Think Europe and quad-play, then Spain and France might immediately spring to mind. In both countries, the bundling together of mobile and fixed-line services is going down a storm with customers.
Belgium, Portugal and the Netherlands may also figure in your thinking. In all five countries, says Bernstein Research, quad-play is a “mainstream offer”.
Look elsewhere in Europe, though, and quad-play is thin on the ground. Analysys Mason estimates fewer than 5 per cent of households in Germany, Italy and the UK have a bundled package of fixed and mobile services.
No such lethargy in France. The research firm reckons more than 40 per cent of the country’s broadband households have mobile voice bundled in with their fixed-line services. Over a fifth of broadband households in Spain do the same.
One obvious reason why quad-play is almost non-existent in some countries is that there aren’t any big players promoting it. But customers, arguably, have growing quad-play appetites. Harder economic times increase the attraction of bundled discounts.
Let’s look at Spain and France, where quad-play is motoring.
Telefonica, Spain’s largest telecoms operator, unveiled Movistar Fusion last September. A bundled package of mobile and broadband services for a fixed monthly fee, the quad-play service has racked up an impressive 1.5 million subscribers since launch.
Over in France, the Iliad Group has been leading the quad-play charge. Under the Free brand (used already for the group’s fixed-line broadband services), Iliad launched an aggressively-priced mobile offering in early 2012. For Iliad’s fixed-line subscribers, however, Free Mobile tariffs are 25 per cent lower.
Iliad doesn’t reveal the number of broadband subscribers who bundle in Free Mobile, but Bernstein Research estimates about 42 per cent of Iliad’s broadband customer base took on a wireless product within 8 months of it becoming available. What’s more, Iliad says it bagged around half of France’s total broadband net additions during 2012, up from a third of net additions the previous year.
Telefonica, too, has witnessed a broadband surge since the launch of Movistar Fusion. In the three months ended December, net gains in fibre customers doubled to 66,000 compared with the previous quarter. Nearly all the broadband customers that Telefonica had lost since the start of 2011 were regained in those three months.
The pulling power of quad-play, then, should not be sniffed at by so-called ‘integrated operators’ – not least if their triple-play landline services are more profitable than mobile. It’s no secret that mobile operations in Europe are being squeezed relentlessly by regulatory and competitive pressures, so quad-play offers the chance of service differentiation and to shore up the broadband business.
We can also throw in some churn arguments for good measure. Bernstein Research calculates mobile contract churn among European incumbents averages out at about 16 per cent a year. The quad-play churn levels of Virgin Media in the UK – by way of example – are under 8 per cent.
So, taking into account the fact that fibre access consumers tend to be in the higher ARPU bracket – and assuming lower churn rates from fixed and mobile bundling – Bernstein Research works out that operators could discount their quad-play packages by around 25 per cent to the standalone ARPU and still see an incremental customer life-time value.
Of course, offering a cost-efficient and sophisticated quad-play service is not easy. The idea of “fixed-mobile convergence” may be attractive to operators, but the complexity of integrating disparate back-office IT systems and setting up unified subscriber databases can be off putting. As we all know, a telecoms group – running fixed and mobile operations – is rarely an integrated one in the truest sense.
Still, there are some relatively simple measures that operators might do to test the quad-play waters. In the case of Iliad, triple-play and wireless products are not bundled together at the point of sale. Instead, Bernstein Research suspects that many triple-play Free customers simply take an additional SIM card carrying the 25 per cent discount.
Fixed-line incumbents with mobile operations look well placed to take advantage of growing quad-play demand, but cable operators – striking up MVNO deals – will also be in the mix.
Standalone mobile operators, with no easy route to wholesale fibre access, seem the most vulnerable. Little wonder, then, that Vodafone is circling cable operators and investing in fibre access networks.
Quad-play is getting interesting.