Changellenge Cup Russia 2013
MTS: Data Transfer Leadership Strategy
Team Tatiana Rubtsova tatiana.rubtsova@mail.ru
Alina Luchinina luchinina.alina@gmail.com Anastasia Ivanovaivanova.anastasia@aol.com Olga Kotelnikova olga.vlad.kotelnikova@gmail.com
Team
Tatiana Rubtsova
Alina Luchinina
Anastasia Ivanova
Olga Kotelnikova
ivanova.anastasia@aol.com
olga.vlad.kotelnikova@gmail.com
tatiana.rubtsova@mail.ru
luchinina.alina@gmail.com
1 Year Master GSOM
1 Year Master GSOM
1 Year Master GSOM
1 Year Master GSOM
Winner of Changellenge SPb Cup 2013
Winner of Changellenge SPb Cup 2013
Winner of Changellenge SPb Cup 2013
Winner of Changellenge SPb Cup 2013
Semifinal Changellenge SPb Cup 2012
Finalist of Russian stage of KPMG Case Competition 2013
Finalist of Russian stage of KPMG Case Competition 2013
Winner of Changellenge Cup Technical 2013
Finalist Changellenge SPb Cup 2012
Internship in “TransCredit Bank, OJC”
Internship in Turku University of Applied Sciences
Finalist of Russian stage of KPMG Case Competition 2013
2
Executive summary MTS typical consumer NOW
The Data Transfer Leadership strategy will be achieved by the following measures: Internet
SMS
Voice call 304 minutes per month Revenue share
12 %
88 %
Demand for mobile internet will be created through promotion in retail stores & partnerships with smartphones producers
ARPU 312 RUR In the FUTURE
Revenue share
25 %
up to
465 minutes per month
+4G
ARPU 462 RUR
The optimal combination of 2G, 3G and 4G networks will correspond with consumers needs
75 %
Various tariffs in Internet will allow to earn maximum revenue New tariffs in voice communication will increase minutes of use 3
Russian telecommunication market has big potential due to mobile Internet penetration Sales of mobile operators are growing at 8% per year
However, Russia is still behind other countries by ARPU per month and has potential for growth
Mln RUR
ARPU, RUR per month, 2012 4x
657
+8% 768
718
824
884
1.167 990 660 417
2009
2010
2011
2012
2013F
Netherlands
UK
Germany
Poland
291
Russia
The main market growth driver will be mobile Internet, while voice communication and messaging will contribute slightly to operators’ revenues Mln subscribers 200
80 60
Mobile telephony
150
40
100
20
50
0
0
2009
2010
2011
Source: Gazprombank, analysis of
2012
2013F
RUR 800 600 400 voice ARPU
200 0
2010
2011
2012
2013F 4
Mobile Internet market will grow by 80% in 5 years Mobile internet users (mln) 150 100
Mobile Internet revenue, bn RUR +80% 159 137
64
79
91
101
109
115
119
+85%
50
169
148
124 111 94
85% more people will use mobile Internet in 2018
0 2012 2013F 2014F 2015F 2016F 2017F 2018F
% 100 80
4G smartphones
3G and 4G smartphones will penetrate the market, reaching 90% in 2018
3G smartphones
60 40 20 0 2012 2013F 2014F 2015F 2016F 2017F 2018F
1 200
2012 2013F 2014F 2015F 2016F 2017F 2018F
Mbt of data per month 500 200 2G
Source: Pwc, Gazprombank, analysis of
3G
With new technologies data consumption will rise, so spendings on mobile internet will increase
4G
5
MTS needs optimal combination of 2G, 3G and 4G networks to succeed in mobile Internet market
VOIP*
0,1-0,5 Mbps
New mobile technology evolves every 10 years 10000 1000
Mobile TV
Mobile TV
56 -115 kbps WAP, EDGE
CDMA
SMS
SMS
Voice call
Voice call
mln subscribers
> 20 Mbps
100 10
IP
0,1
SMS
0,01
2G
Voice call
3G
1980
1985
1990
1G
4G
1995
2000
2G
2005
2010
3G
2015
2020
2025
4G
To keep up with changes and satisfy consumers, MTS should update its network technologies â„– of base stations
Now
2018
41700 36700
35100 2G
Source: MTS, analysis of
28500
3G
42300 4G
2000
2G 3G 4G 6
Modernization of networks should be conducted gradually In 2013-2015 key cities will be targets for 4G, in 2016-2018 it will be introduced in other regions
Investment in 4G base stations is made during 5 years
2013
2014
2015
2016 3G coverage HSPA+ > 80%
4G
ďƒź MTS possesses up-to-date 3G network all over Russia, minor investments are left to do. ďƒź 4G network should be introduced gradually in major cities with high population density and large disposable income.
