profitability presentation
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Restricted - Confidential Information
© GSMA 2009
All GSMA meetings are conducted in full compliance with the GSMA’s anti-trust compliance policy
The MMU programme is funded by a grant from the Bill & Melinda Gates Foundation
Paul Leishman, MMU ManagerFebruary 2011, Barcelona
Is there really any money in mobile money?
Confidential 2
Our research and analysis process
Analysis of data from MMU fund grantees
Interviews with mobile money practitioners
Deep-dive on MTN Uganda’s MobileMoney
1 2 3
GSMA Financial Model
• Developed based on GSMA interviews and collaboration with MTN Uganda• Populated with actual data from MTN Uganda• Considers every impact, good or bad, that mobile money can have for an MNO
Confidential 3
Market: Uganda• Population• Mobile Penetration • Access to Finance • GDP per capita
Operator: MTN• Connections• Market share
Deployment: MobileMoney• Accounts
4.8 mil
40%
960,000
32 mil
35%
20%
US$1,147
Active Customers
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Mo
nth
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Mo
nth
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Mo
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Mo
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Mo
nth
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Mo
nth
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Mo
nth
16
P2P Transfers Per Month
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Mo
nth
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Uganda and MTN Uganda’s MobileMoney
Confidential 4
The findings…
Confidential 5
Is there really any money in mobile money?
-$4,000,000
-$3,500,000
-$3,000,000
-$2,500,000
-$2,000,000
-$1,500,000
-$1,000,000
-$500,000
$0
$500,000
$1,000,000
Month 0 Month 6 Month 12 Month 19
Total Costs
Total Revenues
Monthly Net Cash Flow
Cumulative Net Cash Flow
Monthly Revenue
Monthly Cash Expenses
Monthly Net Cash Flow
Cumulative Financing Requirement
MTN Uganda’s MobileMoney: Cash-Flows
MTN Uganda’s MobileMoney is now cash-flow positive on a month-to-month basis, just 14 months after their launch
MTN’s cumulative financing requirement was less than US$4 million dollars
Confidential 6
Where does the money come from?
52%
12%
33%
3%
Money Transfer Contribution
Airtime Distribution Savings
Retained ARPU from Churn Reduction
Uplift in Voice/Data Consumption
Retained ARPU from churn reduction
Airtime distribution savings
Money transfer contribution
Uplift in voice/data consumption
MTN Uganda’s MobileMoney: Contribution to Gross Profit
Highlights
• 52% of MTN Uganda’s MobileMoney gross profit to date has come directly from their money transfer service (fees minus agent commissions)
• Indirect benefits combined account for 48% of the gross profit generated to date
• Churn rate for mobile money customers has been no more than 0.2% per month compared to 4.5% per month on average for non-MobileMoney customers.
• 3% of total monthly airtime sales now flows through MobileMoney – at roughly a 9% discount.
• MobileMoney customers consume slightly more voice and data than do non-MobileMoney customers.
Confidential 7
How much must operators invest before earning a profit?
21%
11%68%
Year 2
Fixed costs
Step costs
Variable costs
TotalYear-1
Year-2
Variable Costs
Step Costs
Fixed Costs
44%
12%
44%
Total
Fixed costs
Step costs
Variable costs
73%
13%
14%
Year 1
Fixed costs
Step costs
Variable costs
MTN Uganda’s MobileMoney: Cost Breakdown
The financing requirement for a successful mobile money service will ultimately be driven by step and variable costs.
Confidential 8
Key learnings…
Confidential 9
How can operators maximize direct revenues?
56%
44%
Revenue from Reg:Reg Revenue from Reg:Unreg
Revenue from transfers to registered customers
38%
62%
Transfers to registered customers
Transfers to unregistered recipientsAverage volume of transfers to registered customers
Average volume of transfers to unregistered recipients
1 Enable transfers to unregistered recipients
44%
18%
18%
18%
3%
MTN
Zain
Warid
Uganda Telecom
Orange
44%
18%
18%
18%
3%
MTN
Zain
Warid
Uganda Telecom
Orange
Mobile market share% Transfers to
unregistered recipientsRevenue from
unregistered recipients
Revenue from transfers to unregistered recipients
Confidential 10
How can operators unlock churn reduction benefits?
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
Month-1 Month-2 Month-3
Mon
thly
Chu
rn
Active MobileMoney Customers
Registered MobileMoney Customers
MTN Customers (excluding active and registered MobileMoney customers)
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
Month-1 Month-2 Month-3
Mon
thly
Chu
rn
Active MobileMoney Customers
Registered MobileMoney Customers
MTN Customers (excluding active and registered MobileMoney customers)
Churn Rates: MTN Uganda 1 Good execution•provide access to a liquid agent network•quickly resolve issues via customer care
2 Educating customers upon registration•churn reduction benefits, not surprisingly, are highest for those customers that are active
3 Targeting lapsed customers•targeted SMS activities or outbound calls to lapsed customers can help trigger activity and unlock churn reduction benefits
Confidential 11
How can operators unlock airtime distribution savings?
2 Promote specific uses of airtime top-up in above-the-line marketing
3 Use contests and draws as a substitute for permanent discounts to avoid negating savings.
1 Gauge the size of the opportunity
“Top-up with mobile money after hours”
“Top-up with mobile money in any amount”
Illustrative Data
Size of discount paid for selling scratch-cards
Cost of card production, inventory, and fraud
Cash-in commission paid to agents
Customer discounts and agent commissions
Opportunity
9%
3%
0.5%10%
1.5%
+
––
=
“Old” scratch-card related costs mobile money can eliminate
“New” costs that are part of facilitating mobile top-up
Confidential 12
How can operators drive increased consumption of voice/SMS?
56%
44%
One SIM Multiple SIM
Incidence of multiple SIM in the Philippines (2009 survey)
Use of mobile money SIM as primary (2009 survey)
Potential up-side for MNO is immense – but airtime top-up
cannot be the only service at play.
56%
44%
One SIM Multiple SIM
68%
32%
Mobile Money SIM is primary
Mobile Money SIM is not primary
32%
68%
Mobile Money SIM is primary
“Please indicate how many SIM cards you carry”
“Which SIM card do you use as your primary SIM?”
Confidential 13
How can operators manage their costs?
2 Ensure SIM strategy is aligned with growth projections
1 Protect highly strategic, comparatively inexpensive activities
Cash-in/cash-out commissions
Customer acquisition & registration costs
Agent network costs
Technology costs
ARPU loss from discounting
Selling expenses
G&A
MTN Uganda’s MobileMoney: total costs to date
Agent network costsCustomer acquisition and registration costsCash-in/cash-out commissionsTechnology costsARPU loss from discountingSelling expensesG&A
Agent network costs
Customer care
3 Focus on active customers – not just registrations
Confidential 14
Summary
1 MTN Uganda has illustrated that there is money in mobile money...
2 ... And that roughly half of the value comes from indirect benefits, including reduction in churn, savings from airtime distribution and uplift in consumption of voice and SMS.
3 It’s difficult to say how much an operator must invest since the financing requirement is driven by variable and step costs...
4 ... But success will only materialize for operators that bet on their own success with investments in marketing and staff.
Confidential 15
Q&A