Restricted - Confidential Information

© GSMA 2009

All GSMA meetings are conducted in full compliance with the GSMA’s anti-trust compliance policy

The MMU programme is funded by a grant from the Bill & Melinda Gates Foundation

Paul Leishman, MMU ManagerFebruary 2011, Barcelona

Is there really any money in mobile money?

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Our research and analysis process

Analysis of data from MMU fund grantees

Interviews with mobile money practitioners

Deep-dive on MTN Uganda’s MobileMoney

1 2 3

GSMA Financial Model

• Developed based on GSMA interviews and collaboration with MTN Uganda• Populated with actual data from MTN Uganda• Considers every impact, good or bad, that mobile money can have for an MNO

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Market: Uganda• Population• Mobile Penetration • Access to Finance • GDP per capita

Operator: MTN• Connections• Market share

Deployment: MobileMoney• Accounts

4.8 mil

40%

960,000

32 mil

35%

20%

US$1,147

Active Customers

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Mo

nth

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Mo

nth

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Mo

nth

11

Mo

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12

Mo

nth

13

Mo

nth

14

Mo

nth

15

Mo

nth

16

P2P Transfers Per Month

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Mo

nth

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14

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Uganda and MTN Uganda’s MobileMoney

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The findings…

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Is there really any money in mobile money?

-$4,000,000

-$3,500,000

-$3,000,000

-$2,500,000

-$2,000,000

-$1,500,000

-$1,000,000

-$500,000

$0

$500,000

$1,000,000

Month 0 Month 6 Month 12 Month 19

Total Costs

Total Revenues

Monthly Net Cash Flow

Cumulative Net Cash Flow

Monthly Revenue

Monthly Cash Expenses

Monthly Net Cash Flow

Cumulative Financing Requirement

MTN Uganda’s MobileMoney: Cash-Flows

MTN Uganda’s MobileMoney is now cash-flow positive on a month-to-month basis, just 14 months after their launch

MTN’s cumulative financing requirement was less than US$4 million dollars

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Where does the money come from?

52%

12%

33%

3%

Money Transfer Contribution

Airtime Distribution Savings

Retained ARPU from Churn Reduction

Uplift in Voice/Data Consumption

Retained ARPU from churn reduction

Airtime distribution savings

Money transfer contribution

Uplift in voice/data consumption

MTN Uganda’s MobileMoney: Contribution to Gross Profit

Highlights

• 52% of MTN Uganda’s MobileMoney gross profit to date has come directly from their money transfer service (fees minus agent commissions)

• Indirect benefits combined account for 48% of the gross profit generated to date

• Churn rate for mobile money customers has been no more than 0.2% per month compared to 4.5% per month on average for non-MobileMoney customers.

• 3% of total monthly airtime sales now flows through MobileMoney – at roughly a 9% discount.

• MobileMoney customers consume slightly more voice and data than do non-MobileMoney customers.

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How much must operators invest before earning a profit?

21%

11%68%

Year 2

Fixed costs

Step costs

Variable costs

TotalYear-1

Year-2

Variable Costs

Step Costs

Fixed Costs

44%

12%

44%

Total

Fixed costs

Step costs

Variable costs

73%

13%

14%

Year 1

Fixed costs

Step costs

Variable costs

MTN Uganda’s MobileMoney: Cost Breakdown

The financing requirement for a successful mobile money service will ultimately be driven by step and variable costs.

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Key learnings…

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How can operators maximize direct revenues?

56%

44%

Revenue from Reg:Reg Revenue from Reg:Unreg

Revenue from transfers to registered customers

38%

62%

Transfers to registered customers

Transfers to unregistered recipientsAverage volume of transfers to registered customers

Average volume of transfers to unregistered recipients

1 Enable transfers to unregistered recipients

44%

18%

18%

18%

3%

MTN

Zain

Warid

Uganda Telecom

Orange

44%

18%

18%

18%

3%

MTN

Zain

Warid

Uganda Telecom

Orange

Mobile market share% Transfers to

unregistered recipientsRevenue from

unregistered recipients

Revenue from transfers to unregistered recipients

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How can operators unlock churn reduction benefits?

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

Month-1 Month-2 Month-3

Mon

thly

Chu

rn

Active MobileMoney Customers

Registered MobileMoney Customers

MTN Customers (excluding active and registered MobileMoney customers)

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

Month-1 Month-2 Month-3

Mon

thly

Chu

rn

Active MobileMoney Customers

Registered MobileMoney Customers

MTN Customers (excluding active and registered MobileMoney customers)

Churn Rates: MTN Uganda 1 Good execution•provide access to a liquid agent network•quickly resolve issues via customer care

2 Educating customers upon registration•churn reduction benefits, not surprisingly, are highest for those customers that are active

3 Targeting lapsed customers•targeted SMS activities or outbound calls to lapsed customers can help trigger activity and unlock churn reduction benefits

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How can operators unlock airtime distribution savings?

2 Promote specific uses of airtime top-up in above-the-line marketing

3 Use contests and draws as a substitute for permanent discounts to avoid negating savings.

1 Gauge the size of the opportunity

“Top-up with mobile money after hours”

“Top-up with mobile money in any amount”

Illustrative Data

Size of discount paid for selling scratch-cards

Cost of card production, inventory, and fraud

Cash-in commission paid to agents

Customer discounts and agent commissions

Opportunity

9%

3%

0.5%10%

1.5%

+

––

=

“Old” scratch-card related costs mobile money can eliminate

“New” costs that are part of facilitating mobile top-up

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How can operators drive increased consumption of voice/SMS?

56%

44%

One SIM Multiple SIM

Incidence of multiple SIM in the Philippines (2009 survey)

Use of mobile money SIM as primary (2009 survey)

Potential up-side for MNO is immense – but airtime top-up

cannot be the only service at play.

56%

44%

One SIM Multiple SIM

68%

32%

Mobile Money SIM is primary

Mobile Money SIM is not primary

32%

68%

Mobile Money SIM is primary

“Please indicate how many SIM cards you carry”

“Which SIM card do you use as your primary SIM?”

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How can operators manage their costs?

2 Ensure SIM strategy is aligned with growth projections

1 Protect highly strategic, comparatively inexpensive activities

Cash-in/cash-out commissions

Customer acquisition & registration costs

Agent network costs

Technology costs

ARPU loss from discounting

Selling expenses

G&A

MTN Uganda’s MobileMoney: total costs to date

Agent network costsCustomer acquisition and registration costsCash-in/cash-out commissionsTechnology costsARPU loss from discountingSelling expensesG&A

Agent network costs

Customer care

3 Focus on active customers – not just registrations

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Summary

1 MTN Uganda has illustrated that there is money in mobile money...

2 ... And that roughly half of the value comes from indirect benefits, including reduction in churn, savings from airtime distribution and uplift in consumption of voice and SMS.

3 It’s difficult to say how much an operator must invest since the financing requirement is driven by variable and step costs...

4 ... But success will only materialize for operators that bet on their own success with investments in marketing and staff.

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Q&A