Winning subscribers in a zero-sum market

# Winning subscribers in a zero-sum market

On 10 January 2012, Free Mobile switched on its network in France with two prices: 2 euros a month for a light voice plan (free if you already had a Freebox broadband line), and 19.99 euros for unlimited calls, texts and data, with no commitment. Within two years Free held roughly a tenth of French mobile lines.

Not one of those subscribers had just discovered mobile telephony. Each arrived carrying a number that the week before belonged to Orange, SFR or Bouygues Telecom. France already had more active SIM cards than inhabitants. The base did not grow. It moved.

That is the object this block turns around, and this lesson defines it.

Saturation, and why it changes the metric

Mobile penetration is the count of active SIM cards per 100 inhabitants. In Italy, Germany, Brazil, the Gulf states and dozens of other markets it has sat above 100 for years, because millions of people carry two lines: one for work and one personal, one for calls and a cheaper one for data, one at home and one for the country they travel to.

Above 100 percent, the unconnected are not where growth lives. A zero-sum market is one where the pool of demand is effectively fixed, so a subscriber you gain has to be subtracted from someone else's base. Your growth is a competitor's loss, and it lands on their books as exactly that.

Four terms carry the rest of this block:

• Gross adds: lines newly activated in a period, whatever their origin.
• Churn: lines that leave in the same period, usually stated as a monthly percentage of the base. What a departure costs and when a save is worth paying for has its own lesson.
• Net adds: gross adds minus disconnections. This is the number that says whether you actually grew. You can activate a million lines and still shrink if 1.1 million walked out.
• Market share of net adds: who is capturing the movement, quarter by quarter, regardless of who is biggest.

In a growing market, marketing buys awareness among people who do not yet have a phone. In a saturated one, that spend reaches people who already have three offers in their pocket and a switching decision they are not thinking about. The work becomes finding the moment they will move, and being the reason.

Three disruptions that made the point

Free Mobile: price as a porting machine

Free's 2012 launch cut the going rate for an unlimited French plan by more than half and separated the handset from the subscription. The incumbents answered by pushing their own low-cost, no-commitment brands (Sosh, B&You, RED), which meant the price cut spread through the whole market rather than staying in Free's corner. Total French mobile revenue fell for several years. The pool of humans was untouched.

Reliance Jio: rebuilding the market's data habit

Jio launched commercially in India on 5 September 2016 with free voice calls and, for an introductory period, free data. It passed 100 million subscribers in under six months, an acquisition rate no operator had managed anywhere. India's per-gigabyte price collapsed and stayed collapsed. Note what many of those adds actually were: second SIMs. The same person kept their old number for voice and put a Jio SIM in the other slot for data. Incumbent revenue fell even where incumbent subscriber counts held, and the market consolidated (Vodafone India and Idea merged in 2018).

T-Mobile US: paying the cost of leaving

From March 2013 T-Mobile US ran its Un-carrier moves: two-year service contracts dropped, device instalments split out of the monthly fee so a price cut was visible. In January 2014 it went further and offered to cover a rival's early termination fees, up to 350 dollars a line, for customers who ported in and traded a phone. T-Mobile then led the US industry in net adds for years, overtook Sprint as the third largest carrier, and eventually bought it.

The pattern in all three: a price shock paired with an attack on the cost of leaving. Price alone gets attention. Removing the penalty, the paperwork or the lost number is what converts attention into a port.

The mechanics of switching: porting

The regulatory tool that makes any of this possible is Mobile Number Portability (MNP): the right to keep your phone number when you change providers. Regulators pushed MNP through market by market precisely to make switching easy and prices lower.

Before MNP, changing carrier meant a new number, telling everyone, reprinting cards. That friction locked people in. Once it went, the two numbers marketers watch became the port-in (a customer bringing their number to you) and the port-out (a customer taking it away).

Every port-in is a gross add taken from a named competitor. Every port-out is churn with a destination attached. National regulators often publish porting statistics; the European regulator BEREC is one useful source for how portability and switching are tracked across markets.

🎬 [VIDEO: "How Mobile Number Portability Works" - youtube.com - a short explainer on the technical and regulatory process of moving your number between carriers]

SegmentingSegmentingDividing a market into distinct groups of customers who share similar needs, characteristics or behaviours, so each group can be served with a tailored approach.View full definition → the switchers

Blasting one offer at everyone who might move wastes most of the budget.

Prepaid and postpaid

Prepaid customers pay before use: top up a balance, no contract, no credit check. Postpaid customers get a monthly bill for service already consumed.

