international roaming business overview december · pdf file– roaming relationships...

International Roaming Business Overview December 2003


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Andy BermudezManager, Strategy Finance


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Agenda

• Revenue Opportunities

• Roaming Elements

• Marketing International Roaming

• Roaming P&L


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CDMA Roaming Opportunities

Source: http://www.cdg.org./technology/roaming/coverage.asp

International roaming extends the “virtual network footprint” and provides a perception of an advanced, connected network


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2000 and 2010 Global Roaming Revenues

($ millions)2000 2010 2000 2010 2000 2010 2000 2010 2000 2010

Europe $15,973 $16,546 $465 $1,670 $16,438 $18,216 $99,046 $137,038 17% 13%

North America 1,011 1,543 68 1,513 1,079 3,057 80,881 168,255 1% 2%

Asia Pacific 1,211 1,404 65 887 1,276 2,291 96,877 151,893 1% 2%

South America 175 229 47 400 221 629 17,491 27,424 1% 2%

Total $18,370 $19,723 $644 $4,470 $19,014 $24,192 $294,294 $484,609 6% 5%

Total Roaming Revenues

Roaming as a % of Total Revenue

Total Service Revenue

Intra-continental Roaming

Inter-continental Roaming($ millions)

2000 2010 2000 2010 2000 2010 2000 2010 2000 2010

Europe $15,973 $16,546 $465 $1,670 $16,438 $18,216 $99,046 $137,038 17% 13%

North America 1,011 1,543 68 1,513 1,079 3,057 80,881 168,255 1% 2%

Asia Pacific 1,211 1,404 65 887 1,276 2,291 96,877 151,893 1% 2%

South America 175 229 47 400 221 629 17,491 27,424 1% 2%

Total $18,370 $19,723 $644 $4,470 $19,014 $24,192 $294,294 $484,609 6% 5%

Total Roaming Revenues

Roaming as a % of Total Revenue

Total Service Revenue

Intra-continental Roaming

Inter-continental Roaming

Potential global roaming revenues will increase $5.2 billion, from $19.0 billion in 2000 to $24.2 billion in 2010

Source: April 2002 IDC International Roaming White Paper, entitled “How Important Is International Roaming to Wireless Network Migration?”


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• Roamers’ ARPUs are higher than average customers

• Roamers tend to churn less often

• Visitors’ contributions to margins are higher than average local customer

International roaming is an important service offering to attract and retain high-end subscribers

International Subscribers are Valuable Mobile Customers


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Agreements Amongst Operators

Business Elements

Service Company Contract

Roaming Partner Decision

Technical Elements

Network Connectivity

•SS7

•Signal Protocol Interoperability

•Numbering Conflicts

Billing Systems – CIBER - TAP

Data Clearing &Settlement

Air Interface & Handsets

Fraud Management

Customer Service

Testing- Interfaces- Billing

Roaming Elements

Marketing and

Promotions

Roaming Income

Statement


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Roaming Agreements• Inter-operator roaming relationships are formalized in Roaming

Agreements

• A standard CDMA Roaming Agreement is available to members from the CDG website (http://www.cdg.org) and covers:

– Definitions of terms associated with roaming services– Provision of service– Exchange of information (e.g. IRM information)– Billing procedures & responsibilities– Settlement procedures– Customer care– Fraud – Limitation of liability– Agreement suspension & termination– Dispute settlement process

• Agreements are typically signed between operators on a one-on-one basis and have clauses related to tariffs, operator specificrequirements, and value-added services


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• Most of the technical issues relating to CDMA roaming have been resolved. CDMA roaming exists today

• Testing is primarily the operator’s responsibility, but service companies generally assume responsibility for network and billing interfaces relating to contracted services

• Operators need to ensure that their provisioning, operations, billing, and customer care organizations can properly support roaming customers

• Fraud continues to be an operator issue– AMPS networks continue to offer critical service in some regions– Not all CDMA operators have implemented authentication

Technical Elements


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• A careful and thorough business case analysis should be done to determine and understand the economic benefit of roaming to your business

– Operators should consider potential costs and revenues, competitive factors, strategic issues, fraud concerns when evaluating a potential roaming relationship

– Roaming relationships should be driven by business interests andissues. The technical issues can be solved

• Operators need to determine which roaming functions will be done in-house, versus contracted to outside service companies

Business Elements


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CDMA Operator Roaming Cost Components

Inter-Operator Tariff - Applied to outbound roaming

Network Cost per MOU- Applied to inbound roaming

Signaling - Lease line rental for Frame Relay- 3rd party processing and routing service fee

Financial Settlement - 3rd party message processing- CIBER/CIBERNET License Fee (represents an annual and one-time fee)

Fraud Management - RoamX (includes an annual and one-time fee)

Roaming Department- May employ up to 40 people- Billing system (includes an annual and one-time fee)

These components can either be done in-house or outsourced


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Marketing International Roaming: Subscriber Profiling

Inbound Subscribers• Where did they come from?

