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Tuesday, 07 July 2009 08:01

Converged services reduce telcos' customer churn

Reduced levels of customer churn, revenue and subscriber growth have emerged as major benefits to telecommunications companies from the bundling of services, with a prediction that single-service offerings may soon be a thing of the past.

Converged services have become one of the marketing strategies employed by service providers today to grow revenues and subscriber base, and reduce customer churn, according to new analysis from Frost & Sullivan in its latest report on the Asia Pacific market.

“Bundling two or more services such as fixed voice, broadband, mobile and pay TV into attractive price plans has proven to result in less customer churn than single-service offerings,” says Frost & Sullivan senior industry analyst Kamlesh Kalwar.

In Australia, Kalwar paints a promising picture of Telstra’s initial success with the introduction of bundled services.

According to Kalwar, in just 30 months since mid-2006, Telstra has very swiftly transformed from a single-service operator to offering bundled quad-play services to its subscribers.

“In June last year Telstra held a commanding 58.5 percent share of the pay TV market in Australia through its 50-percent owned FOXTEL, after the cable TV network's viewers tied to Telstra-bundles grew to 30.6 percent the same year.

“The company also upped the ante on its retail store experience introducing its interactive T[life] stores in November 2007. The result, a 71 percent increase in revenues from postpaid subscriber net additions and a 31 percent increase in total sales net additions, within a year of operations.”

And, in respect of the reduction in customer churn by many of the telcos, Kalwar cites Hong Kong’s PCCW which, he says, has managed to keep churn rate below one percent since introducing its converged services.

Kalwar also reckons that single-service telco offerings may “soon be a thing of the past as tomorrow’s consumers are likely to demand fully converged services from a single provider as a result of changing lifestyles and technology convergence.”

According to Frost & Sullivan’s latest report - Asia-Pacific converged services market potential - approximately 20.8 percent of households across 14 Asia-Pacific countries, including Australia, subscribed to dual-, triple- and quadruple-play (quad-play) services in 2008 for total bundled billings of US$58.7 billion.

And, by 2014, residential bundled-service revenues are expected by Frost & Sullivan to hit US$88.3 billion.

The report reveals that dual-play services, typically fixed-line and broadband, are the most commonly contracted bundles at present, with 10.8 percent of residential users.

However, according to Frost & Sullivan, triple-play services - fixed-line, broadband and TV - are likely to see greater adoption in the longer term to account for 11.4 percent of residential subscribers in 2014.

“While dual-play subscriptions drop to 10.2 percent household penetration and quad-play (fixed-line, TV, broadband and wireless) expected to grow nearly two-fold to 4.9 percent,” predicts Kalwar, while arguing that “three forms of convergence are driving the delivery of bundled or multiple services to a single user - convergence of networks, content and devices.”

Kalwar says with network convergence, thanks to IP, existing networks are capable of delivering a multitude of services - such as a broadband network enabling applications like Internet, TV and VoIP - with just an incremental upgrade to the core network, and he claims operators are “banking on this opportunity to up-sell their services and increase average revenue per user (ARPU) and customer stickiness.”

He also says that with content and device convergence, the increased mobility of present-day consumers dictates the “need for multiple access points to the same content.  Similarly, the sophistication of devices available today supports consumers’ expectations for ubiquitous access to such content.”

Given this, Kalwar believes that converged services present obvious benefits to both service providers and users, and he predicts that “converged services is expected to be a critical strategy for communication service providers in the mid- to long-term.”

“Apart from meeting customers’ demands with attractive price points while maintaining ARPU and retaining customers, telcos are also able to roll-out loyalty programs to reward subscribers and offer one-stop customer service centres and consolidated monthly billings for users,” Kalwar adds.

However, in a note of caution, Kalwar says that pricing alone is just part of the battle, and that “quality of service, timeliness of market entry and [type of] content will also make or break an operator’s converged offerings.

Citing Singapore’s StarHub, Kalwar says the company has virtually cornered the pay TV market in Singapore “with its exclusive content rights and early introduction of services,” but pointing out, however, that content and broadcast regulations vary country to country.

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