New Revenue Streams

for Pioneering MNOs.

The 5 Step Business
Growth Model

whitepaper

Introduction
Opportunities for growth through
traditional means are becoming
increasingly limited.
GSMA Intelligence
Until Network Operators develop
consumer-centric businesses driven
by differentiated marketing strategies,
their financial performance is likely
to continue to decline.
Strategy Analytics
Proven New MNO Revenue Streams The 5 Step Business Growth Model whitepaper
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According to a recent report by Strategy Analytics1, global trends for
Mobile Network Operators (MNOs) show stagnant revenues and
declining margins. While network operators around the world have spent
over $700 Billion in infrastructure investment over the past 10 years,
revenue growth has been almost flat since 2007.
MNOs have traditionally grown as a result of increased consumer mobility but as
GSMA Intelligence2 warns, the key limiting factor is now market saturation. ARPU
declines are slowing on average as pricing in many markets approaches a floor.
However, at the same time, subscriber penetration in many markets is approaching a
threshold – the addressable population. Opportunities for growth through traditional
means are therefore becoming increasingly limited and MNOs seeking continued
growth must look to new revenue streams to achieve such a goal.
Forward-thinking MNOs have already diversified their offerings with broader, more
engaged services, which have enabled them to achieve revenue growth in a non-
traditional way. These incremental revenues generally come from two main areas:
1. Leveraging the existing subscriber base as an asset to provide market reach to
brands and marketing agencies.
2. Delivering enterprise solutions involving marketing, messaging and other mobile
based engagement services to large corporations.
Meanwhile, MNOs who fail to monetise their existing assets (their subscriber base
and/or network infrastructure) in a novel way, are missing the opportunity to identify
and extract much-needed additional revenues.
References
1. “Are Telecommunications Operators in Denial? ROI is at Risk & New Business Model is Needed”,
Harvey Cohen, strategyanalytics.com
2. “Expanded Financials Coverage Shows Mixed Fortunes for Developed and Developing Mobile Markets”,
Kavi Bains et al, gsmaintelligence.com
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MNO business growth model

To aid business planning and bring clarity to an MNO’s current position with regard to
exploitation of new revenue opportunities, the following 5 step model is proposed:

The MNO Business Growth Model categorises the different ways an MNO can
deliver value from their existing subscriber base and/or develop novel, new enterprise
solutions. It comprises 5 distinct levels as follows:

Target Value?

5
mobile engagement Enterprise Solutions
Enterprise Corporate
Clients
Solutions

4
mobile channel Enterprise Messaging
Enterprise Corporate
Clients
Messaging
Other MNO Other MNO

3
Brands B2C reach Mobile Marketing
Mobile &
Marketing Agencies

2
connections Corporate Connections
Corporate Corporate
Clients
Connections

sophisticated

1
communications Base Communications
Base MNO
Comms
MNO Base Customers

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Level 1 – Base Communications

Primarily promoting the MNO’s own products and services to its existing subscribers,
Base Communications can vary in its range of sophistication but is generally
undertaken by every mobile operator to upsell products and services across their
subscriber base.

Typically, this form of activity has been associated with prepaid users to increase
top-up spend and include more data. This is incentive-based marketing where a user
is offered free content, for example, if they increase their top-up spend by €15 in the
next 7 day period. Post-paid users can be offered additional devices, early renewal or
alternative tariff packages during their contract period.

This level requires investment in systems – data analysis, profiling, offer creation,
redemption algorithms and message management – but doesn’t necessarily produce
new revenues and hence provides a low return on investment for the mobile operator.
Its main goal is to reduce churn (protect existing revenues) and increase the spend of
existing subscribers.

Level 2 – Corporate Connections

The next level in the business growth model is Corporate Connections and the provision
of thousands of communication plans and devices (feature phones, smartphones and
tablets) for corporate customers. For certain sectors, such as banking, finance and
insurance, having a secure connection provided by the MNO is critical.

Corporate Connections effectively expand the MNO’s customer base and crucially
it means the MNO is conducting business with enterprise customers, not solely
consumers. However, this level provides a relatively small number of new subscribers
compared with the MNO’s consumer base as each corporation has a limited
number of users. Call rates and data charges are squeezed in a highly-competitive
marketplace and hence it represents a low return on investment on the MNO Business
Growth Model. In Europe, it is estimated that around 60% of MNOs are delivering
Corporate Communications.

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Level 3 – Mobile Marketing

The third level in the model, Mobile Marketing, encompasses communications from
brands and other businesses to the MNO’s subscribers who have opted-in to receive
MNOs can run highly-targeted
third-party messages. This is one of the hottest areas in mobile and with good reason.
marketing campaigns, selling tightly
Sending a SMS remains one of the most potent forms of marketing. 99% of all SMS
segmented data to third parties
messages are actually read and more than 90% are read within 3 minutes; no other
at a premium, typically charging
form of marketing comes close to these engagement levels.
500% to 600% more than standard
message rates.
Mobile Marketing can be used to drive sales, promotions and vouchers, app
downloads, drive followers on social media and more. Additionally,
the MNO can recognise where each individual subscriber lives and behavioural
traits such as their route to work, their browsing habits and visits to favourite sites. This
subscriber data has a high value to third parties, as it helps to segment and target those
opted-in subscribers with relevant communications.

