files via cellular networks.

It is a good time to introduce AYCA: the majority of mobile customers have yet to move to smartphones, and predictability in pricing should provide sufficient reassurance to try out mobile data services. Further, the technological tools needed to deploy AYCA are increasingly economically viable – for example the cost of deep packet inspection (DPI) technology falls every year, due to Moore’s Law31.

AYCA will not suit every customer or every carrier. Heavy users may prefer unrestricted all-you-can-eat packages, where available, and figure out for themselves which services to use each month. Business users may prefer metered packages. Carriers should offer the range of data tariffs most suited to their customer bases. In a few markets, AYCA may not be the right approach: rather offering differing tiers of unlimited usage but at different access speeds may be considered the best approach.

Regular monitoring of usage patterns, segmentation of the customer base and managing peak data traffic is critical to ensuring data profitability. From a customer perspective, billing predictability is key to stimulating usage amongst first time users.

In addition, operators would need to invest time in monitoring the analytics around data plans. Reviewing the cost structure of data services on a frequent basis is critical to ensuring sound data pricing and managing the “scissor effect”, i.e. rapid erosion of margins due to rising network costs, flat ARPUs and disintermediation.



  1. Source: Deloitte analysis

  2. Respondents that own a smartphone use the mobile network to connect to the internet and do not pay per use of data (all countries, 4,193 respondents); Middle East countries have not been included in the 2012 survey

  3. Sample includes Respondents that own a smartphone and use the mobile network to connect to the internet (all countries, 5,398 respondents)

  4. Etisalat’s 4G LTE plan offers unlimited internet usage between midnight and 3am

  5. For example, as of December 2012, Movistar Spain was offering usage of Joyn, a messaging application for free. Usage of the service was not deducted from data customers’ plans; those that did not have a data plan could still use the service. Source: Movistar, December 2012. See:

  6. Source: Google launches free internet access for developing countries, Engage Web, 13 November 2012. See:

  7. Sample includes Respondents that own a smartphone and use the mobile network to connect to the internet (all countries, 5,398 respondents)

  8. For a fuller review of possible LTE pricing models refer to the prediction “A strong year for LTE, but end-game strategies of regional operators are as yet unclear”.

  9. Source: Deloitte analysis

  10. Moore’s Law is an observation made by Gordon Moore, a cofounder of Intel, in 1965 that the number of transistors which can fit in a given area doubles every two years. A transistor is a semiconductor device which acts as a sort of remote control valve, or switch, for electricity. The challenge over the years has been making smaller transistors. This is an engineering problem which requires a series of surmountable challenges in a number of fields. It is not a physical limitation. Once those problems have been solved the cost to manufacture a square centimeter of smaller transistors is roughly the same as the cost to manufacture a square centimeter of larger transistors. So, unique in the semiconductor industry, you get more and better transistors for the same amount of money. That in a nutshell, is Moore’s Law.


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