Source: analysis of the team
2017
Total
16 291
34 374
53 967
43 174
29 358
177 164 Mln RUR
7
Modernization of networks should be conducted gradually In 2013-2015 key cities will be targets for 4G, in 2016-2018 it will be introduced in other regions
Investment in 4G base stations is made during 5 years
2013
2014
2015
2016 3G coverage HSPA+ > 80%
4G
ďƒź MTS possesses up-to-date 3G network all over Russia, minor investments are left to do. ďƒź 4G network should be introduced gradually in major cities with high population density and large disposable income.
Source: analysis of the team
2017
Total
16 291
34 374
53 967
43 174
29 358
177 164 Mln RUR
8
Modernization of networks should be conducted gradually In 2013-2015 key cities will be targets for 4G, in 2016-2018 it will be introduced in other regions
Investment in 4G base stations is made during 5 years
2013
2014
2015
2016 3G coverage HSPA+ > 80%
4G
ďƒź MTS possesses up-to-date 3G network all over Russia, minor investments are left to do. ďƒź 4G network should be introduced gradually in major cities with high population density and large disposable income.
Source: analysis of the team
2017
Total
16 291
34 374
53 967
43 174
29 358
177 164 Mln RUR
9
To implement new technologies it is necessary to create demand for 3G and 4G Internet by increasing sales of smartphones Smartphones and modems are most often used for mobile Internet Internet connectivity 2012 year Traffic used Main trends in mobile Internet per month
Subscribers Smartphone
303 Mbps
22,5 mln Standard cell phone
2,5 mln
450 Mbps
Tablets
40,5 mln
< 50 Mbps
Mobile modem
11,9 mln
350 Mbps
Growth of popularity of GPS navigators Development of internet-banking Development of mobile commerce Expansion of social networks
In 2013-2016 there would be burst in demand of smartphones and mobile phones Russian subscribers purchased their last 1H 2012 mobile in 13% 2011 5% 36% 2010 9% 2009
13%
Average price for mobile modem 1000-3000 RUR Source: analysis of the team
2008
24%
Before 2008
Retail stores of MTS would be helpful while creating demand for mobile internet MTS retail chain sales
Mobile modem is a beneficial device to develop Internet market Mobile modem is easy to produce and introduce into the market Would help to increase penetration of 4G
3 years is an average life time of mobile device in Russia
50% 69% x2
60%
31% 2012 year
2018 year
Cooperation with smartphone manufactures helps to reach goal: Would be able to sell at lower price Can include and promote own services Moreover MTS would sell its own smartphones 10
Moreover to increase Internet penetration it is essential to find new ways of data transfer monetization 30 % of consumers are willing to pay fixed amount for favorite applications Fixed amount per month for unlimited Internet access to favorite apps
30% 28%
More to have unlimited Internet access 21%
On a per megabyte basis Don’t know
Social networks News Emails
95%
Weather
10%
Unlimited Internet access is not really beneficial for the company Price
Additional revenue from multi tariff access
Unlimited tariff plan causes traffic overload and, as consequence lower service quality Source: Deloitte, analysis of
News platforms:
72% MTS increases clients loyalty
Music/video
Revenue from unlimited
Social networks:
11% 46% 88% 17%
Games
11%
For fixed amount of data and then pay additional usage
Therefore, MTS needs to collaborate with apps producers
Number of consumers
So MTS needs to use the following data transfer monetization Price for Mbt