Through its subsidiary Weve, UK mobile

The highest value form of mobile marketing for the MNOs comes from utilising their
network operator O2 has the ability to reach
a total of over 31 million consent-based location-based data for each opted-in subscriber. By leveraging this unique data,
customers providing a single point of contact using geo-fencing for example, MNOs can run highly-targeted marketing campaigns,
for brands and businesses to connect to a
large-scale mobile audience. selling tightly segmented data, to third parties at a premium, typically charging 500%
to 600% more than standard message rates. As location data delivers a significantly
Engage Hub and bureau service have
enabled O2/Weve to leverage their “treasure
higher response rate, brands and businesses are prepared to pay this premium.
trove” of rich customer data that already
existed within the organisation and build
Thus, Mobile Marketing can provide new incremental revenues, directly related to the
entirely new revenue streams that are scalable
and repeatable to allow further revenue number of campaigns, of medium-to-high value on the MNO Business Growth Model.
growth in the future.
However, it is estimated that only 20% to 30% of European MNOs are
With the largest, verified, 1st party data successfully monetising their existing subscriber base by offering mobile
set in the UK, O2 can help brands and marketing services to third parties.
agencies deliver a mobile-centric strategy
with unprecedented reach targeting a
variety of audiences based on age, location,
demographics and behaviour. The wealth
of location triggers and many forms of
behavioural data, from web browsing to
phone usage and roaming information, are
brought together in the Engage Hub to build
smart segments that engage users throughout
the marketing funnel.

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Level 4 – Enterprise Messaging

At number four in the MNO Maturity Model is Enterprise Messaging. This is an A2P,
one-to-one, and one-to-many mobile channel model, in which an enterprise purchases
Those MNOs operating level 2
wholesale messaging bundles from the MNO in order to communicate with its own
Corporate Connections will have a
customers. To provide a comprehensive service the MNO must provide an aggregation
ready market of businesses to buy
service in order to offer the enterprise complete coverage of their customers, including
this messaging and an enterprise
those who are not subscribers to the MNO. This type of messaging is used by
facing sales force to sell it.
enterprises both for marketing outreach and service messaging, for example sending a
simple order confirmation or booking reference at the time of transaction.

Part of the appeal of Enterprise Messaging is that it also has utilitarian use to drive
company efficiency and productivity, such as increasing the number of parcels
successfully delivered at first attempt, or appointment reminders so that doctor or dental
appointments are not missed.

For the MNO it transforms the vertical models included in the MNO Maturity Model
into a horizontal model spanning mobile subscribers belonging to other MNOs.
Enterprise Messaging is an important higher rung on the revenue-generation ladder.
Those MNOs operating level 2 Corporate Connections will have a ready market of
businesses to buy this messaging and an enterprise facing sales force to sell it. It is
estimated that at least two thirds of MNOs are engaged in Enterprise Messaging,
and with aggregators potentially offering a competitive bulk product, this competitive
market is becoming increasingly commoditised, driving prices and profits down.

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Level 5 – Enterprise Solutions

Enterprise Solutions sits at the top of the MNO Business Growth Model
and perhaps represent the pinnacle of growth potential for any MNO. In level 5, the
Enterprise Solutions… represent the
MNO delivers entire mobile engagement solutions for enterprises, allowing them to
pinnacle of growth potential for
perform multi-channel engagements with their own customers, typically delivering
any MNO.
services that are quicker and more beneficial to the customer, and more efficient and
lower cost for the enterprise to deliver.

Bank of America worked with O2 and
Engage Hub to develop “Travel Alerts” which
is set to be rolled out to all MBNA customers.
When an individual travels to another country,
O2 sends an automated alert to their card
company to say that he or she has arrived.
This tailored, enterprise solution, also enables
the customer’s card company to send an
encrypted request to O2 to confirm whether
the customer’s phone is in the same location
as any transaction being made. As a result,
there has been a significant reduction in
both fraud and the number of cards being
incorrectly declined.
The overall value to the enterprise of these improved customer interactions allow the
MNO to charge a significant value-based price rather than a diminishing message
based price. For example, informing a customer when their parcel will be delivered,
allowing them to rearrange a specific time for delivery, and provide them with real-
time alerts that the delivery timeslot will be met, all via the mobile phone, using a
combination of email, SMS and web to deliver the information and receive feedback
from the customer.
Services in levels 1-4 have focused on driving low-level forms of engagement between
a company (whether MNO or brand or business) and the consumer. An Enterprise
Solution fundamentally changes this dynamic to a cross-channel, mobile engagement
model incorporating email, messaging, push, voice, and IVR. It enables enterprises
to engage in real-time conversations with its customers, deliver personalised and
highly-targeted information and ultimately build an understanding of when and how
customers want to engage to drive a higher return on investment.

