Monday, October 16, 2006

Skewed penetration but straightforward strategy

There’s a lot of debate as to how one adjusts mobile penetration rates to properly size the actual market opportunity. But it’s not just about getting phones in the hands of the phone-less. It’s also about converting single SIM subs to dual, dual SIM subs to triple, etc. I have a gut feeling that expanding multi-SIM penetration (do I hear penetration rates of 250%?) could be a real growth area. But I’m not sure operators are actually addressing that particular opportunity.

I saw a Vodafone presentation recently that showed that in the UK, Germany and Spain, consumer subs had an average 1.19 SIMs each and business subs had an amazing 1.55 SIMs each on average. In fact, 12% of the business subs had 3 or more active SIMs. The consolidated figure, for consumer and business subs, was 1.22 SIMs per sub. With that knowledge, it's pretty simple math to work out the actual phone-less population.

Who are these phone-less people? My gran for one. My 2 year old for another. In other words, people who, if they did sign up for a mobile, would have such low ARPU that they'd be cost prohibitive to keep on the books.

So, mobile operators trying to build mobile market share have 2 options: Fight tooth and nail for churners - a pretty tough and expensive fight and does nothing to improve customer loyalty. Or they could target the multi-SIM market and build market share by increasing SIM penetration. I think multi-SIM presents a lucrative opportunity for some creative bundling. Particularly now that mobile operators are jumping into fixed line services.

I'm a multi-SIM guy and like me I think most multi-SIM folks are also multi-operator. So an interesting strategy could be for the operator to be the supplier for all my mobile comms needs: business 1, business 2, personal 1, get the picture. They’d be increasing the total comms market by getting more SIMs in more peoples’ hands which should lead to increased usage, but more importantly they’re locking me in by bundling multiple accounts at a good price. Mobile number portability is still a pretty painful process, and that’s just when I want to move a single number. If I had to move 2 numbers, I’d probably think twice before going there.

Add to the bundle my home broadband service and my switching costs suddenly skyrocket. I'm pretty much hooked in for life.