CONNECTED CONSUMER SURVEY 2016: MOBILE SERVICES AND DEVICES IN THE MIDDLE EAST AND NORTH AFRICA

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1 analysysmason.com RESEARCH SURVEY REPORT CONNECTED CONSUMER SURVEY 2016: MOBILE SERVICES AND DEVICES IN THE MIDDLE EAST AND NORTH AFRICA KARIM YAICI, KEREM ARSAL and ARIS XYLOURIS

2 About this report This report focuses on aspects of Analysys Mason s Connected Consumer Survey that relate to the behaviour, preferences and plans of smartphone users in the Middle East and North Africa (MENA) region. In particular, it focuses on respondents usage of mobile services and devices. The survey was conducted in association with On Device Research. The research was conducted in August and September The survey groups were chosen to be representative of the mobile- Internet-using population in the region. We set quotas on age, gender and geographical spread to that effect. There were 4500 respondents in the region. Morocco GEOGRAPHICAL COVERAGE Saudi Arabia Qatar UAE Oman KEY QUESTIONS ANSWERED IN THIS REPORT WHO SHOULD READ THIS REPORT How strongly do operators perform as smartphone sales channels, and how does their performance relate to consumers choice of tariffs? What is the average consumer spend on handsets and how can operators capture a larger share of this spend? What are the mobile data usage patterns among respondents and how does data pricing affect these patterns? What impact does 4G have on mobile users spend and engagement with their smartphones? What are the data utilisation levels for contract subscribers and what effects do differing approaches to overage have? Operator-based strategy executives and marketing managers who are interested in understanding consumer market trends, the role of operators as smartphone distribution channels, and the impact of differing approaches to pricing in the market. Market intelligence and research executives in service providers that are responsible for understanding end-user trends and supporting business units in identifying and addressing new opportunities. Equipment/device manufacturers and software providers that want to identify end-user trends in service and device usage and help their operator customers to improve their ability to address market opportunities. 2

3 Consumers that buy their handsets from mobile operators replace their handsets slightly more frequently and report higher mobile service NPS There are some notable differences between consumers that prefer retailers and operators for handset purchases. Although operators do not need to respond urgently, these trends should nonetheless inform their device portfolios and bundling tactics. Firstly, regardless of any self-selection bias, 1 those that buy their handsets from operators have reported higher Net Promoter Score (NPS) 2 than those that use retailers. Devices are therefore likely to play a role in the relationship between operators and customers. Secondly, handset replacements cycles appear to be slightly more dynamic at operator channels. Not only are the handsets-in-use newer, but their intended replacement cycle is slightly quicker. This is good news for operators that want to use device upgrade programmes to build long-term relationships with their customers. Finally, operators rely more on Apple (ios) phones than retailers, which often carry a diverse range of Android phones. This is generally in line with operators willingness to focus their device bundling efforts on premium customer segments. Operators must balance this approach by ensuring that they do not depend too much on a single brand and by attending to the possibility of an overall slowdown in replacement cycles. As smartphone sales stagnate and customer excitement for each forthcoming model wanes, operators may find it necessary to expand their device portfolios and data bundles to reach lower-spend segments. 1 Customers already satisfied with their operators may be buying their handsets from the retailers. Figure 7: Mobile NPS and selected handset-related metrics across operator and retailer channels, the Middle East and North Africa, 2016 Handset sales channel NPS ios Operator NPS of mobile service Retailer Age of device in use (months) Expected replacement time (months) Share of sales that are ios 44% 35% Source: Analysys Mason 2 See the methodology section for further details about Net Promoter Score. Question: Where did you buy your mobile handset from? ; n =

4 4G contract subscribers have higher data allowances than those on legacy networks, and this trend is clearer in more-mature 4G markets Network technology is a strong predictor of data usage requirements. Qatar, Saudi Arabia and the UAE have the highest proportion of contract respondents on 4G with more than 5GB of mobile data per month. On the other hand, the majority of users with sub-1gb allowances were on a 2G/3G network. Figure 13: Difference in the proportion of contract customers with 4G compared to non-4g subscriptions by stated data allowance, by country, This trend can also be observed for monthly data usage by prepaid users. The largest difference in usage profile is observed in Qatar, where 43% of 4G users reported using more than 5GB of data, compared with 13% for 2G or 3G users. On the lower end, 64% of 2G/3G users use less than 1GB per month. This gap reflects the higher data demand and more-mature operator propositions in Qatar, which encourage migration to higher data allowances. At the market level, incumbents Etisalat, Omantel, Ooredoo and STC have a higher proportion of users with data allowances of 2GB or more than the competition. However, despite having the smallest LTE coverage in Morocco, Méditel, managed to secure the highest proportion of high-end data users in this market. This could be linked to having the cheapest per-gb rates for higher data tiers (10GB and above) in the country. 4G users in Oman appear reluctant to opt for higher data allowances (the difference in data consumption between 2G/3G and 4G users is minimal). While this could partially be explained by the reported low penetration of 4G services, we believe that this highlights the need for operators to explain the clear value of LTE to encourage take-up of higher data tiers. 1 Questions: How much of your data allowance do you use? ; n=1486, Do you have a 2G, 3G or 4G mobile service? ; n =

5 CONTENTS EXECUTIVE SUMMARY HANDSET CHANNEL DYNAMICS 4G USAGE AND MONETISATION METHODOLOGY AND PANEL INFORMATION ABOUT THE AUTHORS AND ANALYSYS MASON 24

6 About the authors Karim Yaici (Senior Analyst) leads Analysys Mason s The Middle East and Africa regional research programme. His primary areas of specialisation include operators' digital strategies, new telecoms opportunities and challenges, and consumer trends in growth markets. Prior to joining Analysys Mason, Karim was an associate analyst at Ovum, where he authored reports on mobile accessories and mobile applications. Prior to that, he worked as a research engineer in the Institute for Communication Systems and Vodafone. Karim holds an MSc in Information Systems Management from the University of Southampton and a PhD in human computer interaction from the University of Surrey. Kerem Arsal (Principal Analyst) is a key contributor to Analysys Mason's Mobile Services research programme, which helps operators to understand, and monetise to maximum efficiency, the interplay between voice, messaging and data services. His work involves in-depth coverage of issues such as customer retention, mobile data pricing, MVNO strategies, and the impact of regulation and roaming. Previously, Kerem was a research manager at Pyramid Research, where he was responsible for setting the thematic research agenda across multiple tracks and regions. He also headed numerous projects around operator strategies, as well as commercialisation of, and demand assessment for, new products in the consumer and enterprise segments. 25 Aris Xylouris (Research Analyst) Aris is a key contributor to Analysys Mason's primary research for the Consumer Services research practice and manages our Connected Consumer Survey. His work involves in-depth coverage of issues such as consumer behaviour, convergence and bundling, and mobile and fixed service pricing. Aris also contributes to the Fixed Broadband and Video, Mobile Services, Digital Economy and Mobile Devices research programmes. Aris is a trained economist and before joining Analysys Mason he held internships as an economic analyst in the media sector, working on market analysis, financial evaluation, profitability analysis and business plan development. His wider experience includes quantitative forecast modelling and computer simulations using agent-based models. Aris holds a Bachelor in Economics from Athens School of Economics and Business, and an MSc in Behavioural Economics from Warwick University.

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