Report exposes rampant prepaid churn in APAC operators

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Prepaid churn so high in APAC that operators must replace their entire subscriber base every two years, on average. A new report exposes rampant churn and missed opportunity in India, Malaysia, the Philippines and Thailand.

Strategy Analytics and Juvo, a pioneer in mobile Identity Scoring for financial and digital access, launched the study uncovering the hidden reality of the prepaid mobile market in developing economies in the Asia-Pacific region, as well as Latin America and Africa.

Though prepaid is the dominant form of mobile connection – accounting for 71% (5.7 billion) of global mobile connections and 32% ($265 billion) in service revenues in 2018 – very little research has been conducted in the space. The report, “Death by a Thousand NOs: Putting the Profit Back into Prepaid”, reveals a high-margin market where billions of dollars of operator OPEX are being wasted annually as operators acquire and re-acquire constantly churning customers, and where opportunities to drive loyalty and launch new services are being missed.

The study analyzes eight prepaid-dominant markets: India, Malaysia, the Philippines, Thailand, Argentina, Brazil, Mexico and South Africa. In the four APAC markets alone, operators wasted $397 million last year replacing lost prepaid subscribers.

The Prepaid Market in Developing Economies

Prepaid is even bigger business in developing economies. Prepaid services account for 82% of connections and 50% of revenue in developing Asia-Pacific markets; 94% of connections and 80% of revenue in Africa; and 70% of connections and 32% of revenue in Central and Latin America.

In contrast to popular belief, prepaid is a strong source of profitability for developing market mobile operators in APAC, with EBITDA margins falling in the 45-55% range (aside from India where Reliance Jio cut the price of service by more than half and created significant downward pressure on pricing).


However, in the APAC markets studied, prepaid churn in the last year ranges from 3.8 – 6.6% per month (45-80% per year, compared to 16% per year for postpaid). This means, on average, operators have to replace their entire prepaid subscriber base every two years.


In the APAC markets analyzed, high churn is having a direct impact on operator bottom lines. In the last year, 86% of subscriber acquisition cost expenditure was devoted to replacing churning subscribers and just 14 percent to subscription and revenue growth. To put that into context, subscriber acquisition costs accounted for 2.9% of prepaid OPEX and 1.8% of prepaid service revenue. Over that period, the operators in these markets spent $397 million on replacing lost prepaid customers.

A New Prepaid Proposition

The prepaid business is a constant race against time, with customers at their highest risk of churning during low balance periods. Mobile operators have to change their relationships with prepaid customers in order to change the churn dynamics. To shift from a customer acquisition mindset to a new prepaid value proposition focused on consistently and constantly driving retention, loyalty and added value.

Operators must leverage every single interaction with their customers to build more personalized, deeper identity-based relationships. This means using transaction data like topping-up prepaid airtime, repaying progressive airtime credit and rewarding positive behaviour along the way to build financial identities for customers. Consistently incentivizing customers to move up the ladder unlocks access to new, higher value products and offerings like handset financing and other financial services. All of those benefits evaporate if a user suddenly decides to grab another SIM card and leave the operator’s network. Retention of that user not only saves money, it creates a financial identity that is the foundation for new revenue streams.

Operators that reduce churn and create a more sustainable acquisition engine can maximize their gains in one of two ways:

  1. The first option is for operators to ‘bank’ their gains of reduced churn. Increased loyalty alleviates the never ending pressure to spend quickly, become more profitable and maintain a desired growth rate. Reducing churn by 20% means an operator’s subscriber acquisition cost expenditure would fall by 18 percent – a 0.5% reduction of prepaid OPEX – and improve prepaid EBITDA by 0.8%.
  2. The second option, of specific interest to ‘early movers,’ is to maintain subscriber acquisition cost expenditure and grow market share. On average, if an operator in one of the eight markets had taken this decision in September 2017, reducing churn by 20% means prepaid service revenue would have been 4.7% higher and EBITDA 4.9 percent higher in the year to September 2018.

Polsky continued, “establishing longtime prepaid loyalty is possible and can unlock massive financial opportunities for operators. The purpose of Death by a Thousand NOs is to shine a light on the prepaid market and to highlight the economic impact that saying ‘NO’ by default is having on the operator’s bottom line. We want to prove that by saying ‘YES’, both prepaid customers and operators win.”

The report, Death by a Thousand Nos: Putting the Profit Back into Prepaid, is available for free download here.

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