Unlimited tariff
Bundling
Apps
9,00 RUR
Per day 20 RUR Per month 300 RUR
BIT 149 RUR per 50 Mbit Super BIT 299 RUR per 100 Mbit Student Boom 100 RUR per 50 Mbit
1, 3+ , 5+ Vk.com Odnoklasniki Twitter Facebook Foursquare Instagram
3G and 4G would be charged similarly 11
The main trend in voice communication market is cannibalization of fixed line calls and MTS should use this situation to increase average MOU Decrease in fixed line calls is explained by increase in local and intercity mobile calls Mobile carriers eat the part of fixed line traffic in local calls 1%
Monthly minutes of speaking
45%
1% 40%
1% 38%
1% 38%
To make profit of this situation MTS should spur customers to speak more MTS should offer more bundles 28% of users buys minutes in packages Ade differentiation of package users
2005
55%
150
62%
62%
180
35-54 2009
29%
309
60%
Source: Rosstat, analysis of
2011
2012
IP carriers Fixed line carriers Mobile carriers
126
2012
2010
More intercity calls are made through mobile phones 4% 36%
4% 33%
5% 31%
6% 30%
60%
62%
63%
65%
2009
2010
2011
2012
`
5%
18-34
21% 73%
55+
MTS should introduce target bundles for young people which will cost 500 RUR and include: 300 minutes of local calls 120 minutes of intercity calls 500 sms
MTS should lower prices for intercity calls RosTelecom
МТS
Beeline
Megafon
3.40 RUR
11 RUR
7.50 RUR
7 RUR
MTS should: offer competitive tariffs (7 RUR per minute) develop special offers and bundles for subscription fee organize aggressive promotion campaign 12
Promotion should increase loyalty of existing consumers and attract new audience It is necessary to promote services using ATL and BTL channels
It is logically to make accent on TV promotion as it has the biggest coverage and the highest effect Channel
ATL
TV and Outdoor advertising
ATL 85%
Effect
Coverage
Costs
Effect
Coverage
TV
Outdoor 4G demonstration
Channel
BTL
BTL 15%
Costs
4G demonstration Mobile modem sampling
It is necessary to create proper image of MTS
The role of sales man in retail shops is significant
MTS is fast and reliable Wide coverage at low price Different services for different people Source: analysis of
51 %
Russian users consider the recommendation of sales representative choosing mobile phone 13
Proposed measures will substantially increase key indicators in 5 years Monthly minutes of use will grow to 479 min
Monthly average revenue per user will grow by 48% by 2018 480
MOU with proposed actions 465 479 445 412 375
500 450
400 350 300
RUR
460
Intercity calls 440 Bundling voice
420
337 304 283
MOU inertial
400 4G
250
200 150
380 360
Applications
100 50 0 2011 2012 2013 2014 2015 2016 2017 2018
340 Inertial scenario
0 2014
Source: analysis of
Internet bundle
320 2015
2016
2017
2018 14
Team
Tatiana Rubtsova
Alina Luchinina
Anastasia Ivanova
Olga Kotelnikova
ivanova.anastasia@aol.com
olga.vlad.kotelnikova@gmail.com
tatiana.rubtsova@mail.ru
luchinina.alina@gmail.com
1 Year Master GSOM
1 Year Master GSOM
1 Year Master GSOM
1 Year Master GSOM
Winner of Changellenge SPb Cup 2013
Winner of Changellenge SPb Cup 2013
Winner of Changellenge SPb Cup 2013
Winner of Changellenge SPb Cup 2013
Semifinal Changellenge SPb Cup 2012
Finalist of Russian stage of KPMG Case Competition 2013
Finalist of Russian stage of KPMG Case Competition 2013
Winner of Changellenge Cup Technical 2013
Finalist Changellenge SPb Cup 2012
Internship in “TransCredit Bank, OJC”
Internship in Turku University of Applied Sciences
Finalist of Russian stage of KPMG Case Competition 2013
15