Marketing Case study analysis

Please read the case study (TELUS : The Public Mobile Brand Acquisition Decision) answer the following questions in around 1500 words, excluding appendix, dereferences, and cover letter. The main assessment criterion is the quality of your analysis. Please avoid general marketing statements or unrealistic strategies. Your suggestions/answers must be justified and rationalized well by available information in the case as well as your critical thinking and marketing knowledge. You may use simple financial calculations and marketing tools such as SWOT, perceptual map, etc. to support your arguments.

1)  Define the core issue or issues involved in the case. Explain the three alternatives for TELUS?

2)  Conduct a situational analysis for TELUS by analyzing the company; its differentiation and competitive advantage in three tiers market; wireless consumers; and TELUS target audience?

3)  What is your assessment of Public’s company, its performance, its strengths, target audience, and it positioning?

4)  What is your assessment of the three alternatives? Which one is the best one and why? Offer a thorough rationale of your recommended approach.

No PlagiarismAPAmarketingcase studyAnalysis

Brooke Cooper and Sarah Dickson wrote this case under the supervision of Professor Michael Taylor solely to provide material for
class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors
may have disguised certain names and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.

Copyright © 2017, Richard Ivey School of Business Foundation Version: 2018-01-12

It was January 1, 2014, a couple of months after TELUS Communications (TELUS) had publicly
announced that it would acquire Public Mobile Holdings Inc. (Public), a prepaid, low-cost wireless
telecommunications company. Officially, TELUS acquired Public on December 31, 2013, for CA$229
million1 net of cash acquired. At the time of the acquisition, Public was losing money and had a poor
financial outlook. Despite this, TELUS saw many benefits to the acquisition, including operational
synergies, as well as access to a new customer segment and to storefronts outside of TELUS’ more
traditional mall locations.

David MacLean, director of Mobility Marketing at TELUS, was contemplating the future of Public and
how it would fit into TELUS’ overall portfolio.2 As the team lead for Public’s integration into TELUS,
MacLean, along with his team, was tasked with the challenge of determining Public’s future. He saw that
he had three primary options, each presenting its own pros and cons.

1. Option one was to shut down the Public brand. Once the acquisition was complete, TELUS could

migrate Public customers over to one of TELUS’ three other brands. Government constraints
stipulated that the migration could happen no sooner than January 1, 2015. This option required the
least amount of resources to execute and was favoured by many top executives, who did not believe
that TELUS needed a fourth mobility brand.

2. Option two was to continue operating Public under the same brand and value proposition that existed
before the acquisition. Public had grown quickly over the years and had secured a number of store
locations in higher traffic areas that appealed to a demographic TELUS had never focused on.

3. Option three was to refresh Public’s brand and change its value proposition. Although this option
presented the most amount of risk, MacLean wondered if it was the best way to enhance TELUS’
financials.

MacLean needed to provide a recommendation to TELUS’ chief marketing officer, David Fuller, in May.
To gain approval for his plan, MacLean needed to present a strong case for his recommendation for the
Public brand and its 222,000 existing prepaid customers. The recommendation needed to consider the
intensely competitive nature of the telecommunications industry, the consumer dynamics in the market,

1 All currency amounts are in Canadian dollars unless otherwise specified.
2 TELUS owned TELUS Mobility, Koodo Mobile, and PC Mobile Postpaid.

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and the effects on key financials metrics for TELUS; in particular, the average revenue per user (ARPU)3
and the churn rate4 (see Exhibit 1).

Public, a start-up Canadian wireless telecommunications provider, was launched on March 18, 2010, with
the purpose of making wireless telecommunications more affordable and accessible for Canadians. Public
had made its first spectrum5 purchase at the 2008 Industry Canada Spectrum auction, where it purchased
G band6 spectrum in Toronto and Montreal. At the time, this spectrum was supported by only select low-
tier phone devices, which fit well into Public’s prepaid value proposition (see Exhibit 2).

As a prepaid carrier with limited coverage, Public appealed to individuals who had tight budgets, skewed
older (between 35 and 70 years old), were not tech-savvy, and required high-touch support. Public’s
customer base was so budget restrained that only 30 per cent of customers paid on a regular basis, with
the remaining 70 per cent paying on a more sporadic basis. Furthermore, of those who discontinued their
service with Public, 40 per cent reported that they were not planning to use a mobile phone in the near
future because they could not afford it. This high level of price sensitivity resulted in an average tenure of
about 13 months, with 35 per cent of customers reporting a tenure of six months or less, significantly
lower than the industry average of 85 months, or just above seven years.

Knowing that price was the main decision factor for its target segment, Public offered a simple prepaid
rate plan structure made up of five core plans starting at $19 per month (see Exhibit 3).

