Dear Elisse,

Here is my report on the market research conducted on behalf of our client Company X, on whether
they should explore the idea of handset leasing to drive improvements in profitability. My
recommendation is that handset leasing is an idea that should be pursued because competitors in
other markets such as the US and Singapore have seen rather vast success with this business model.

Below are the reasons why I recommend this move:

Changing Customer preferences

 With the rate at which phone upgrades are presented to the general public, people no
longer wish to purchase a phone they may have to replace in a couple of years.
 The 5G revolution, and its exclusivity to certain mobile devices has driven the demand for
handset leasing plans.
 SKT, a telcom service in South Korea, released a leasing service on June 1st, 2018. By June
27th, 28% of its new customers were signed up to the service.1

Competitors have introduced similar products and done well

 Companies in the US, Singapore, and Austrialia have boosted their revenue and subscriber
base compared to the industry average when the existence of a handset leasing service is
isolated as a variable.
 Leased devices net the telcom company ‘Sprint’ ~$4.2 billion at the end of fiscal 4Q16.
During fiscal 4Q15, this figure was ~$3.6 billion.1
 Offering a handset leasing service in place of a sim-only plan can mitigate the loss in ARPU
from 54% to 5%.2

Increased competition from MVNOs

 The competitive pricing strategy and large data package promises of MVNOs cracks down
on the profit potential of telcoms which increases competition within the sim-only market
 Telcoms have to provide some further advantage over MVNOs to remain competitive
instead of lowering price of their Sim-only plans, which will continue to squeeze margins
negatively.3
 Traditional handheld packages have less success in countries such as India where a large
portion of the population are prepaid, thus a handheld leasing strategy could combat the
1
Blog: Are smartphone rentals value for money? - Mobile World Live
2
https://www.researchgate.net/publication/
344482743_Handset_Leasing_and_Telecommunication_Sector_and_Operators
3
Telecom Sector (phillip.com.sg)
 inability to make such a one-time investment, and provide higher revenue products to low
ARPUs.

Hence, I suggest that Company X consider making forays into this potential market.

Best wishes,

Aria Hashemi