Getting to know the 'sophisticated' prepaid user

By Karen Flores,

Posted at Dec 20 2009 01:58 AM | Updated as of Dec 28 2009 06:22 PM

MANILA, Philippines - Local telecommunications firms have attracted millions of prepaid subscribers to their networks through the years. But as most Filipinos struggle with limited resources and rising prices as a result of the economic crisis, how do these companies get each subscriber to spend more on prepaid credit?

Unlike postpaid subscribers who pay their bills every month, which can reach thousands of pesos, prepaid users usually purchase top-ups in small amounts to make calls and to send text messages.

Prepaid subscribers currently account for more than 95% of mobile phone users in the country.Getting to know the 'sophisticated' prepaid user 1

Prepaid users may usually belong to the low-income segment of the market, but they are actually very sophisticated, according to Globe Telecom Inc. president and chief executive officer Ernest Cu. With the wealth of bucket-priced offerings at their reach, he said these users have learned to shop for the cheapest call and text promos, posing a challenge to profit-seeking telecommunications firms.

"(Prepaid users) are not simpletons. They're very sophisticated, they know how to use the service. They are our most important segments, and they are a big challenge to us," Cu told in a recent one-on-one interview.

From January to September, a Globe prepaid subscriber spent an average of P247 a month, data from the company's financial report showed. This is 11% lower than the P279 per month recorded in the same period last year.

Touch Mobile (TM), Globe's mass-market prepaid brand, also recorded an 11% drop in gross average revenue per subscriber (ARPU) at P125 from last year's P140. This as some prepaid users tend to go in and out of call and text services based on their immediate budget and needs.

"It's important to know how our prepaid customers think. If you're a telco, how do you convince a farmer to spend his money on prepaid load over food? And how can you make him choose you over the other telco? How do you keep him spending? That's where the challenge is," Cu said.

The declining ARPU trend can also be seen in Globe's rival, Philippine Long Distance Telephone Co. (PLDT), which houses Smart Communications Inc., Talk 'N Text, and CURE. For the first 9 months of the year, the mobile phone giant's gross ARPU for prepaid subscribers dropped 13% to P221.
"There was a decline in average outbound and inbound domestic voice and text messaging revenue per subscriber in the first 9 months of 2009," PLDT said in its financial statement.

Race to the top

For the longest time, local telecommunications firms have fought over who has the larger network of subscribers. Last August, however, Globe decided to scale back on its direct-to-subscriber campaigns to focus more on encouraging users to make more calls and to send text messages.

"At the end of the day, Globe's goal is to generate revenues for a continuously growing company," Cu was earlier quoted as saying.

As of end-September, Globe had 23.1 million subscribers from last year's 23.7 million. Of the total net reductions, the company said 1.1 million came from TM while the balance came from the Globe prepaid brand. 

"With the launch of improved sales and acquisition campaigns, improvements in subscriber net acquisitions are expected in the latter part of the year," Globe said.

PLDT, on the other hand, had some 39.14 million subscribers as of end-September, posting a 15% increase from last year's 34.18 million. 

"Because the growth in our cellular subscriber base was mainly in the lower-income segment of the Philippine wireless market, average monthly cellular ARPUs for the first 9 months of 2009 was lower as compared to the same period in 2008," PLDT said. 

Both PLDT and Globe offered similar voice call promos and SMS packages for prepaid users during the 9-month period to sustain growth momentum. 

But with PLDT in the lead in terms of subscribers and revenues, how is Globe planning to convince the "sophisticated" prepaid user to avail of the company's services?

For Cu, it's not only about just improving Globe's voice and text messaging services, but also about improving Globe as a brand. That way, he said customers would prefer Globe over other brands even if they offer the same services.

"Our ambition is to be the Apple of the telecom world," Cu said.