Maxis adopts hook strategy with LTE

• Attractive pricing plan for handset shows telco is adopting proven strategy
• US operator Verizon switched away from premium pricing, reaping benefits too

WITH Maxis Bhd taking a market leadership position in Long Term Evolution (LTE) rollout in Malaysia, first with its dongle and now with its handset offering, it is timely to ask two questions: Will the LTE market be a handset-dominated one, a dongle one or a combination of both? And, will Maxis adopt a premium positioning with its LTE offerings or use LTE as a hook to get users to pay for higher data packages?
 
At a January meeting Digital News Asia (DNA) had with Maxis, its joint chief operating officer Mark Dioguardi chose to keep his cards close to his chest about its pricing and positioning strategy, but did say that Maxis will not make the mistakes other operators did.
 
With the launch of its Feb 9 pricing plan for its two LTE handsets, Maxis is clearly going with the hook and not premium strategy. Its 4G package is superior to what it offers customers on 3G.
 
With Maxis halfway through its Q1 2013 period, a proper impact of its LTE offering will only be seen in its Q2 2013 period which runs from April 1 to June 30.
 
As to the question of LTE being a dongle or handset market, “This is a handset market, make no mistake about it,” says Leslie Shannon, head of strategic marketing, Middle East and Asia, at Nokia Siemens Network (NSN).
 
As part of her role, Shannon has been following LTE developments not just in the region but globally. She was speaking to DNA via conference call from Espoo, Finland.
 
Her belief that handset offerings will determine the success of LTE 4G networks is also borne by the fact that 91 million LTE handsets were sold last year versus six million LTE dongles and 3.5 million LTE tablets.
 
“LTE handsets outsold other LTE devices by a factor of 10 to 1,” she exclaims, pointing out that the handsets can also double up as dongles.
  
Shannon points to the lessons US wireless carrier Verizon learned in its LTE experience. It started offering LTE in December, 2010 with a premium pricing segment based on dongles.
 
It was only last June that it did something very interesting. It stopped differentiating between 3G and 4G and just offered customers mobile broadband packages.
 
Customers who happened to have LTE phones and were in areas with LTE coverage would automatically enjoy LTE speeds. And just last month Verizon announced that it would stop investing in its 3G network and only sell LTE-capable devices. “They have created the ecosystem for LTE,” notes Shannon.
 
This was the same approach taken by the telcos in South Korea and has been proven to work well. The reason for not pricing LTE at a premium is simple: Telcos earn more revenue from LTE simply by virtue of LTE users consuming more data and taking higher value packages.
 
Shannon noted that Verizon’s recent Q4 2012 results showed its wireless subscriber base adding a record 2.1 million customers and 9.8 million smartphones being activated too, which she attributes to the strategy of just offering mobile broadband without segmenting between 3G and 4G.
 
In contrast, European operators which launched earlier than Verizon have stuck with separate packages for 3G and 4G, and have priced 4G packages at a premium and with a heavy dongle focus versus the handset focus of Verizon and the successful Korean telcos.
 
When this segmentation happens, customers do not get to experience LTE and telcos are left fishing for customers among the early adopters and fast followers, typically a smaller segment of their total user base.
 
There’s another problem too, Shannon says. “Customers remember how they were lied to by operators about the promise of 3G all those years ago and so they are not going to bite with LTE if there is a segmented approach. Plus, those on HSPA+ already enjoy a really good experience, so why bother,” she says.
 
But herein lies the irony, “because LTE is really fantastic,” she enthuses. Sharing her own experience in Korea, the telcos will throttle LTE customers to 7Mbps from the 50Mbps they get on LTE, “and that is really painful,” she says, adding, “the rest of the world would kill for 7Mbps!”
 
But it is not just the speed that is great, the latency is vey low and it all adds up to a great user experience she says, stressing a point that was made by Maxis when announcing its LTE handsets.
 
Meanwhile, the market waits to see when Celcom and DiGi have their LTE rollouts.
 
Related Stories:
 
Maxis claims first to launch 4G LTE service
 
Maxis rolls out LTE-powered smartphone offers
 
LTE is good to go, so now what?
 
MCMC issues spectrum for 4G
 

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