October 23, 2007 12:09 ET

'Stickiness' and Convenience of Multimedia Service Bundles are in the Eye of the Beholder, KPMG Study Reveals

Key industry strategy for subscriber growth & retention increasingly unfounded

TORONTO, ONTARIO--(Marketwire - Oct. 23, 2007) -

Attention: Business/Technology/Assignment Editors and Telecom Reporters

While the telecommunications industry is banking on bundled multimedia service packages to increase and retain their subscriber base, a significant number of consumers say they would readily break their contract and switch to another provider if they were offered a better price for one or more of the services, according to a global telecom study by KPMG LLP, the Canadian member firm of KPMG, a global network of professional firms providing audit, tax, and advisory services.

The study, Consumers & Convergence II: The Search for Value, Choice and Convenience in the Digital Age, found that the notion of bundled services generating 'stickiness' through all-in-one convenience and unified billing is not as strong as the industry believes. The data reveals that what consumers think of as convenience and ease of use may differ from what their service providers think.

"Canadian consumers, who spend a significant part of their day on multimedia devices, tend to be more price sensitive than loyal when it comes to bundled services," said Kathy Cunningham, Industry Sector Leader, Communications and Media practice, KPMG LLP. "The providers' assumption that bundling packages that offer the triple- or quadruple-play of services will be a strong retention factor is not as binding with consumers as a competitive price point."

Of the 4,400 consumers surveyed by KPMG in 16 countries in North and South America, Asia, and Europe, 57 percent indicated attractive pricing is the most important driver in the decision for signing a bundled service contract. Of the 200 Canadians surveyed, 75 percent indicated that pricing was a key factor when signing a bundled service contract. Only seven and half percent acknowledged convenience of single billing as the most important factor.

Moreover, 58 percent of Canadian survey respondents indicated that even if only one of the bundled elements they subscribe to was offered at a more competitive price point by another carrier, they would readily break their contract and switch to another carrier. Twenty percent of respondents indicated that their current service package was 'sticky' and they would not consider switching.

The only product category where consumers showed loyalty was games. Not only would less than half of Canadian gamers switch because of price, but 40 percent would not even alter their usage-indicating that a successful game is thus a relatively 'sticky' product for consumers. Other categories, including instant messaging, multimedia, blogging/networking, news access, and shopping, do not have the same retention factor with consumers.

The study showed consumers globally are generally unwilling to pay a premium for additional multimedia services on their mobile phones. Over 84 percent of Canadians also said they would switch to a cheaper or free multimedia site if their current content provider introduced or raised fees. This is consistent with findings in last year's study, Consumers & Convergence: Challenges and opportunities in meeting next generation customer needs.

The study also showed that consumers do have preferred devices for specific activities, but generally the mobile handset is emerging as a central point in user experience because of its ease of use and ability to help the consumer navigate through multiple media experiences. Mobility increasingly means that users expect to be able to be online all the time and that their online experience be personalized to their needs.

Canadian consumers use their mobile handsets as a primary device for voice calls (79 percent) and secondarily for SMS (short message servicing) messaging (46 percent), while other on-line activities, such as instant messaging (eight percent) and social networking/blogging/video sharing (four percent) saw the desktop/laptop computer as the primary device. Computers and consumer durables, such as MP3 players, are overwhelmingly the devices of choice for multimedia applications, which include REVEALS music and video clips, with 62 percent using their desktop or laptop computer to access multimedia applications and 37 percent using their consumer durables, compared with two percent using a mobile phone for these applications.

The KPMG International study asked just under 4,400 consumers in 16 countries in North and South America, Asia, and Europe to describe their on-line experience and the devices used to access such content or destinations. Surveys were conducted largely online, with the exception of two markets: China, which were conducted over the phone, and India, where most interviews were face-to-face.

About KPMG in Canada

KPMG LLP, a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG, a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 144 countries and have more than 104,000 professionals working in member firms around the world.

The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. KPMG International provides no client services.

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