Ongoing revenue share issues?

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Jeff Dandy
managing director, Aztec Telecom

The decision-making process has changed with ongoing revenue share. Our earning power has gone down massively with low-spenders. We have to decide whether to keep low-spenders with O2.

If it’s better for them and us in terms of subsidising kit to switch networks, then we will consider that. If they want to remain with O2, then a fee may have to be levied for handsets.

If they are businesses that tend to travel abroad a lot, however, we will look to put them on an ongoing scheme rather than a one-off hit – provided the deal appeals to them also.

Most of my customers are businesses; they never go over their bundle limit then I am doing my job right. Of course, I get less money that way and there are other dealers who do this, so it’s difficult.

But until revenue share properly settles down, and we know exactly where we are, it will remain a little confusing.

Biggest area of growth? Fixed line and broadband.
Best thing in dealer channel? When ongoing settles down, my company will be worth more than it was previously. The constant cash flow increases the overall value. Previously, the value was in our customer database only. The industry couldn’t go on the way it was with upfront payments.
Worst thing in dealer channel? Clawback. The fear is we pay out for handsets and the customer goes bust. The risk is with dealers, not networks.

Aztec connects O2 via HSC, Orange via HSC, Mainline and Midland, and Vodafone via Redstone.

Jeff Dandy is pictured top left.

 

Paul Leonard
managing director, Sprint Communications

It’s still very early days for ongoing revenue; I still see network issues with deployment. But I never thought it would be an easy ride.

It’s a culture-change but it’s the correct thing to do. It just could have been handled better. We’ve always had an element of revenue share from networks but never had a break down. We just got a figure and that was it. What we are getting now is what we should have had in the first place.

Certain players will have difficulty changing their processes. As time goes on, we will see more and more customised versions.

I’m pleased each network has done it differently. Some people wont cope with it; some will do very well. But we could have done without it launching during a recession.

The revenue share model aims you towards specific networks; there will be strategic alliances formed. Some of the smaller players will choose.

Biggest area of growth? Tracking. We have licensed our own software and imported our own products. A few months and we will launch it as a white-label service to the wider market.
Best thing in dealer channel? Revenue share. Business now reflects what it is worth, and is not based on estimates. This is a very important part of its evolution.
Worst thing in dealer channel? The mixed messages from the networks – despite the public focus on retention, they still make clear it is our mission in life to deliver them huge amounts of new business.

Sprint Communications connects O2 direct, Orange direct, T-Mobile direct, 3 direct and Vodafone via Yes Telecom.

Paul Leonard is pictured bottom left.

 

Keane Beaken
mobile sales manager, Focus 4U

The cashflow element of revenue share doesn’t affect us too much. The key now is to have extra good relationships with customers, and explain the conditions of the new market.

If customers understand that, which most do, it is a smoother process and in the long run it is good for business.

The real changes will come when distributors stop paying any upfront. At the moment you still receive an upfront as part of the deal, and can afford kit and take a revenue share later on when it is paid for.

The industry is going to tighten up massively. In the next 18 months bigger dealers have a great opportunity to lock down business. But it’s a closing window. As the recession bites, fewer customers will want to move around or have time to talk to different dealers.

It will be a case of farming your business, and adding products.  The big merry-go-round will stop. The industry has slowed down; the money is not flying around as it was. Good dealers will grow, where others will fold.

Biggest area of growth? Apple iPhone. Great for us right now.
Best thing in dealer channel? The tariffs are going down in price, and we are moving slowly away from subsidy to the model used everywhere else. If you buy Sky you don’t get a free TV so why should you get a free phone?
Worst thing in dealer channel? Re-signing a customer on a revenue share can mean you go two years without an advance. That’s tough. Clawback is another issue. The networks have fixed it so they don’t lose now.

Focus 4U connected Vodafone via Yes Telecom, and Orange and O2 via Fone Logistics.

Keane Beaken is pictured top, second right.

