Last year the mobile phone market was shaped by four key factors: the dominance of the smart phone; heavy price discounting; a shift from text-based communication to Instant Messaging; and the rapid expansion of mobile data services usage. Smart budgeting for 2014 should respond to these market changes.
Capital Planning
Smart phones are much more expensive than the old flip tops, despite the increased price competition arising from Samsung’s aggressive positioning against Apple and Micosoft/Nokia. The majority of mobile calling vendors offer a ‘subsidy pool’ from which businesses draw when purchasing new or replacing old mobiles. These ‘subsidies’ are little more than a capex to opex conversion with opex increased as part of the monthly phone plan cost and capex reduced accordingly. Analysing the true cost of the subsidy and assessing whether it meets your planned replacement and new purchase requirements can save you from incurring a significant amount of wasted financial resources during the term of the contract. Note also that replacing a broken or lost phone from the subsidy pool will usually mean signing a new contract with a new expiry date. The ‘break fees’ associated with contracts provide vendors with a useful mechanism to discourage you from moving to a better deal with a new supplier when the main contract expires.
Expense Planning
It has been our sad experience that loyal customers come off second best when it comes to getting the best deals from their mobile providers. If your mobile contracts are expiring this financial year it is important that you plan for both price reductions and increased consumption. Your vendor, however, may not be keen to assist!
In a typical situation we have seen vendors offering to roll over existing contracts at the same or only slightly lower rates while assuring their clients that this was the best deal available only to have new offers emerge when the vendor discovers that the client is testing the market.
A recent example saw a customer presented with a choice between a 6% or 7% decrease on their existing rates.
After a deeper review by Total Utilities an additional 11% reduction was offered, and then, after we demanded plan optimisation this was increased by a further 19%. All up a 33% saving was offered after an initial 7% by a vendor assuring their client that this was the “best we can do”.
Typical offers should include.
– A review of the existing plans with offers to align to new, improved plans. Sadly these ‘reviews’ often fail to consider free mobile to mobile and landline to mobile calling minutes within an organisation (assuming they are part of the original offer at all)
– Much improved offers on calling rates. Expect to go to the market to force change here.
– New offers that pool data services for the business as a whole (be careful to consider growth – see data charges)
Consumption Planning
We have already referenced the move from texting to Instant Messaging (IM) services. Offers of hundreds or even thousands of ‘free’ texts are meaningless if all you are doing is paying in advance for texts you never use!
What a supplier presents when delivering their offer can be vague. There is usually talk of ‘free minutes’ but are they chargeable minutes? Often many calls are internal to a company or to regular suppliers and customers and these calls can be free as part of the contract. Analysis is everything.
The explosive growth in mobile data consumption will continue unabated for several years to come. Business planners can certainly expect to build data growth and its costs into their forecasts on any reasonable budget horizon up to five years. Expect to measure price reductions against consumption increases when planning your budget.
The arrival of 4G mobile data services will see more data available at higher speeds and lower per unit costs. Will your contract allow you to take immediate advantage of this?
Putting in place a budget plan for Mobile Services
Total Utilities recommends a careful review across all facets of your mobile budget plan. (You can do this yourself or ask us to do it for you). The key actions for you to include in your budget planning and execution include:
Avoid – budgeting for mobile costs based on previous expenditure. Market pricing, service offerings, contract conditions and consumption patterns are all evolving rapidly. Last year’s usage, while useful as a benchmark, is unlikely to help you find savings, efficiencies and improved business agility for the future.
Review – your current usage patterns and trends to provide a benchmark against which to build a valid financial and consumption model going forward.
Overlay – the trends to increased mobility, greater data consumption and the need for business agility when deriving mobile budget costs and selection decisions
Ask – Stakeholders for their key considerations. Even the act of asking can be seen by many people as a desire on your part to take account of their needs in your decision. Listen carefully – you may be surprised what drives the priorities for your key colleagues.
Refuse – to accept that greater use of and consumption by mobile devices means that increased charges are inevitable. It is more than possible to make savings while at the same time increasing consumption, improving business effectiveness and responsiveness and maintaining contract adaptability.
Demand – A better deal from your existing provider. If they are reluctant then ask Total Utilities for help. We will work on your behalf to meet your business needs while ensuring all parties get a fair chance to put their best foot forward. We are vendor neutral, take no commissions or incentives from vendors and always focus on finding the ‘best price’ not necessarily the least price when helping a client select a suitable mobile vendor.