Draft for my presentation 2009 IBC VAS Mobile Forum LATAM, Miami June 9-10

1. Mobile VAS Forum
2009
Finding
Opportunities
In A Year Of
Economic
Uncertainty
Raúl Castañón M.

2. Agenda
o Telecom Industry Outlook
o Industry Trends
o Latin America Market Outlook
o Finding Opportunities In A Year Of Economic Uncertainty
o Market Segmentation Analysis By ARPU And Usage Behavior In LATAM
o Can Operators Generate More Revenue From The Low ARPU Segment?
o Understanding Subscriber Usage And Opportunities Of The Low ARPU
Segment
o How To Adapt VAS Offering Using Market Segmentation And Usage Trends
o Summary And Conclusions

3. Industry Trends
and
Latin America
Market Outlook

4. Expected growth rate for 2009 for the Telecom equipment
market, compared to the year before (IDATE).

5. Expected negative growth rate for 2009 for mobile phone shipments,
compared to the year before (IDC).

6. Nortel will cut 3,200 positions on top of previous cuts, Nokia will cut
another 1,700 jobs and Microsoft will cut 5% of its workforce over the
next 18 months.

7. Mobile apps
and Smart
phones
will drive
growth in
2009.
Apple's AppStore reached 25,000 applications in March and is
expected to become a $1B business in 2009. Palm, RIM, Nokia,
Windows and Android are launching app stores in 2009.

8. New
players will
benefit
from new
opportunities.
Traditional infrastructure vendors will struggle through the recession
but 2009 will be a big year with opportunities
for Smartphones and Mobile Applications.

9. LATAM To Grow At Slowest Pace In Seven Years
LATINFOCUS expects Latin America to grow at the slowest pace in
seven years. Industry analysts estimate wireless subscriber growth in
2009 to be between 5% (Yankee Group) and 8% (Moody's), down from
double digit growth in previous years.

10. Operators face
delayed
investments, re
duced CAPEX
and slower
growth rates.
Pricing might be an option to grab new subscribers but in a year of economic
hardship and with subscriber growth coming mainly from lower ARPU segments,
price discounts can only get them so far.

11. Operators
will limit
CAPEX to
maintain
healthy cash
flows.
Since the region is still expected to grow in total number of
subscribers, expanding capacity of existing network infrastructure will
be their top priority.

12. Despite the
downturn, some
operators still
expect 10%
subscriber
growth for 2009.
With mobile penetration reaching saturation in major markets and
slower growth rates this year, the only way they can achieve this is via
churn from other operators.

13. Even as subscribers
limit spending
there are
opportunities
to generate
revenue,.
Opportunities can come from increased MOU or SMS, introducing SMS
based services in countries with low voice usage or new data services
where usage and ARPU show potential for rapid adoption.

14. Opportunities
can also be
found in
network
productivity
improvement.
Some of these opportunities can be positioned as new services; this
year operators will have limited resources but they cannot afford to
miss opportunities to maintain or improve their position in the market.

15. There are still
opportunities
to generate
more
revenue
from voice.
Call Completion practices in Latin America focus on “B” party solutions:
Voice Mail and Missed Call Alert. Slam down at voice mail or regulatory
prompt in Latin America is between 70% and 80%.

16. Market
Segmentation
Analysis By ARPU
And Usage
Behavior In LATAM

17. Opportunity Map Latin America
The chart above shows three key factors: (x) Average Monthly
SMS; (y) MOU - Minutes of Usage; and ARPU - Monthly Average
Revenue per User (bubble size) for the six largest markets in the
region; Brazil, Mexico, Chile, Colombia, Venezuela and Argentina.

18. Heavy Users
1%
Mass Users
14%
Non Users
51%
Light Users
34%
Voice Mail Revenue Generation
Approximately 50% of voice mail subscribers generate no
revenue but do generate significant traffic in the network.
This does not include an additional ~30% of subscribers
that are not provisioned in the voicemail system.

19. 70%
60%
50%
40%
30%
20%
10%
0%
A B C D E F G
SUBS % TOTAL Ch SOU %
Voice Mail Revenue Generation
Approximately 50% of voice mail subscribers generate no
revenue but do generate significant traffic in the network.
This does not include subscribers that are not
provisioned in the voicemail system.