 

Phil Rider
chairman, Digital Phone Company

We have always had ongoing revenue with Vodafone, and it’s an important part of our business model; it allows us to look after our customers on a long-term basis.

Voice revenues are falling and networks want to pay less upfront commission. They are now deploying more fierce retention models, as they go beyond straight acquisitions.

Clearly sharing the benefit of added revenue generated from additional services is a fair and sensible way of rewarding everybody concerned. It’s the most obvious way forward. Why wouldn’t we both share the potential upside and downside?

We have given the end user too much value at our own expense, both the distributor and us. We used to be quite happy giving away a £400 phone with scant regard for what the customer will spend on an ongoing basis; that cannot be sustained.

There is a strong commitment with Vodafone to work closely with people it considers to be longterm and serious players, and that partnership is getting closer.

Biggest area of growth? Take-up of lower-end tariffs lately, which is unfortunate. But also data products such as mobile broadband devices, as data pricing is now more realistic.
Best thing in dealer channel? We’ve just come off the back of one our best quarters for years. I don’t know how others are doing but we are aggressive at chasing volume, and people seem to be spending still. We don’t see recession on the high street.
Worst thing in dealer channel? Competition; always competition. The fight with the networks and Carphone and Phones 4U; we’re constantly in a battle.

Digital Phone Company connects Vodafone direct.

Phil Rider is pictured top, middle.

 

Rob Williams
managing director, Carphone Company

My customers understand the true value of a handset, and know they are paying more on line rental because they have had a free handset.

So, with revenue share now, I don’t find too many customers question why they have to pay. You have to decide what’s best for you and what’s best for your customers; if you look after them, they look after you.

But revenue share has encouraged mis-selling; dealers put customers on the highest tariff to get the best share. That is wrong.

If you do your job right, you shoot yourself in the foot to a degree, as you decrease your potential earnings.

But if customers are educated about subsidies, and you bring value to their business by providing the right service, then you can bring other revenue streams to them.

Revenue share will sort the men from the boys.

Biggest area of growth?
Mobile data and converged devices – BlackBerry and iPhone. Mobile broadband is still going well, but the margins are minimal.
Best thing in dealer channel? Customer satisfaction. Good service is rewarded by customer loyalty.
Worst thing in dealer channel? Network restrictions on certain products and customers.

Carphone Company connects O2 via Avenir and Vodafone via Yes Telecom.

Rob Williams is pictured top, second left.

 

Damian Cole
managing director, Get Connected

Ongoing revenue was always going to be difficult because we take a hit on upfront commission.

But in the long term it is going to be beneficial. It will take 10-15 months for it to really work for us.

But we haven’t changed our model because we’ve always worked on high margins.

Biggest area of growth? Business is steady; no area in particular.
Best thing in dealer channel? Retail premises at good rental prices.
Worst thing in dealer channel? Fraudulent connections.

Get Connected connects Orange direct.

Damian Cole is pictured bottom, second right.

 

Mike Ridgway
managing director, Qualitel

The fact we get an advance payment on the O2 revenue share through Fone Logistics works well for us. The information on the customer spend is accurate and easy to understand.

We have had to change our business plan slightly but it hasn’t had a real impact financially. However we are more cautious on the types of business we take.

With the upfront commission, once you get through the clawback period as a dealer you are no longer exposed. With revenue share, if you take an advance from the distributor, as we do, we are exposed throughout the customer contract. It’s not a major fear as long as business is done correctly.

We have never been as close to O2 and Fone Logistics as we are now. It’s about collaboration for the common good, and it does work.

But you have to focus on quality customers with decent ARPU and credentials.

The same can be said with Orange and Vodafone. Orange is six months behind with ongoing so it’s not quite as slick, but it will all be sorted out.

We have always received some ongoing share from Vodafone. We are fortunate in the food chain but, if I was a small dealer in a one-room office, I might be concerned.

