New Microcell strategy focuses on easy customer acquisitions, high growth areas

Microcell Telecommunications Inc. has discontinued its wholesale business, scaled back corporate market activities and is now focused almost entirely on the consumer retail market as it fights to survive in the highly competitive wireless telecommunications sector. Earlier this month, the struggling wireless operator reached an agreement with its bankers and noteholders on a recapitalization plan that will keep the Montreal-based company solvent. The agreement was unveiled on January 6, the same day the company filed for protection from creditors under the Companies’ Creditor Arrangement Act (RoW Update, Jan. 13/03). Primary strategy detailsscale back activities not related to the consumer retail PCS business; allocate resources within the PCS division primarily to activities with a high impact on the customer base; target retail consumer segments with the highest growth potential, such as the youth, young adult and urban professional markets, as well as small office/home office business users; adopt a "fast-follower" approach to wireless data to reduce the costs and business risks associated with new product and service development; leverage the customer base by offering enhanced voice-related and SMS-based services to encourage incremental usage and to maintain ARPU; invest in customer retention programs, and ensure customers are matched to the right payment method;focus network capacity and maintenance, rather than footprint expansion; discontinue active solicitation of wholesale business, while continuing to support existing third-party service providers.In documents released publicly earlier this month, the company notes that its new strategy is a recognition of challenges associated with slower than expected wireless data adoption and the difficulty in acquiring and supporting business accounts. "Accordingly, the company has adjusted its strategic direction to focus primarily on core PCS voice operations within the retail consumer market segment," Microcell writes. Wireless data services and the ensuing revenue was highly touted by all players in the wireless industry, but it appears the hype has been reduced to hope. As an example, Microcell predicted in October 2001 that mobile wireless data services would account for 25% of its gross revenues by 2005 (RoW, Oct. 2/01). That’s a far cry from the newly anticipated level of only 3% of total service revenues by 2008. As a result, the company has developed a new post-paid marketing strategy concentrating on big-minute bundles, per-second billing, no contracts, global roaming and competitive long distance rates. On the pre-paid side, the new marketing strategy centres around flexibility, spending control, simplicity, convenience and mobile replenishment. "This market positioning should enable the company to acquire its fair share of new subscribers and to maximize its cash flows through focusing on certain higher growth market segments …," Microcell states. (See box for detailed list of Microcell’s business strategy.) Following the complete implementation of this new business strategy, the company offered up some aggressive growth projections for itself. It also unveiled its projections for the wireless sector as a whole. Underlying the wireless operator’s plan, Microcell predicts that the Canadian wireless industry will reach a penetration rate of 58% or 18.8 million subscribers by 2008. The company projects that it will double its current subscriber base to 2.4 million during the same period, which would increase its market share from about 10% to 13%. During this five-year period, the company plans to dramatically alter its pre-paid/post-paid customer mix by adding 70% post-paid in 2008 compared to 50% this year. Microcell believes attaining this level of penetration won’t prove too great a challenge since its total cost of acquisition (COA) for a retail subscriber is in the $250 to $300 range. COA for the other three national wireless operators is well over $350 and has seen levels of nearly $500. The significant cost difference can be attributed to the differing marketing expenses and customer-retention programs of the various carriers.

New Microcell strategy focuses on easy customer acquisitions, high growth areas

News | January 20, 2003

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