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April 2013

Profitable 3G: China’s Mobile Operators Monetize Networks with Retailers & Partners

Profitable 3G: China’s Mobile Operators Monetize Networks with Retailers & Partners

Information Technology is a necessary business cost, but in today’s competitive mobile world, IT needs to become a business enabler too.

Mobile operators are at the center of explosive growth in wireless services.  Sure, Over-The-Top providers are skimming the cream, but the telecoms still have tremendous assets they can exploit to make money.  All that’s required is some IT ingenuity and a broader view on how the mobile user can be served.

One company who’s an expert at practical IT enablement is AsiaInfo Leakage, the leading telecom billing vendor in China today.  I caught up with the company at the Orlando TM Forum where Kevin Xu, Senior Consultant and Presales Manager from Marketing & Consulting, briefed me on some of the creative ways that Chinese mobile operators are going to market and partnering with other companies in the value chain.

Dan Baker: Kevin, what steps are mobile operators in China taking to monetize their networks beyond the usual service the introduction?

Kevin Xu: Dan, the challenge is helping the operator transform its business beyond conventional thinking.  And that’s where we can help.  The operator usually understands how to market 2G voice very well, but 3G data services is a different story.

For example, if I’m a 3G user and traveling to Orlando, our systems allow us to track the user by location in Orlando.  We can also check the user’s consumption behavior and if the user is traveling here using 3G services, the operator can analyze web traffic and drive relevant offers to the customer just like Google does online.

Now the data can also provide broader public assistance types of information.  For example, in 2010 at the World Expo Event in Shanghai, China Mobile was asked to provide the predicted number of travelers coming in and out of Shanghai.  So from mobile phone information, you can easily determine the age of the customer, which city he is from, when he arrived, and when did he leave.

How far along is mobile network policy in China?  How is that being implemented?

We call that trend CPC or Convergent Policy Control.  And the way it works on a 3G or 4G network is we discover the service being used.

Bandwidth Management

So web surfing or on-line chat generally requires narrow bandwidth.  But if you watch T.V., sports, or a movie online, it requires wider bandwidth.

Then the idea is to adjust the bandwidth automatically.  Besides that, we also can make fine adjustments to automatically improve the speed for VIP customers, for example.

And all this is controlled by the particular operator’s policy.  The key thing is our systems identify the customer, the application being used, and the time of day.  Time is very important because during rush hour, network congestion is such that we cannot afford to provide a speed improvement.

So we have already deployed the CPC solution in eight provincial centers in China.

Shopping Mall and Telco Alliance

Another interesting example is in a shopping mall.  When the subscriber enters the mall, he receives a welcome message on his smartphone, saying: “Hello, Kevin.  Thanks for coming to our mall.  Please visit the restaurant on our mezzanine floor where you receive a 10% discount on their lunch menu.  Are you interested?”

And if you indicate yes, then you’re taken to a web page that shows you the dishes and introduces the chef.  When you finish your lunch there, the bill shows the automatic 10% discount for lunch.  Now besides getting a discounted meal, you also enjoy the free internet surfing across 3G which is all paid for by the shopping mall.

Ok, so what’s happening behind the scenes?  Well, actually several partnering deals are going on.  For instance, the restaurant owners share some of their profit with the shopping mall.  The shopping mall, in turn, uses that profit to pay the operator for the 3G service.  So in this way the 3G consumers within the mall get to surf for free.  So this is a win/win strategy all the way around.

Advertiser Partnering for TV on Mobile Phones

Another local operator client is Jiangsu Telecom in east China.  Jiangsu Telecom has an agreement with one app service provider to allow subscribers to watch T.V. on their mobile phone.  The customer doesn‘t need to pay because the data usage fees are paid by the app company who inserts advertisement in the TV video and popup ads.

So the operator gets money from the app company.  Now AsiaInfo Linkage is coordinating all this activity under the covers.  Our first instance of this service was delivered China Telecom last year, but we expect much more subscribers to have access to it this year.

Partnering with Social Network Sites

Another partner is the micro-blogging site Weibo, the Chinese equivalent of Twitter.  Weibo has huge influence in China with more than half a billion users.

So China Mobile has relationships with social networking sites (SNS) like Weibo.  And users of Weibo, for example, get reduced rates.  In return, Weibo rewards China Mobile by promoting new product offerings.  So the SNSs become marketing channels for the telco.

AsiaInfo Linkage's BSS Architecture

AsiaInfo Linkage Architecture
Source: AsiaInfo Linkage

What’s mobile service like in China these days?  What’s the penetration of smart phones and how much do people pay?

Smart phone usage in China depends on a person’s income.  The well-educated people, especially in big cities, generally prefer to use Samsung Galaxy 3 or iPhone 5, iPhone 4S.  Yet even in relatively undeveloped areas of China, the smartphone is still very popular.  It’s just that the phones are supplied by a local domestic handset vendor.

The price of these local smartphones is only $100 U.S. dollars and the functionality is quite good.  So this is why most people under 45 years old are 3G smart phone users.

Today the old handsets are only for the seniors, or people living in poor areas.  The network in China is quite advanced with most urban and suburban areas supporting 3G.

The actual rates the user pays once again depend on the quality of the brand.  For instance, I use a premium postpaid brand called GoTone and I pay roughly $40 a month for 2 Gigs of download volume.

But there are cheaper packages that go for less than 10 dollars a month with hundreds of free minutes and probably half a gigabyte of data volume.  Prepaid, I should mention, is extremely cheap in China and costs the user something like one cent a minute as opposed to say 10 to 25 cents per minute for AT&T’s prepaid.

What’s the battle for BSS software look like these days in China?  I notice that Amdocs has recently exited China, so who are the current market leaders?

Dan, if you add up the market share for billing, CRM and business intelligence in the telecom market, AsiaInfo Linkage has more than a 50% market share.  The rest of the market is shared by the equipment vendors like ZTE, Huawei, and some three or four other small vendors.

Since we’ve been in business now for nearly 20 years, we’ve accumulated very rich experience not only on the product side but also in system integration and consulting, particularly to drive the consumption of services.

Our consulting services team in China has about 300 business operations experts on staff.  These guys help the operators discover and correct weak points in customer churn and figure out what products to offer and help figure out what retail and marketing partners make sense.

China Mobile has more than 32 branches around China.  More than half of those branches use our solution.  Basically we daily send a PSO team of dozens to a hundred to each of these branches.  So whenever the customer has a problem, they tell the team and we can get on the problem immediately.

Another role of PSO team is helping the operator run its daily work.  So we perform managed services work doing bill generation and optimizing server utilization.  We find that nowadays managed services are critical because the operator wants to be relieved of daily complex and boring work.  We try to fill that need.

Kevin, thanks for this interesting info.  Is AsiaInfo Linkage marketing outside of Asia?

Yes, since 2009, AsiaInfo Linkage has started to develop overseas markets and we’ve gained a couple of key customers during past years.  Nothing has developed in North America quite yet.  Our main areas of interest are Southeast Asia, EMEA which including Europe, the Middle East, and Africa.  We set up Product Marketing office and EMEA regional office in the U.K. in 2013.

Copyright 2013 Black Swan Telecom Journal

 
Kevin Xu

Kevin Xu

Kevin Xu is Senior Consultant and Presales Manager in  Marketing & Consulting at AsiaInfo Linkage.  He is an expert in software architecture design, telecom business processes, and BSS/OSS systems.  Prior to his current work he was a Global Trainer for Comverse Singapore and a Computer Lecturer at China Petroleum University.   Contact Kevin via

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