Biggest area of growth? Corporate connections. We are finding success at the high-end of the SME market and in the corporate sector.
Best thing in dealer channel? The independence – the fact we are experts at personalised service. If you’re tied to one network, you can’t offer the best fit.
Worst thing in dealer channel? We are having some issues with the level of support we get on repairs for BlackBerry; it’s quite frustrating. It’s a long turnaround time. If it’s BlackBerry enterprise equipment, and network-branded, the repair and support tends to leave a lot to be desired. If we buy from distributors, service is a lot better.

Qualitel connects O2 via Fone Logistics, Orange via Mainline and Vodafone direct.

Mike Ridgway is pictured bottom right.

 

Mike Hallam
group managing director, Wish Communications

Ongoing revenue share is indicative of the industry’s new focus on retention. Our business hasn’t changed; we are still highly acquisitive, driven by a strong commercial arrangement with Vodafone.

We are still able to structure deals for acquisition.  There is a balance now.

Ongoing revenue share is good for the industry. It brings allegiances between dealers and networks, and so makes dealers stronger. There was little loyalty before. The concern is acquisitive network commercials fall away; we need to fund the hardware still.

Biggest area of growth? Data. We have gone from 10 per cent penetration to 25-30 per cent penetration within our base in six months.
Best thing in dealer channel? Ongoing revenue helps increase loyalty and trust.
Worst thing in dealer channel? Falling ARPU. We get revenue based on ARPU and that is a concern.

Wish Communications connects Vodafone via Yes Telecom and Orange via Mainline.

Mike Hallam is pictured bottom, second left.

 

Mark Finlayson
managing director, Next Communications

Ongoing revenue has always been a part of our Vodafone relationship and strategy. My understanding is Vodafone is investigating how it will make it work across its base. It has to happen.

Revenue share is a rational way to run a business – paying hundreds of pounds to clients without knowing the return on investment does not make sense.

Yes, it worked and was successful for a long time, but the market has matured and changed.

And the old remuneration just drives churn.

Biggest area of growth? Mobile email solutions, which have been huge for us. We still offer BlackBerry solutions for customers, but we tend to focus on Nokia and Windows Mobile devices.
Best thing in dealer channel? Converged communications. That is the big hope. It’s going to change the game completely as it opens up the fixed line market to our channels. That will be the biggest change for us. We are looking to up-skill and move in to this area to ensure we are in that challenge.
Worst thing in dealer channel? As an independent we are exposed to changing network policies. There is a limit as to what we can do and we have to react. One problem we face is our client base eroding – every person that gets laid off, there’s a chance existing business vanishes. The dealer channel feels the same pain as customers.

Next Communications connects Vodafone direct.

Mark Finlayson is pictured top right.

 

Mark Geraghty
managing director, Olive Communications

Revenue share has not had a negative impact. We have only really increased our fraud prevention as there is more of this due to the economic climate.

I’m happy with the way things have been rolled out. Yes Telecom/Vodafone still pays the upfront and 3 has moved towards part-payment.

Revenue share will almost certainly have an impact on the market. I think it will be very hard for smaller and new dealers to survive in this climate with cashflow when supplying high-end handsets on the revenue share model.

Margins are declining as the market has become very competitive; dealers are prepared to bring new business with little or no upfront margin, and the only winner is the customer. You need to retain your customer base on service.

Biggest area of growth? BlackBerry. We have also provided a lot of machine-to-machine (M2M) business, which is a new area with good margin.
Best thing in dealer channel? The best thing is being able to offer different solutions on different networks, working with a variety of partners. Long term, the big positive is the value of the business goes up.
Worst thing in dealer channel? That you don’t own the customer and you are governed by the mobile networks.

Olive Communications connects Vodafone via Yes Telecom, O2 via Fone Logistics and 3 direct.

Mark Geraghty is pictured bottom middle.

 

This article appeared in Mobile News issue 445 (August 10, 2009).

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