• Why did they come?

• Where did they call?

• How much did they use (duration of calls, # of calls)?

• What services did they use?

Outbound Subscribers• Where did they go?

• Why did they go?

• Where did they call?

• How much did they use (duration of calls, # of calls)?

• What services did they use?

• Are they male or female?

• How old are they?

• What is their occupation?

Understand who the international travelers are and what services are needed when abroad or visiting your country


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Marketing International Roaming: Tourism Statistics

Source: World Tourism Organization, Yearbook of Tourism Statistic, 2001Note: Tourism statistics are for countries with CDMA networks

Intra-continental roaming represents the largest opportunity

North America

86,944,913 91,213,47484,980,348

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

1999 2000 2001

Europe North America Asia Pacific CALA ROW

Caribbean and Latin America (CALA)

25,580,318 26,917,785 26,330,585

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

1999 2000 2001


Asia Pacific

68,478,69278,024,894 83,081,558

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

1999 2000 2001



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• According to a NOP Research Group survey, – “International roaming should be a good revenue-generating value-

added service for operators, but many customers leave their phones at home when going aboard because they think the service is unaffordable (or unavailable).”

– “It’s only when the pricing and marketing are right that operators can hope to ramp up ARPU.”

• Rates should be simple to understand and predictable– International roaming rates typically range between $1 to $4 per minute

Marketing International Roaming: Roaming Rates


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Marketing International Roaming: Communications

External Communication

• Provide roaming information on website

• Send roaming information updates to customers via SMS

• Advertise via TV, magazines radio, billboards, Internet, etc…

Internal Communication

• Training customer care representatives and dealers

• Distribute periodic “Roaming Newsletters” internally


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• Where can I roam?

• Before you go

• How to setup roaming

• How much does it cost?

• How to make and receive calls

• Mobile data roaming

Marketing International Roaming – Selected Websites

• World clock and area code locator

• How does messaging work?

• Loan phones

• Roaming terms and conditions

• Need more information?


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Sample CDMA Operator Roaming P&L

Capital expenditures are minimal to enable international roaming. International roaming generates healthy margins.

Note: Estimated costs for a generic CDMA operator

FYERevenue - Outbound

Unique Subscribers 35,000Avg. # of Visits per Year 2Avg. # of Days per Visit 5Avg. # of Calls per Day 5Avg. # of Minutes per Call 3Avg. Price per Minute $2.00

Subtotal - Outbound Revenue $10,500,000

Revenue - InboundUnique Subscribers 15,000Avg. # of Visits per Year 2Avg. # of Days per Visit 5Avg. # of Calls per Day 5Avg. # of Minutes per Call 3Avg. Price per Minute $1.00

Subtotal - Inbound Revenue $2,250,000

Gross Int'l Roaming Revenue $12,750,000Less: Bad Debt 5% $637,500

Net Int'l Roaming Revenue $12,112,500

ExpensesCost of Service

Inter-Operator Tariff - Outbound Roaming $5,250,000Network Cost per MOU - Inbound Roaming $45,000

SignalingRental of Lease Line for Frame Relay $12,0003rd Party Processing/Routing Service 43,750

Total Signaling Cost $55,750

Financial Settlement3rd Party Message Processing $28,000CIBER/CIBERNET License Fee $87,188

Total Financial Settlement Cost $115,188

Fraud ManagementRoamX $3,750

Subtotal - Cost of Sevice $5,469,688

Gross Margin $6,642,813 55%

SG&A $3,028,125 25%

EBITDA $3,614,688 30%

Depreciation of Non-recurring Expenses $33,333

EBIT $3,581,354 30%


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Summary

• International roaming is a value-added service offering that provides revenue opportunities

• Roaming has many different elements and parties that need to work together to make it successful

• It is important to understand roamers’ profiles/needs and effectively communicate your roaming capabilities to them

• International roaming generates healthy margins with minimal upfront costs.

international roaming business overview december · pdf file– roaming relationships...

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