Due to its G band frequency limitations and its focus on value, Public offered a narrow selection of low-
tier phones, which customers could purchase outright in stores. These low-tier phones were manufactured
by companies such as Kyocera Corporation and ZTE Corporation, and were lagging several years in
respect to technological advancement behind the leading phones in the market, such as the devices of
Apple Inc. and Samsung Group.

Understanding its customers’ need for high-touch support, Public grew its number of storefronts to 400
over the course of three years. It focused on opening convenient, street-front stores (see Exhibit 4) in the
higher foot traffic areas of Toronto and Montreal. To keep costs low and to be as accessible as possible,
88 per cent of Public’s outlets were through dealers7 and third-party retailers such as Loblaws, Money
Mart, and Walmart. These dealers and third-party retailers were chosen based on their ability to connect
with Public’s target consumers. For example, they employed store staff who could fluently speak the
prominent second language of the surrounding area. Using this method of distribution meant that Public
had less control regarding customers’ in-store experience; however, this allowed them to connect more
deeply with the local community and save on the capital expenditures of building company-owned stores.

The benefits of an inexpensive, prepaid service offering coupled with accessible stores was a great
combination for certain customer segments, especially the low-income segment, recent immigrants, and
parents purchasing a phone plan for their children. This combination, however, led Public to struggle with

3 ARPU was calculated by dividing total revenue by total number of subscribers in a given month.
4 Churn rate was the monthly percentage rate at which customers discontinued service with their service provider.
5 Spectrum referred to the radio frequencies used in the telecommunications industry. In Canada, spectrum allocation was
managed by the federal government through the Canadian Radio-television and Telecommunications Commission.
6 G Band spectrum consisted of frequencies used nowhere else in the world and was compatible with a limited number of
devices available in the market at the time.
7 Dealers were independent stores that owned rights to sell a brand’s products and services.

profitability. The company constantly faced a high churn rate and low ARPU, two key financial metrics in
the industry. Public’s ARPU at the time of the TELUS acquisition was around $26, while the churn rate
was over 6 per cent. These metrics paled in comparison to those of incumbent Canadian
telecommunications providers, such as Bell Canada Enterprises (Bell), Rogers Communications Inc.
(Rogers), and TELUS, which regularly reported an ARPU of around $60 and a churn rate of under 2 per
cent (see Exhibit 5).

Public was able to continue to grow its customer base; however, after three years of operations, it was still
unprofitable, reporting a loss of $55 million in 2013. Given Public’s poor financial outlook, the primary
shareholders agreed to sell Public to TELUS.

In order to receive acquisition approval, the federal government mandated that TELUS continue to offer
Public’s $19 per month unlimited provincial calling plan until at least December 31, 2014. While this
plan had to be available for the remainder of 2014, TELUS did have the option to send out promotional
communications to incentivize these customers to switch to other TELUS brands before that date. Upon
agreeing to these stipulations, TELUS officially received approval to acquire Public on November 29,
2013, and the transaction closed on December 31, 2013.

TELUS inherited 222,000 Public customers, 140 management employees, and 325 retail team members.
TELUS also became the owner of Public’s wireless network. Compared to Public’s network, TELUS had
a far superior High Speed Packet Access (HSPA)8 network, which operated nationwide using reliable and
fast fourth generation (4G) Long Term Evolution (LTE) technology. Given this information, MacLean
and team determined that it was in the best interest of both the customers and the business to migrate the
existing Public customer base to TELUS’s HSPA network and shut down Public’s network. This meant
that, upon network transition, Public customers would benefit from national coverage, as opposed to the
coverage in the greater Toronto and Montreal areas that they had originally signed up for.

The Canadian wireless telecommunications industry was mature, with a 2 per cent annual growth rate,
and quickly reaching saturation, with approximately 80 per cent of Canadians owning a phone at the time
of the case.

Bell, Rogers, and TELUS—also known as the “Big Three”—were the incumbent service providers, who
continued to benefit from first mover’s advantage and who collectively held 90 per cent market share in
2013. Launched in the late 1980s, these three companies were able to grow quickly in terms of both
services offered and number of customers. Over time, initiatives such as loyalty discounts and bundling
products (e.g., home phone, Internet, and television) became effective ways to not only protect their
customer bases from churning, but also grow the base by cross-selling products.

