1. Pricing strategies for an incumbent operator: Mobile Services The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the ITU or its Membership. Dr Kelly can be contacted by e-mail at Tim.Kelly@itu.int Saburo Tanaka, ITU

2. Pricing strategies for mobile Pricing mobile services: Agenda A Mobile Revolution Worldwide and in the sub-region Pricing Mobile Options Price comparisons and trends Price trends Average Revenue Per User (ARPU) Fixed-Mobile Interconnect A Mobile Future

3. A Mobile Revolution Source: ITU World Telecommunication Indicators Database. 0 200 400 600 800 1'000 1'200 1'400 199319951997199920012003 Mobile Users Fixed Lines Fixed Lines vs. Mobile Users,worldwide, Million

4. Mobile subscribers per 100 inhabitants Year-end 1999 Sub-region Source: ITU World Telecommunication Indicators Database. 11.09 4.21 3.42 3.00 1.42 1.06 0.81 0.33 0.16 Malaysia Thailand China Philippines Sri Lanka Indonesia Cambodia Viet Nam Lao P.D.R.

5. Mobile subscribers as % of total telephone subscribers Year-end 1999 Sub-region Source: ITU World Telecommunication Indicators Database. 76.3% 42.4% 35.3% 32.9% 28.5% 26.8% 24.8% 19.7% 9.4% Cambodia Philippines Malaysia Thailand China Indonesia Sri Lanka Lao P.D.R. Viet Nam

6. Pricing strategies for mobile The secret of mobile success Why is mobile currently growing ten times faster (~55% p.a.) worldwide than fixed lines networks (~5.5% p.a.)? Why is the average mobile user much younger than the average fixed-line user? Why do users make calls using a mobilephone even when a fixed-line telephone is available and cheaper? What is the secret of the success of mobile? Price Options

7. A selection of price options From Orange (UK) Source: http://www.uk.orange.net/kit/index.html.

8. Pricing Mobile Note: Price basket based on monthly subscription plus 50 mins peak and 50 mins off-peak use. Source: ITU World Telecommunication Indicators Database. $37.00 $27.71 $21.02 $19.55 $19.34 $17.80 $16.26 $10.87 $9.74 Cambodia Viet Nam Malaysia Lao P.D.R. Thailand Sri Lanka Philippines China Indonesia Price of 100 minutes per month mobile usage, in US$

9. Declining prices for mobile access, global average, in US$, 1992-98 Note:CAGR = Compound Annual Growth rate. Source: ITU World Telecommunication Development Report 1999: Mobile cellular

10. Average revenue per user (ARPU) Bell Mobility (Canada) 0 20 40 60 80 100 120 909192939495969798 Revenue/cost per subscriber per month (US$) 0 200 400 600 800 1'000 1'200 1'400 1'600 Subscribers ('000s) Revenue per sub/month Cost per sub/month Subscribers Source: ITU World Telecommunication Development Report 1999: Mobile cellular

11. Cultivate the high-spenders Source: Price Waterhouse Coopers, based on Canadian data.

12. Mobile ARPU converging with Fixed-line ARPU, Japan (Yen 000s p.a.) 0 50 100 150 200 250 300 19901991199219931994199519961997 Mobile ARPU Fixed-line ARPU Source: ITU World Telecommunication Development Report 1999: Mobile cellular

13. Pricing mobile and fixed: Monthly subscription charges (US$) 0 5 10 15 20 25 Malaysia Indonesia Cambodia Thailand HK Sar Sri Lanka Residential fixed-line Digital cellular 3.0 2.4 1.1 5.0 1.7 5.0 Ratio: Cellular/fixed

14. 0.0 0.2 0.4 0.6 0.8 1.0 HK Sar Sri Lanka Cambodia Malaysia Thailand Indonesia Residential fixed-line Digital cellular 18.2 6.7 10.0 3.07.5 Ratio: Cellular/fixed 0 n.a. Pricing mobile and fixed: Price of 3 minute local calls (US$)

15. Pricing strategies for mobile Fixed-Mobile Interconnection Interconnect prices are a major determinant of retail prices Evidence of market failure Interconnect prices are variable but generally very high In Calling Party-Pays environments, caller may not be aware of the charge they will be paying Calling party does not have a choice of operator to terminate the call Fixed-to-mobile and mobile-to-fixed highly asymmetric By 2005, 75% of all calls worldwide will involve a mobile

16. Pricing strategies for mobile Calling opportunities worldwide 89.7% 5.0% 0.3% 1993 52.7% 19.9% 7.5% 1998 23.4% 25.0% 26.7% 2003 Fixed-to- fixed Fixed-to- mobile Mobile-to- fixed Mobile-to- mobile Source: ITU Fixed-Mobile Interconnect website: http://www.itu.int/interconnect

17. Interconnection Rates in selected European countries under CPP (in US $ / minute)

18. Interconnection Rates in Selected European Countries Calling Party Pays (CPP). In US $ per minute.

19. Interconnection rates in selected non-European countries Calling Party Pays (CPP) vs. Receiving Party Pays (RPP). In US$ per minute.

20. A mobile future Source: 1990-1998 data from ITU World Telecommunication Indicators Database. 1999-2010 ITU projections. Mobile has overtaken fixed-lines in Cambodia, Finland, Italy, Korea Mobile subscribers to overtake fixed-line worldwide before 2005? Mobile revenue to overtake fixed-line after 2004? Fastest growth in developing countries Actual and projected subscriber growth, fixed-lines and mobile, millions, 1990-2010 0 500 1'000 1'500 2'000 199020002010 Fixed Mobile

21. The race for 3rd Generation mobiles: IMT-2000 0 32 64 9.6 128 144 384 2,000 1G 2G 3G Voice Text Messaging Video Streaming Still Imaging Audio Streaming Data Transmission Speed - kbit/s Electronic Newspaper Remote Medical Service (Medical image) Video Conference (High quality) Telephone (Voice) Voice Mail E-Mail Fax Electronic Publishing Video on Demand: Sports, News Weather Karaoke Video Conference (Lower quality) JPEG Still Photos Mobile Radio Video Surveillance, Video Mail, Travel ImageAudio Voice-driven Web Pages Streaming Audio Data Weather, Traffic, News, Sports, Stock updates Mobile TV E-Commerce Time Source: Adapted from Motorola.

22. For more information... Publication launch: 10 October 1999 (TELECOM 99) Available on paper and online (PDF format) World Telecom Indicators Database available online Website: http://www.itu.int/ti Other reports launched at TELECOM 99 Direction of Traffic 1999: Trading Telecom Minutes Trends in Telecom Reform 1999: Convergence Internet for Development (updated with latest data)