While converged bundles have taken up strongly in several countries, such as Spain, France and Portugal, their impact on market and operator performances have been mixed. They help with customer retention and cross-selling (and cause some market share changes), but they rarely generate growth at the market level, in neither subscriber nor revenue terms. Moreover, due to their discounts, they have not been able to reverse the erosion of retail revenue in these markets; nor could they stop the acceleration of mobile retail revenue decline for most operators.
Yet, in this challenging landscape, there have emerged some best practices in the design of converged plans, particularly in terms of how the mobile service element is bundled.
- Avoid cannibalisation of the high-end mobile tiers.
Operators commonly offer considerably less mobile data allowances in converged bundles than those they make available in their top-tier standalone tariffs. On average, most European operators that we analysed, offer 20% in entry-level converged bundles, and 50% in top-level converged bundles of the maximum available data allowance on standalone offers. This approach protects the heavy mobile users from cannibalisation and allows operators to gradually expand to other tiers in the future when they need to.
- Use multi-SIM initiatives to compete for mobile market share.
Many operators with converged bundles give customers the option to buy more than one mobile line, i.e. add-ons, but some go beyond this approach and make multi-SIM initiatives a central part of their proposition in order to appeal to larger households and compete more aggressively for mobile market share. In Portugal, both MEO and NOS used such tactics to accelerate their mobile subscriber growth after launching converged bundles. NOS uses a shared data plan, which rewards the addition of each new Subscriber identity modules (SIM) into the bundle with more data to share. MEO reserves key features of its fixed and mobile services for bundle tiers that come with at least two SIM cards.
- Reward convergence by emphasising “benefits” rather than “discounts”
Cost-saving is a key message communicated to customers of converged bundles, but discounts are also a big reason why operators hesitate to launch these bundles. To sidestep this problem and reframe the value proposition, operators can reward convergence with “benefits” instead of “discounts”, thereby obtaining a better control over their prices. KPN in Netherlands, for instance, provides stackable benefits to different bundle configurations that its customers create. The aforementioned example of shared data plans by NOS is another case where convergence is about giving more to the customers.
In the long run, operators must be wary of continuously “adding more for less” to their converged bundles, if they wish to prevent revenue erosion across more services. But until they find innovative or exclusive services that exploit genuine synergies across fixed and mobile use cases, they will have to focus on the tactical aspects of how they design and communicate the value proposition of their bundles.
This blog published by the author Kerem Arsal, senior analyst, Analysys Mason