Acquiring customers in this competitive environment required spending a lot of money upfront to pull
customers away from their current carrier. These incentives typically were in the form of device
discounts, credits, or gifts with purchase and were measured under the cost of acquisition (COA)9
umbrella. While this expense was relatively manageable for national companies with strong balance

8 High Speed Packet Access was an evolved version of the third generation (3G) mobile network, featuring faster speeds
and improved reliability.
9 Cost of acquisition consisted of the total of the device subsidy (the device cost to TELUS less the initial charge to the customer),
commissions, and advertising and promotion expenses related to the initial subscriber acquisition during a given period.

sheets and economies of scale, it was difficult for new entrants to gain market share and maintain
profitability. These barriers to entry were somewhat offset by the intervention of the Canadian Radio-
television and Telecommunication (CRTC) in the industry. For example, the CRTC helped to spur
competition through initiatives such as allocating specific spectrums in auctions to new entrants or to
smaller discount carriers.

Within each segment, most of the offerings such as rate plan pricing and phone line-ups were similar,
making it important for competition to differentiate on other factors such as network and customer
service. While it might have been difficult for new entrants to gain a profitable foothold in the industry,
there was definitely an opportunity for them to disrupt the market and enhance the level of differentiation.
Smaller discount wireless providers, notably Mobilicity and Wind Mobile (Wind), benefited from the
CRTC’s interventions and recognized an opportunity to focus on specific regions and target markets to
gain share from the Big Three (see Exhibit 6).

In 2013, there were 28 million wireless subscribers in Canada, of which approximately 83 per cent were
postpaid and the remaining 17 per cent were prepaid. Of those Canadians who did not own a mobile
phone, some (children, people living in remote areas, people with lower income) were unable to and
others chose not to.

Growth in postpaid users was slowing. The net growth of incremental new users in the postpaid segment
was projected to decline by approximately 1 per cent per quarter over the following couple of years and
reach a point of stagnant growth by 2015.

The prepaid segment, on the other hand, was expected to continue to experience a net decline in users (i.e.,
losing more customers than acquiring), but was expected to show some improvement over the next couple
of years. The prepaid space was projected to experience a net growth of new users at a rate of 2 per cent per
quarter. Unlike the postpaid segment, the prepaid segment was expected to grow beyond 2015.

The lack of postpaid growth was partly attributed to a declining number of customers migrating from
prepaid to postpaid plans. In previous years, upselling customers to switch to a postpaid plan had been a
major area of focus. It showed high returns and significant financial benefits as migrating customers
typically resulted in an increased ARPU and decreased churn, along with a reduced COA. Yet, this
strategy had diminishing returns. With a lot of the opportunity previously captured, the same level of
growth from this tactic was no longer available.

The mature telecommunications industry in Canada tended to be divided into three value-oriented
segments: premium, mid-market, and price-sensitive. The premium segment consisted of customers who
appreciated services that offered value well beyond the level offered by the basic services, and who were
willing to pay an associated premium cost. Examples of these services included support offered 24 hours
a day, seven days a week; access to the latest devices; and an array of rate plan add-ons to suit their needs,
such as roaming and long distance packages. Consumers in this group were typically between the ages of
35 and 55, had children, and were affluent. Many consumers within this category were early adopters of
technology and used it regularly in their day-to-day lives.

The mid-market segment encompassed people who were willing to pay for some additional conveniences.
These consumers tended to be between the ages of 18 and 34, were anxious about price, and were
generally less educated than customers in the premium segment. Consumers within this group used
technology often but were not overly tech-savvy.

The price-sensitive segment included consumers who valued price above all else. While they wanted a
good, working product, they were also willing to make trade-offs to get discounts. These consumers
tended to use a prepaid service model, because it provided them with increased cost certainty. Prepaid
customers could be further segmented based on their usage.

Prepaid customers traditionally fell into one of eight segments (see Exhibit 7). These customers were
evaluated based on the importance of price to their purchase and the added value they required of their
carrier. Carrier value-add was typically determined by four factors: (1) the availability and location of its
retail stores, (2) the selection of phones it carried, (3) the customer service support it offered, and (4) the
size and quality of its network.

TELUS, Bell, and Rogers had many retail locations, provided in-store and call centre support, and had a
national network. Therefore, these premium, prepaid brands lent themselves to targeting sponsored youth
and seniors, safety users, and basic users—all users who required a great deal from their carrier and were
less price sensitive.

Koodo Mobile (Koodo), Virgin Mobile (Virgin), and Fido Solutions (Fido) had fewer kiosks to provide
support to customers and less expensive rate plans. Therefore, these mid-market brands offered simple
services that lent themselves to targeting unsponsored youth and basic users. Sponsored youth and
unsponsored youth also tended to have the highest propensity to switch to postpaid plans over time, which
had significant financial benefits for these brands.

