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18 Feb 2021

The future of telco bundling – new trends and challenges

What is bundling?

Bundling refers to selling two or more products as one combined product or service package. In recent years, telcos / MNOs have increasingly worked on creating product bundling partnerships with music and video streaming service providers to attract new customers, retain existing ones, and stay on top of their game in today’s competitive market. Some suggest that with the emergence of 5G, operators will start launching bundles with gaming services as well. According to Omdia, more than 540 digital content bundles were launched in 2019, across 93 countries worldwide.[1]

Win-win scenario for both operators and streaming service providers

Telcos provide infrastructure (devices and connectivity) through which content is consumed and “free” advertisement for streaming services. Streaming services provide operators with added value for their customers. They often require exclusivity when signing contracts with streaming services – they want to be the only ones on the market who provide users with a certain popular streaming service.

Operators include various streaming services in their tariff plans and get users signed up with advertisements. They often offer a free trial period that is meant to get users ‘hooked up’ on the service. During the free trial period, streaming service providers are giving away their content for free, but they’re getting advertised by the operators in return. After the free trial period is over, users are converted into paying subscribers.

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(source: Research and Markets)

MNOs have an advantage in user acquisition that can be attractive to streaming service providers – they already have a billing mechanism in place, as well as pre-existing marketing channels to reach target audiences. The most commonly used payment mechanism by operators is Direct Carrier Billing, since with card-based payments they don’t receive any revenue.

Nonetheless, telco bundling isn’t something new. As reported by Google, since the rise of broadband internet that happened 20 years ago, telcos have been creating the so-called, “triple play” and “quadruple play” bundles, “in which multiple products and services are packaged together and offered to consumers with incentives to increase adoption”.[2] This includes all sorts of bundle variations, such as fixed line and mobile telephony, television, as well as both fixed and wireless internet services.

Why do consumers love bundles?

Ovum (2019) recently surveyed consumers from six different markets (US, UK, China, Brazil, France, Australia) and 63% of them said they purchased a bundle of two or more services. Almost 50% of respondents said they purchased a bundle because “it was a good offer at the time of purchase,” while 32% said it was cheaper to buy a multiplay package than to purchase each service separately[3].

Another important factor drives preference for bundles – convenience. Ovum study confirms that about 60% of people sign up for carrier-bundled media service because of the ease of either paying via their telco bill or paying for different services under a single bill, or for better customer service.[4]

OTT bundles are on the rise

According to Ovum “the rising popularity of Netflix and mobile services in the bundle has left the traditional telco services bundle exposed to competition from next-gen bundles that resonate more with new and existing consumers”.[5] Furthermore, mobile and OTT media services are putting pressure on traditional bundles.

People (especially millennials and younger generations) prefer mobile to fixed voice in a bundle, as well as SVOD (subscription-based video-on-demand) services such as Netflix, Amazon Prime, Disney+, Hulu, etc. to pay-TV. Even though they are still more pay-TV subscribers than SVOD subscribers, the latter will continue to grow. Ovum states that “OTT TV content is increasing in reach and should be considered an essential part of the bundle in the next five years”.[6]

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As Ovum market research shows, bundles drive customer loyalty and make them spend more: around 45% of the respondents said the bundled media made them either spend more on their carrier plan or remain loyal to their carrier –or both.[7]

Overcoming bundling challenges to reach shared goals

To conclude, telco bundling, or carrier bundling means bringing two services together with a shared goal.

Consumers want a single provider to meet all their content needs and operators are well placed to do that. They can deliver value and convenience to consumers by offering them access to wanted OTT service with a single login and a single bill.

Therefore, it’s predicted that OTT subscriptions and partnerships are about to grow exponentially in years to come.

As stated before, bundling has many benefits both for the operators and for merchants:

  • MNOs can attract new subscribers with added value and achieve better brand positioning
  • Merchants can gain more users from the pool of MNO subscribers and get better margins than with app stores

Their shared benefit is:

  • increased user base
  • successful customer retention
  • co-marketing campaigns

However, OTT services integration can be expensive and difficult but can be easily solved with the help of payment aggregators. Overcoming OTT integration challenges and improving the consumer experience is the key for the mutual benefit of all sides involved (including MNOs, merchants, and aggregators).

If you would like to learn more about how bundles are set from a technical perspective, feel free to contact me directly for a consultation. As a technical and payment aggregator, NTH Mobile can manage relationships between mobile operators and service providers, handle all aspects of integration, including technical support, guidance, and infrastructure.

Have any thoughts you would like to add? Share in the comments below!

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[1] https://www.omdia.com/resources/product-content/global-ott-video-bundling-amp-service-partnerships-tracker-3q19-ces003-000674

[2] http://services.google.com/fh/files/misc/google_next-generation_telco_bundle.pdf?utm_campaign=Google+Ad+Manager&utm_medium=bitly&utm_source=Ad+Manager+website+download

[3] https://www.omdia.com/~/media/Informa-Shop-Window/TMT/Files/Ovum-Telco-Services-Bundle.pdf

[4] https://www.amdocs.com/sites/default/files/Ovum-OTT-market-study-2019-20.pdf

[5] https://www.omdia.com/~/media/Informa-Shop-Window/TMT/Files/Ovum-Telco-Services-Bundle.pdf

[6] https://www.omdia.com/~/media/Informa-Shop-Window/TMT/Files/Ovum-Telco-Services-Bundle.pdf

[7] https://www.amdocs.com/sites/default/files/Ovum-OTT-market-study-2019-20.pdf

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