It is offered as a free, value added service Right now it is estimated that a mere 10% of MNOs in Europe are delivering
to the card company’s customers and in
addition to the enhanced security, removes the
this level of engagement with their enterprise customers, which means 9 out
hassle of having to contact the bank or card of 10 MNOs are not capitalising on the customer engagement revolution that is taking
company before going abroad.
place within the enterprise.
The entire process is automated via the
Engage Hub and is an excellent example of
cross-channel engagement with significant
benefits for both the customer and the
enterprise.

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5 Enterprise
Solutions
Biggest Revenue Growth Opportunities

4 Enterprise
Messaging

3 Mobile
Marketing
Biggest Revenue Growth Opportunities

2 Corporate
Connections

1 Base
Comms

0 20 40 60 80 100
Source: Engage Hub
Estimated % European MNOs Operating at these Business Growth Levels

Business Growth Model Summary

So in summary, MNOs can deliver increasingly valuable services by comparing their

existing offerings with the 5 steps of the business growth model and focusing on the
development of new market propositions at the levels that offer the highest potential
value-add. Specifically:

Level 3 – Mobile Marketing - using their subscriber base as an asset to provide

market reach to brands and marketing agencies.

Level 5 – Enterprise Solutions - providing a mobile channel for enterprises to

engage with their own customers.

But, for MNOs that seek to move up the levels of the business growth model, some
key enabling technologies and capabilities are required to deliver the scale and
complexity of the new revenue-generating offerings.

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Key enabling technologies

Multi-Channel Capabilities – providing integrated communication channels including SMS, MMS, Email, Voice,
Push notifications - so that engaging at the right time using the right channel is simple and provides a superior customer
experience. It allows engagement using a mix of communication channels depending on preferences and priorities. For
example, sending a call-to-action or an order confirmation via SMS, while using email to send more detailed terms of sale or
full order details, and ultimately using voice connection to manage urgent or complex queries.

Location Based Services – handling the volume of events, creating and managing geofences, tracking each opted-
in user against every geofence. All required to provide real-time triggers in the system to act on.

A Workflow/Business Process Engine – any engagement with a customer is following a business process. To
follow that process quickly and efficiently it must be automated. Therefore at the heart of an engagement solution must be an
automated business process and an easy to use workflow system to configure it.

Strong and Simple Data Integrations – communicating with external applications to connect and talk to all
sorts of different databases or remote systems to extract or populate information. Integrating with databases such as CRM
systems, POS and transaction systems, weather feeds, stock market feeds and so on, with the ability to extract and exchange
relevant information to build compelling engagement solutions.

Sophisticated Data Management – storing and managing the vast quantity of data generated by customer
interactions to allow detailed data mining for actionable insights and comprehensive reporting.

“MNOs can deliver increasingly

valuable services by comparing their Unfortunately, it is not enough to have some of these capabilities. To minimise

existing offerings with the 5 steps complexity and time to market, they must be delivered from a single environment, using

of the business growth model and a single platform that brings all of these capabilities together.

focusing on the development of new

market propositions at the levels that Finding the right platform and working with the right partner is the final key to

offer the highest potential maximising new revenue stream potentials and achieving incremental business growth

value-add.” beyond traditional business models.

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Conclusion
For MNOs facing the challenge of declining revenues and
squeezed margins, finding their current level on the MNO
Business Growth Model will allow them to identify the additional
revenue streams that are open to them.
For those not currently leveraging the value of their subscriber
base, level 3 mobile marketing is a well proven route to
generating new revenues.
For those MNOs operating at Level 4 enterprise messaging,
feeling the market pressure of lowering message prices, the
About Engage Hub
Engage Hub is a global technology provider of mobile, data-
driven customer engagement solutions. By harnessing the power
of cloud technology, we help enterprise organisations deliver
highly personalised, connected experiences across multiple
channels, including SMS, web, email, voice, push notifications
and Facebook Messenger.
Our innovative logic building technology triggers intelligent
conversations using real-time data. This, combined with our
dedicated industry consultants, is what sets us apart. We have
over 30 years’ experience delivering successful projects to
Want to know more?
If you would like to find out how Engage Hub can help you drive new revenue streams, call us on:
+ 44 (0) 207 183 3860 or email us at sales@theengagehub.com
www.theengagehub.com
move to deliver level 5 enterprise solutions can provide a new
revenue stream that is both high margin and sustainable
over time.
The first step for all MNOs is to position themselves on the
business growth model in order to identify the next logical way
to open up new revenue streams.
The second step is to identify the capabilities required to deliver
the new services and find the right partner to work with to
minimise time to market.
help businesses strengthen customer engagement and improve
operational efficiency.
Headquartered in London and with offices throughout Europe,
Asia and South America, Engage Hub provides intelligent
customer engagement solutions to some of the world’s most
successful enterprises, such as, Sainsbury’s, MBNA, Hermes,
Singtel and Telefonica.