Is quad-play just a response to weakened customer loyalty in triple-play? With mobile as giveaway?

If we read the investor reporting of Telefónica, PT and Orange, quad-play offers – which bundle fixed broadband with fixed telephony, TV and mobile – are a massive hit in Spain, Portugal and France. Vodafone, once synonymous with mobile-only, has motivated its 7,7 billion EUR acquisition of German cableco Kabel Deutschland and its 7,2 billion EUR acquisition of Spanish cableco Ono with the need for quad. Operator groups like Deutsche Telekom and TeliaSonera are reorganising to converge mobile and fixed.

A newly developed analysis framework from tefficient suggests that the true driver behind quad-play might well be weakened customer loyalty in triple-play: Household customers today assign little importance to fixed telephony and a rapidly declining importance to TV due to the booming use of over-the-top TV services. By adding mobile, triple-play operators hope to revert the negative loyalty trend.

A side-effect is that mobile profitability might be sacrificed: Many cablecos have recently made mass-market entries into mobile as MVNOs. Telenet in Belgium, Ziggo in the Netherlands, Numericable in France and Ono in Spain have lately built large mobile bases. Through this, cablecos dilute their margins since the typical MVNO EBITDA margin is below 10% – whereas the margin of the core cable business can be as high as 50%. To disrupt mobile further, cablecos are also offloading data traffic from smartphones and tablets onto their Wi-Fi “homespots” by using the set-top-boxes in the homes of customers as public Wi-Fi access points open also for other end-users.

“Through our new analysis framework, operators can get a number of strategic questions answered”, says Fredrik Jungermann of tefficient.

·  How can I use quad-play to improve my competitiveness within my market?

·  Based on facts, which improvements can I expect on my mobile and fixed subscription bases?

·  How will churn be affected?

·  Can I reduce acquisition and retention cost?

·  Will these loyalty effects compensate the quad-play discounts that I need to give?

·  And, if I don’t have the assets to do quad-play: How can I defend against competition?

“To some extent, operators play smoke and mirrors with quad-play”, continues Fredrik Jungermann. “It’s time for operators to be realistic about the positive long-term effects quad-play can bring and use facts to identify the best practices. tefficient’s analysis framework provides – combined with our consulting – a great start when entering quad – or facing competition that do.”