Does Direct Operator Billing Make Sense?
21 May 2014
With the global increase in the usage of smartphones and the desire to purchase goods and services online, it has become evident that mobile operators must act quickly to consider the changing needs of their customers. Some mobile operators already have billing mechanisms in place for certain mobile purchases such as Premium SMS but Direct Operator Billing gives the mobile operator an opportunity to exploit the use of mobile payments within their region with a secure and seamless one click transaction experience.
As CFO at SLA Mobile, I wanted to demonstrate to mobile operators the financial benefits and opportunities that Direct Operator Billing can generate. In simple terms, I needed to show how they could significantly increase their revenues and obtain a high EBITDA percentage with Direct Operator Billing without cannibalising the mobile operators Premium SMS business.
Our Managed Service approach is what makes us different at SLA Mobile. By identifying key value drivers, we can estimate the value that our services and solutions will bring you. Innovative financial modelling is key to how we assist you evaluate your strategic initiatives.
At SLA we have worked with some of the world’s largest and most innovative mobile operators and using a combination of this market experience and my own knowledge, I constructed a financial model called the “Drayne Input/output Model”. The model takes into consideration the operator’s current drivers as well as market/external factors to generate a 3 Year outline of forecast revenues.
The main drivers of the financial model from an operator’s perspective include the mobile operator’s subscriber base, existing Average Revenue per User (APRU) and the percentage of subscribers that have smart phones. It is also appropriate to include the percentage of subscribers that have feature phones as Direct Operator Billing can also be utilised on these devices.
When examining market factors, a prediction is made of the percentage increase of smartphones per annum in the region. The model also takes into consideration customer growth rate and the perceived adoption rate of Direct Operator Billing. Looking at all these drivers allows us to look at various scenarios for the following 3 years based on the “Best”, “Average” and “Worst” case scenarios.
The model acts as a scenario based analysis over a 3 years period for the mobile operator and gives them an interesting insight in to the potential revenues they can look forward to with this payment solution. We are beginning to see that in the telco industry, financial models are not well defined for some of these future digital services but we are focussed entirely on supporting mobile operators to execute their digital services business strategy.