International Roaming Business Overview December 2003
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
International Roaming Business Overview December 2003
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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
Europe North America Asia Pacific CALA ROW
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
Europe North America Asia Pacific CALA ROW
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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 2003