Operators are packaging together a variety of lifestyle services across finance, commerce, entertainment and a range of household services as a way to diversify and build revenue streams outside the traditional telco business. Will it stick?

Lifestyle service aggregation for more engagement

Telcos have looked at Amazon Prime for years with envy – a subscription program which had 200 million paying Prime memberships in 2021 (the majority of which are in the US). One Morgan Stanley analyst estimated Prime households can spend up to $3,000 a year on Amazon – twice what a non-Prime household spends . Attracted by the free inclusive shipping offered, Amazon has since padded out the program with attractive features such as video and online storage for personal data such as photos. While features such as delivery are increasingly becoming more costly, these aggregated lifestyle services build loyalty through repeat purchases (and Prime renewals) and provides the company which a wealth of data on what consumers value.

By contrast, telcos’ customers often only interact with their service provider when they are purchasing a new device every two to three years, or when something goes wrong with their connectivity. To build value with consumers, operators need to find ways to engage and stay relevant in consumers daily lives, in the way that Amazon has. Telcos have been promoting their own and partners’ entertainment (content) services for many years – most operator websites have a “lifestyle” option alongside core connectivity services, directing customers to a range (five or six) mainly of entertainment services, or occasionally wellness services. However, achieving differentiation or competitive advantage selling the same individual subscription services is a challenge. Now operators are aiming to overcome this challenge by providing an additional layer of convenience to consumers by aggregating multiple digital and/or physical services into a single holistic package. The concept is not new, but the ability for telcos to curate a large selection of services and offer customers the ability to manage multiple subscriptions in one place has an appeal in today’s proliferating subscription economy.

The subscription economy went into overdrive during the pandemic, but as the cost-of-living crisis has hit, particularly in Europe, consumers have scaled back on their spending. In the UK, Barclaycard payments, which processes £1 ($1.23) in every £3 ($3.69) spent on UK credit and debit cards, reported 67% of households had signed up to a subscription in 2022 after a spike of 81% in 2021. While two-thirds of UK households still subscribe to a digital or direct-to-door subscription service, the average UK household is spending £41.70 ($51.23) a month on subscription services in 2022, down from £51.65 ($63.45) in 2021. This suggests that while the subscription economy remains valuable, consumers are seeking to get better value for money. In the highly competitive entertainment market, where consumers’ preferred content may be spread across multiple streaming platforms at different times of the year, operators can help consumers to manage multiple subscriptions and control their costs in a single location.

The chart below shows that entertainment is by far the largest subscription spending category for consumers in the UK. This trend is expected to be similar across most markets, and there is also potential for operators to expand their ambitions into a wider lifestyle aggregation strategy targeting other areas of day-to-day life.

Barclaycard Payments: Top UK subscription categories

Source: Barclaycard Payments commissioned research, June 2022

This report looks at a variety of lifestyle services across finance, commerce (food, cosmetics, clothing), entertainment and a range of household services such as energy, health, education which can be aggregated to deliver new revenue streams outside the traditional telco business. These new revenue streams also complement the telco business in terms of customer engagement/activity, lower churn and retention ensuring telcos can stay relevant in consumers’ lives. We explore three approaches to building lifestyle subscription aggregation services.

1. Financial services and commerce: Operators such as KDDI, SK Telecom and Vodacom have sought to build on their financial services propositions to offer a wide range of commerce and lifestyle services to their customers, expanding revenues based on the volume of sales and transactions settled via their payments services and direct revenues from services sold within the lifestyle ecosystem. With financial services having a lower capital intensity compared to the traditional telco business, operators stand to earn a higher profit margin compared to the core business.
2. Entertainment: Operators such as Optus in Australia and Verizon in the US are expanding their content and entertainment subscription offerings from a small selection (averaging approximately three to five) merchant subscription options to up to 20 subscription services, the majority of which customers can manage (add and drop) each month.
3. Household service aggregation: Some operators such as MEO in Portugal, Japan’s Docomo and KDDI as well as Orange have sought to capitalise on their existing customer relationships to offer a suite of household services, encompassing insurance, energy and home security, as well as broadband, TV and telephony.

Table of Contents

• Executive Summary
• Introduction
• Lifestyle commerce and finance aggregation
  • KDDI’s Life Design strategy
  • SK Telecom’s T Universe lifestyle subscription platform
  • Vodacom’s lifestyle and payments super app
  • Takeaways
• Entertainment aggregation
  • Optus’ SubHub “super bundle”
  • Verizon’s +play “super bundle”
  • Takeaways
• Household service aggregation
  • Altice Portugal’s MEO Care household support services
  • Docomo’s Smart Life services
  • Orange’s Protected Home service
  • Takeaways

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