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Operator device subsidy and financing strategies

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Market Study
Published: July 2013
Pages: 50
Research from: Ovum (was Informa Telecoms and Media)
Sector: Handsets & Devices

From: GBP 1495.00
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Informa Telecoms & Media discusses the key features of subsidy and the various types of handset-financing strategies available to operators, as well as their effects on operator financial performance.

Operators need to overcome customers’ expectations of seemingly “free” devices in markets where such perception is still the norm. An important factor in making financing programs work is offering a simple, transparent and flexible proposition that is aligned with the carriers’ financial objectives.
Francesco Radicati, Research Analyst, Informa Telecoms & Media

The key factor driving the surge in the operators’ subsidy costs is that they are actively promoting expensive smartphones to drive data consumption. This means that, as more customers take up smartphones, the operators are paying even more in subsidies. This drives commercial costs up and has a negative impact on profitability.

As handset wholesale prices and operating costs continue to rise, and with new accounting standards on the horizon for 2017, more and more operators have begun to experiment with handset financing. Since 2008, nearly 30 European operators have introduced handset-financing programs as an alternative to the subsidy-led model in an attempt to tackle a deteriorating financial performance and to deliver affordable smartphones to the mass market.

Regulatory factors also play an increasing role in the shift away from subsidies. The challenge for operators, therefore, is to change end-user perceptions about how much they pay for their devices and also to select the correct handset-financing plan that will improve their financial performance.

This report examines best-practice cases, particularly in Western Europe where the trend toward financing is being spearheaded by telcos. Additionally, Informa Telecoms & Media ran a business simulation to analyze the revenue, cost, profitability and cashflow potential of the four key handset-focused plans: rental, leasing, financing and installments.
How will this research help you:
• Understand the factors driving operators, retailers and OEMs to introduce financing
• Determine the financial profile of these new models and their impact on operator financial performance
• Recognize best practices among operators that have already introduced the model
• Assess the potential for the introduction of handset financing in new markets

Countries/regions covered:
• Western Europe (analysis)

• Global (dataset)

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