Daniel Proctor, chief technology officer at HH Vendor Finance, explains how changes in the mobile phone market can benefit resellers and their customers.
Selling to the consumer market
Traditionally mobile phone dealers have largely relied upon airtime contracts, rather than selling mobile equipment, to maintain their revenue stream.
They were paid commission up front by the airtime providers for making a sale and winning business and this covered the cost of the handset.
But this has changed as airtime providers increasingly move away from paying commission up front to paying once they have received revenue from the customer.
This has meant that mobile phone dealers have effectively borne the cost themselves of including mobile handsets when customers sign up to a long-term airtime contract – now commonly a two year contract term.
Customers have come to expect their phone hardware to be included in their airtime contract.
If phone dealers continue to offer mobile handsets as part of this package it become very cash intensive as the dealer will have to pay upfront then make the money back when they are paid by airtime providers. Thus there is pressure to separate out the airtime contracts from the cost of the mobile device.
There is a perceived danger by the phone dealers that the customers will walk out when faced with having to pay separately or upfront for their handsets but that is not necessarily the case. The total amount they are paying will still be the same, just separated into two contacts.
Mobile phone dealers can overcome this issue by ensuring the cost of the mobile device can be paid off in instalments over a longer period and the charges for the contract or SIM only deal and the handset, while separate, are presented to customers within one bill. This should mean the customer will not notice any difference in terms of cost or convenience.
This is where an effective vendor finance arrangement can help.
HH Vendor Finance, for example, works with its partners to provide a simple contract set up and ongoing billing service to their customers.
Where a reseller is selling handsets, the contract is structured so the customer still only has one bill which is a big USP.
It also means the reseller maintains ownership of the whole billing relationship.
Their customers also benefit as separating out the contracts allow them to hunt around and get the best deals on the airtime contract and handsets. It gives them flexibility on changing airtime deals rather than trapping them into a contract for two years in order to ensure they pay off the cost of the handset.
Selling to the business market
Advancing technologies have meant telecommunications contracts, particularly business to business contracts, are now sold via channels which can include broadband and landline and mobile phones, rather than single phone contacts.
It is now innovation in software that is driving the market and not the equipment – ie the handset – that is providing value. Increasingly unified communications systems means that applications and usage are becoming independent of the physical platforms. A phone call, for example, can now be made from a mobile phone, or a tablet or a laptop, and the end result will be the same. The lines between devices have become increasingly blurred with all of them offering the same services.
This means the way telecoms contracts are packaged and sold to the end user – in this case businesses - has changed or needs to change, often resulting in a more complex and multiple set of contracts of varying lengths together with increased approvals and administration.
However, a vendor finance team with expertise in mobile leasing can help to simplify these complex contracts by bundling everything into one contract making it much simpler and easier for the end customer.
For example, HH Vendor Finance works with Olive Communications to provide one effectively managed service contract with their clients can cover everything from mobile and fixed lines to data and airtime contracts. By rolling the handset and airtime contracts together, HH Vendor Finance ensures its partners own the billing relationship while they operate the cash collection making the process simple and seamless.
This effectively gives partners a very cost effective direct debit agency and adds to their long term value by giving them ownership of the billing.
Business customers benefit from the simplification of receiving one bill.
For SMEs the costs are neutral and by separating out the contracts they are getting the best handset deals and airtime costs.
For the bigger corporates separating the mobile device costs from the airtime contracts offers increased flexibility so they can save money by taking control and bulk buying the devices at cut down prices.