20. Can
Operators
Generate More
Revenue From
The Low ARPU
Segment?

21. The Low ARPU
Segment
represents
approximately
half of total
subscribers.
This segment includes a majority of young, prepaid subscribers that generate
traffic but no significant revenue. Most calls end in slam down with no billable
SOU.

22. Understanding
Subscriber
Usage And
Opportunities
Of The Low
ARPU Segment

23. Regulation
plays an
important role
in user
behavior.
The introduction of regulation prompt has had a major impact in call completion.
Slam down on calls diverted to voice mail on Unreachable/Busy/No Answer in
Latin America is between 70% and 80%.

24. Regulation also
impacts
technical
deployment of
solution.
Operators can choose to play the regulation prompt at the switch or use the voice
mail platform for this purpose; however, when calls are not forwarded to the voice
mail system the call information that can be used for notifications is usually lost.

25. Connected
70%
Unreachable
10%
No Answer
15%
Busy
5%
Voice Mail Revenue Generation
Busy/Unreachable – calling party tends to hang up and
redial. Ring No Answer - user might send SMS; less likely
to redial. Busy with call waiting – this scenario overlaps
with No Answer.

26. 450.0
400.0 375.8
350.0
300.0
250.0
200.0
150.0
100.0 87.0
50.0 23.6 34.6
3.9 15.9
0.0
0.0
A B C D E F G
Opportunities Of The Low ARPU Segment
Approximately 25% of subscribers bring in 95% of total
revenue. This means that 75% of subscribers generate
almost no revenue.

27. How To Adapt
VAS Offering
Using Market
Segmentation
And Usage
Trends

28. User behavior can
be used to
segment the
market and define
the right service
for users.
VAS managers have followed the strategy of deprovisioning services from low
usage segments. This looks good on paper but translates into playing with
financial formulas instead of providing services to increase revenues.

29. Incoming Call
No 30%
Answer?
Yes 70%
Yes 70%
VM user?
End
No 30% Yes 70%
Slam down?
End
30% Missed Call
No
Alert
Billable
event
End
End

30. 100
Connected 70% 70
Not Connected 30% 30
No Answer 15% 15
Unreachable 10% 10
Busy 5% 5
Yes 70%
VM
User?
No 30%
Yes 70%
Non Users 30% 9
Slam
No Answer 4.5 down?
Unreachable 3
Busy 1.5
No 30%
Billable
VM Deposit 30% 6.3 event Missed Call
Alert
End
Slam down 70% 14.7
End

31. Usage
Behavior ARPU Segment Plan Solution Goal
A and B Missed
“A” Party services, price
No VM Low Youth Prepaid Call Alert, A Party
sensitivity.
voice to SMS/MMS
A and B Missed
Light Call Alert, A or B
Low Youth Prepaid
Users Party voice to
SMS/MMS “A” Party services
New and exciting, trendy
services.
A and B Missed
Mass
Medium Youth Prepaid Call Alert, B Party
Market
voice to SMS/MMS
New services that don’t
A and B Missed
require high end handsets.
Mass Young Call Alert, Voice
Medium Prepaid Make traditional services
Market professionals Mail delivery to
exciting and trendy, increase
MMS, E Mail.
VM usage.
A and B Missed Loyalty, for subscribers that
Heavy Young
Medium/High Postpaid Call Alert, VVM, may want the iPhone but
Users professionals
Voice To Text. don’t want to switch.
A and B Missed Corporate solutions such as
Heavy Corporate
High Postpaid Call Alert, VVM, Blackberry or high end
Users Users
Voice To Text handsets like Nokia N95.

32. Summary and Conclusions
By analyzing end user behavior, traditional services can be
repackaged and launched as new services, leveraging existing
VAS infrastructure and reducing CAPEX normally required for
new services.
Repackaging existing services is a smart strategy in an
economic downturn.
Operators can introduce new services with minimal CAPEX,
providing a faster ROI for new investments and increasing
productivity by utilizing existing infrastructure.

33. Raul Castanon
http://telcolatam.blogspot.com/
http://www.linkedin.com/in/rcastanon
http://latamtelecom.net/