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MegaFon charging towards smart pipe

MegaFon charging towards smart pipe

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MegaFon saw its subscribers reach 48.061 million in Q3 2009, accounting for 23.6 percent of the total Russian market. In contrast with Q2 2009, it increased 0.5 percent. Maximum concurrent online user number increased from 1200K to 2000K in 2009. And the volume of data service increased more than five-fold from 254.4 terabytes in January to 1,318.1 terabytes in December of 2009. The average monthly traffic per subscriber during the same period increased from 7 megabytes to 34 megabytes. Data service revenue in 2009 grew by 50% over 2008 to 361.65 million USD, accounting for 33% of total VAS revenue, compared to the figure of 28% in 2008. In Q4 2009, data service revenue for the first time exceeded that of SMS. Part of the success can be attributed to the package traffic charging platform (PTCP) which enabled MegaFon to smartly benefit from the mobile data growth.

Challenge facing data service development

With explosive growth of Russian telecom market since 2000, voice services finally reached a saturation point in 2006 and increasingly fierce pricing war among operators led them turn to data service for growth and profit.

With the development of mobile data services, operators are mostly worried about becoming merely a channel of data services. Increasingly, more and more operators begin to seek the transformation from pipeline operator to smart operator, providing intelligent, differentiated services in line with subscriber needs and habits in the context of recommended service offering.

It is clear to MegaFon that PTCP, being the foundation for operator transformation, is of vital importance to operators' development. Traditional charging policy based upon traffic or duration inevitably leads to homogeneous competition and pricing war, which calls for a radical change. Additionally, with most of the Russian subscribers opting for prepaid mode, featuring high price sensitivity and poor credit, issues of high churn rate and bad debts are a natural result. All of these call for the transformation of operators toward smart pipe for data services.

Call for a new charging platform

Faced by the decline of ARPU, slow growth, high churn rate, increased bad debts, and other issues, MegaFon performed an in-depth analysis and found the following three constraints:

First was the single billing measure. Data services are mainly about providing content. The essence of content services is the content itself, and not the content carrier. The traffic or monthly billing models based on a uniform rate will not indicate the value of the content itself, and do not provide differentiated services to subscribers. This calls for content-based billing.

Second was quasi real-time billing. The original billing platform can only provide the real-time billing of voice services and prepaid model, and not real-time billing of data services. However, in the development of data services, it is important to control the real-time consumption of subscribers. A billing platform must have accurate, real-time billing capabilities and clear consumption prompts.

Third was extensive network management. The key of data services development is to provide accurate content to the right target subscribers. Operators can improve the ARPU only through this method. On the contrary, when the provided content does not meet subscribers' requirements, it will easily lead to their dissatisfaction. In the past, MegaFon' s network control was weak, and did not meet the requirements for accurate customer positioning.

In early 2007, MegaFon kicked-off a package traffic charging platform project throughout its entire Russian network. Among many participating vendors, Huawei was selected as a partner based on its test performance, accurate grasp of the available management, control of demands, and fitting in with MegaFon' s concept of value-added development.

Content charging platform holding the key

With Huawei' s content charging platform, MegaFon could realize access via multiple technologies and separate service control from network access, which helps reduce investment considerably. The content charging platform boasts powerful DPI function, making it possible for fine-tuned management.

Meanwhile, MegaFon could utilize this platform to develop service statistics function quickly, like service ranking, bandwidth consumption distribution by service/subscriber, service quality ranking and log of subscriber survey, to realize operation visualization. With real-time subscriber follow-up and monitor system, MegaFon could easily follow up on services utilization by subscribers and interface status among network elements based upon subscriber' s mobile phone number and thus guarantee the effectiveness of service operation.

MegaFon started service control gateway (SCG) deployment in 2008 and implemented different charging policies according to customer contracts and service attributes. Taking level-based charging for example, MegaFon has different charging policies to combine different traffic, duration, fixed rates and content. This helps ensure the growth of higher-value services like email, streaming media and music. Also, it helps prevent the use of insufficient balance accounts and has boosted MegaFon' s mobile data revenue by 20%.

MegaFon deployed its operation analysis center and mobile advertising platform in early 2009 to measure customers and traffic by categories like sports, finance, automobiles, travel, and food. Through pricing and control policies, MegaFon developed high-value services, such as MP3, travel and sport offering. Then they delivered targeted ads to selected subscribers with special interests in music, film and sports. As a result, MegaFon actually increased its customer base and revenue amid the economic downturn.

Prepared for the future

With the content charging platform, MegaFon realized rapid growth of data services and successfully transformed into smart operator, fine-tuning its management in terms of service control, content charging, subscriber behavior analysis, content optimization and customized security guarantee.

As a result, MegaFon is capable of focusing on segment market, and providing tailored packages at higher performance/cost ratio to subscribers of different groups or regions, like student, retiree, small business and large company. More new services are released for targeted subscribers after in-depth exploration into subscriber need.

In addition to the surging growth in subscriber number, MegaFon also saw its subscriber ARPU jumping to the top slot in Russia market.

As MegaFon Group CEO Mr. S. Soldatenkov remarked, "Huawei did well to help MegaFon analyze the complex network status and requirement, and completed all the integration works. Moreover, Huawei provided a wealth of new features and long-term product roadmap. PTCP platform occupies a very important position in MegaFon' s future-oriented strategic layout. We are confident that with Huawei' s support, this platform will become an important business growth pole in MegaFon."

With the maturity of mobile voice service, mobile data service becomes not only the new area of focus in the industry, but also strong propelling drive behind society development toward smart networked society. For this, operator' s role in leading the industry chain and controlling the pipe via lean management is of instrumental importance. MegaFon provides a valuable reference and example for moving into the right direction.

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