Prepaid switchers are the most fluid. Nothing holds them, they are price sensitive, and they can churn over a weekend. In India, Nigeria and much of Latin America prepaid dominates, which is why Jio could take a hundred million lines so fast: there was no contract standing in the way, only a SIM slot.

The flip side is that cheap to win means cheap to lose. Winning a prepaid line with a fat incentive and watching it leave next month destroys value. The target is not the port-in. It is the port-in that stays.

Value tiers

• High-value switchers: heavy data users, multi-line families, small business owners. Worth a real subsidy.
• Mid-value: steady single-line users. Worth a modest, targeted offer.
• Deal chasers: they follow whatever promo is hottest and leave when it ends. Give them the minimum, or let a rival pay for them.

The expensive mistake is treating a deal chaser like a high-value prospect: premium acquisition costacquisition costCustomer Acquisition Cost (CAC) is the total sales and marketing spend divided by the number of new customers gained in a period. It measures how efficiently you grow.View full definition → for a customer gone before you recoup a cent.

Trigger moments

People switch at predictable moments: a contract ending, a new handset, a house move, a bill that spikes, a dead zone in the new kitchen. Reaching a rival's customer at the trigger converts several times better than a random blast, which is why porting campaigns are timed against device launch cycles and contract anniversaries.

Port-in incentives that actually move share

Bill credits or cashback for porting in. A one-time amount spread over several months, which rewards staying rather than arriving.

Device subsidy or trade-in. Ties the pull of a new handset to the act of switching.

Paying off the old contract. T-Mobile's 350 dollars a line is the reference case: it removes the single biggest reason people delay a switch they have already decided on. Expensive, so it belongs on high-value targets, not on everyone.

A visibly better core offer. More data, better roaming, an included streaming service. Free Mobile needed no gimmick; the price was the argument.

The discipline is the payback period. If your incentive costs six months of margin and the segment's average tenure is four months, you lose money on every win you celebrate. Size the incentive against expected lifetime valuelifetime valueLifetime Value: the total revenue (or profit) a customer generates throughout their entire relationship with your business.View full definition →, not against what a rival announced this week.

Channel economics: where share is actually won

A good offer still fails if the channel selling it is paid for the wrong thing.

• Owned retail: branded stores. High control, high fixed cost.
• Third-party retail and dealers: independent shops on a commission per activation.
• Digital and app: lowest cost per sale, weakest on complex or high-touch deals.
• Telesales and doorstep: still large in some markets, tightly regulated in others.

Dealers are usually paid per gross add. A dealer earns the same whether the customer stays two years or two months, so dealers optimise for volume. Some will port a customer from your rival to you, then back again next quarter, collecting twice. This is gross add inflation, and the counter is a clawback: if a ported-in line disconnects within 90 days, the dealer repays or forfeits the commission.

The headline channel metric is cost per gross add (CPGA): total acquisition spend (commissions, subsidies, marketing) divided by gross adds. Raw CPGA lies when quality varies. A cheap channel that delivers deal chasers can cost more per customer kept than an expensive one that delivers families.

Channel A: CPGA = 100, avg tenure = 6 months  -> cost per retained-month ≈ 16.7
Channel B: CPGA = 140, avg tenure = 18 months -> cost per retained-month ≈  7.8

Channel A looks cheaper per add and is twice as expensive per month of customer actually held.

Putting it together

1. Accept that growth means taking share, and run the plan on port-ins and net adds rather than reachreachThe number of unique people exposed to your message in a given period. Unlike impressions, reach counts each person once, no matter how often they see it.View full definition →.

2. Attack price and switching friction together, the way all three disruptors did. One without the other stalls.

3. Segment switchers by value and by trigger moment.

4. Size incentives to expected lifetime valuelifetime valueLifetime Value: the total revenue (or profit) a customer generates throughout their entire relationship with your business.View full definition →, structured so the money lands over time.

5. Manage channels on quality-adjusted cost, with clawbacks to kill fake adds.

Do it badly and you buy expensive customers who leave, funding a competitor's next promotion with the very people you just paid to win.

Key takeaways

• Above 100 percent penetration means zero-sum. Total demand is fixed, so every gross add is subtracted from a named rival's base, and net adds decide whether you grew.
• Price plus friction removal is the winning combination. Free Mobile cut the price and dropped commitment, Jio gave away voice, T-Mobile paid the exit penalty itself.
• Some adds are not new humans. A large share of Jio's early growth was second SIMs, which moves revenue without moving population.
• Segment switchers by value and trigger. Deal chasers and multi-line families need different offers; one offer for both wastes the budget on the wrong half.
• Judge channels on quality-adjusted cost. The lowest cost per gross add is often the highest cost per customer retained, and per-activation commissions are what create the gap.