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Magyar Telekom M-Payment Strategy

ISP Project
by

Jann Lau

on 20 April 2010

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Transcript of Magyar Telekom M-Payment Strategy

(Pre)
SWOT Mobile Payments : Paying for Itself OPPORTUNITIES STRENGTHS THREATS WEAKNESSES Established in 1989

Subsidiary of Deutsche Telekom
60% owned by Deustche Telekom
40% owned by public and Hungarian government

Market Leader in Hungarian telecommunications industry

Integration Effort
Organizational Restructuring in 2009
Spread of Fixed and Mobile Departments under BBU, CBU, Macedonia, and Montenegro
Service Integration under BBU division

10 member companies in Hungary; and 6 international member companies
Overview of Magyar Telekom Strategy Initiatives Increase Cash Flows Increase Profitability with Minimum CAPEX Expand non-voice services Diversify and Improve ARPU Mobile Payment Service Why Mobile Payment? Brand Equity

Telecommunications Market Leader

Powerful strategic investor in Deustche Telekom (DT)

Wholly owned full-service subsidiaries in CEE region



Competition from Vodafone, Pannon, and smaller competitiors

Stagnation of domestic fixed-line market

Mobile market nearing saturation point

Migration away from fixed-line services towards ADSL and other broadband technologies

Low ARPU

Domestic fixed-line revenues and subscribers declining

Mobile revenue growth declining due to rising tariffs

Local loop unbundling = increased pressure from competition in fixed-line market

Low autonomy regarding expansion opportunities as DT's subsidiary

Corruption Scandal Growing market competition in Hungary

Declining fixed-line revenues

Strong growth in Hungarian internet and broadband markets offsetting voice-service declines

Increasing regional investments in face of lack of growth opportunities domestically

First operator to launch VDSL2+ technology in parts of Budapest

Economic Recession Trends in the Telecommunications Industry Conclusion Increase Cash Flows Diversify and Improve ARPU Increase Profitability with Minimum CAPEX Expand non-voice services Telecommunications Industry Analysis Analysis of MT's Resources 2011 2012 2013 2014 2015 Mobile Payment Service Strategy Timeline Questions? 2016 Nationwide retail roll-out; 33,766 POS readers Expand adoption of m-payments by industries Evaluation Phase Identifying Financial Services Partners Initial 6-month Test Phase Largest financial services provider in Hungary
46% Total Profit of Hungarian Banking Sector in 2005
Largest bank card issuer (2005: >3.3m retail debit cards,
>250k credit cards) MasterCard, Visa, and AMEX collectively process >90% payments between the banks of merchants and the banks of purchasers Encourage Existing MT Customer sign-up Target Revenue: 100M HUF
Install NFC Readers in retailer
terminals with POS machines

*CASE STUDY: SK Telecom (2003) Mass invites through monthly bills to mobile subscribers
Marketing through existing MT retailers and OTP branches
Incentive program for early adopters Identify Off-Shore Manufacturer to Purchase SMART SIM Cards and NFC Readers from *The Payment Card Business in Hungary *Central Bank of Hungary Revenue Assumptions: Cost Assumptions: Credit usage in Hungary grew 23% per annum for last 6 years;
- We expect 20% annual growth in next 5 years
15% Existing MT Customer sign-up;
- 20% signees to replace credit card with mobile payments
User base to grow 30% annually for next 5 years
MT receives 1.3% of transaction value Purchase and install 200,000 SMART SIM cards per year @ $5 per SIM
Install NFC Readers in all 33,766 retail terminals in year 1
Maintenance Cost = 1% of revenue
Marketing Cost = 5% of revenue
Est. 300M HUF for Set-Up, Test Phase, and P'ship (Post)
SWOT OPPORTUNITIES STRENGTHS THREATS WEAKNESSES Stronger relation with customers

Differentiation from competitors

Increase in ARPU

Relationship with Financial Institutions Low barrier to entry in mobile payments

Unstable macroeconomic conditions

Uneducated consumers Insight into consumer spending habits

Synergy effects in marketing

Growing credit card usage Decline in Fixed-Line revenue

Potential Privacy Rights of consumers

New line of business vulnerable to regulation changes What is a 3G SMART SIM Card? 2G and 3G compatible SIM
Customer’s bank card number is linked to their cell phone number.
Thus, mobile phone acts as a debit/credit card. What is an NFC Reader?
Wireless communications technology which allows for the transmission of data between two NFC enabled devices, such as a mobile phone and a POS register, when held 10 to 20 cm away from one another.
ISO/IEC 14443 standard RISKS: Technology doesn't catch up

Security of personal information

Potential system safety risk

First mover disadvantage

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