Hello Elisse,

Here is my report for the impact of handset leasing on the profitability of telecom companies and
whether our client i.e., Company X should consider going ahead with this model or not. My
recommendation is that they should proceed with handset leasing because the telecom market is
expected to grow by about $3.4 trillion by 2022.

Below are the reasons why I recommend this move:

Changing customer preferences

 The cellular traffic growth sees no end in sight and will continue to grow exponentially
driven largely by video applications especially in Europe by 2025.
 In terms of cash outlay, the customer pays about 50 per cent less over two years for a
mobile plan and a rental than for a similar plan with a handset they end up owning after two
years.
 28 per cent of SKT (South Korean Telecom) subscribers in their 20s prefer to lease. Men
accounted for 64 per cent of those signing up for lease plans.

Competitors who have introduced similar products and done well

 I found that one of the companies i.e., Rentomojo has managed to achieve a 3 folds growth
in revenue from operations which grew from Rs 35.5 crore in FY18 to Rs 107 crore in FY19.
 Among the top four US wireless players Sprint revenue amounted to 33.6 billion U.S. dollars,
in 2019 an increase of over one billion U.S. dollars from the year before (2018).
 Telstra in Australia also offers leasing plans, which generally cost about AUD10 ($7.38) less
per month than standard 24-month phone plan contracts. Customers can upgrade after 12
months for AUD99 and is performing good in market.
 SKT’s (South Korean Telecom) monthly rental fees are also substantially lower than
purchasing a premium phone with a contract plan.
 Another company of Singapore -Singtel offers a 10GB plan at SGD36 a month, so adding
SGD35 for the S9 rental, the monthly cost is SGD71. The total cost over 24 months is
SGD1,704. The company is working well in terms of profits as well as providing benefits to
customers.

Future Opportunities in Handset Leasing

 Technology is becoming more and more expensive. Leasing and financing are huge benefits
to the mobile channel because it can easily help them avoid paying over the odds for
handsets and similar products.
 Finance and leasing are such an attractive option as the businesses won’t always have the
cash upfront to fund the expensive devices.
 Lease Telecom over the last year has tapped the opportunity of providing finance and
approved more than £12 million in credit to businesses, with 50 per cent of those for
smartphones. At least £6 million accounted for over 750 Apple devices per month.

In conclusion, looking at the points above, our hypothesis is that this should be a profitable business
to venture into as Leasing in the telecom industry will be worth billions over the next few years due
to 5G and rising smartphone costs.
Sources:

1. Blog, Are smartphone rentals value for money?

2. Market Realist, Why Sprint Is Focusing on Handset Leasing to Accelerate Growth

3. BCG, Playbook for accelerating 5G

4. Deloitte Pages

5. A new lease of life for the handset market- LinkedIn