The discount carriers Wind, Chatr Mobile (Chatr), Mobilicity, and Public all competed to attract new
immigrants, deal seekers, and consumers who were frugal by necessity. These segments were the most
price-sensitive and had the same value expectations as the target market of the premium carriers. This
made it challenging for the discount carriers to compete profitably. One segment that no carrier had
successfully attracted was life hackers. These customers ranked price at medium-high importance, but
required the least value-add from their carrier (see Exhibit 8).

Three companies competed in the premium space: Bell, Rogers, and TELUS. These carriers catered to
individuals who were willing to pay more to have access to full-service customer support and high-tier
devices, such as the latest iPhone or Samsung phone. These customers also expected excellent service
coverage while in Canada and other coverage options while travelling outside the country.

To provide full-service customer support, each carrier had corporate-owned stores in high foot traffic
malls and large call centres. Through this structure, these carriers had customer service representatives
available to assist new and existing customers at any time of the day.

Bell was Canada’s second-largest wireless telecommunications company, reporting a market share of 28
per cent in 2013, equating to 7.8 million subscribers. Of its customer base, 86 per cent were postpaid
customers and 14 per cent were prepaid customers.

The primary message Bell advertised was that the company operated on Canada’s largest network. Along
these lines, Bell highlighted the speed, reliability, and extensive coverage of its 4G LTE network.

Rogers, founded in 1960, was Canada’s largest wireless voice and data telecommunications services
provider, capturing 34 per cent of wireless market share in 2013. In order to differentiate from its direct
competitors, Rogers continued to invest heavily in its network and systems to enable improvements for
customers travelling abroad. Similar to Bell’s subscriber breakdown, 85 per cent of Rogers’ customer
base was on a postpaid plan and 15 per cent was on a prepaid plan.

Three carriers competed in the mid-market space: Fido, Virgin, and Koodo. These carriers offered less
expensive rate plans than the premium service parent brands,10 while accessing the same network. These
flanker brands11 were able to support lower prices by offering a smaller selection of higher-tier devices
and keeping marketing spend and customer support investments low. These brands also focused on
smaller concept stores, such as mall kiosks, to save costs. While these brands offered a combination of
both prepaid and postpaid services, the majority of their consumers were postpaid.

Bell acquired full ownership of Virgin on July 1, 2009. Virgin differentiated itself through its Member
Benefits program. This program was available to all its customers—Virgin referred to them as
members—and allowed them to take advantage of exclusive discounts at other retailers (e.g., Goodlife
Fitness, J.Crew) and VIP experiences (e.g., first access to concert tickets).

Fido was acquired by Rogers in November 2004, making it the first flanker brand in Canada. One unique
aspect of Fido was its loyalty rewards program, known as FidoDOLLARS. The program awarded
customers who paid their monthly bills or made prepaid top-ups by giving them 4–5 per cent back in
FidoDOLLARS, which could then be put toward the purchase of a new device or add-ons such as
premium voicemail, name display, or auto-forwarding.

10 These are the case author’s observations. Rate plans for mid-market flanker brands were typically $48 to $60 per month,
compared to top-tier plans by the Big Three, which were typically over $70 per month.
11 A flanker brand was an extension of an existing brand created to target another segment of the market.

Canada also had several regional wireless carriers, including Wind, Mobilicity, Chatr, Saskatchewan
Telecommunications Holding Corporation, Vidéotron, EastLink, Tbaytel, and MTS Mobility. At the time
of Public’s acquisition, Wind, Mobilicity, and Chatr were Public’s three biggest competitors, who were
vying for a similar target market in overlapping coverage areas.

To reach their objective of providing Canadians with simple and affordable wireless service, these three
carriers typically used a prepaid structure, lower-tier devices, and a smaller, less advanced network.
Accordingly, these discount regional carriers catered to individuals who were budget conscious and willing
to make trade-offs, such as regional instead of nationwide coverage, to save money. Public, Wind,
Mobilicity, and Chatr all utilized a community-based retail strategy, which allowed consumers to easily
access stores on foot or by using public transportation. In addition to the expensive network of storefronts
that these discount carriers maintained, customers were also able to receive support by contacting a call
centre.

Compared to the business models of national premium brands and their flanker brands, the independent
discount carriers’ business models of high fixed costs and cheap rate plans had a very small profit margin.
This was further amplified by a smaller subscriber base, low ARPU, and high churn rate. Finding the
right balance between acquiring customers, meeting the needs of this target market, and balancing costs
had proven difficult for these companies, forcing some of them to nearly go bankrupt.

Wind began as a privately owned carrier in December 2009, with the goal of providing its customers with
low, simple, and fair pricing. Customers could access Wind’s network in Canada’s major cities and
suburbs and on its highways, where the majority of Canadians spent their time. When customers left their
coverage area, they had the option to roam on Wind’s Canadian and U.S. partner carriers’ networks for an
incremental cost, a fee that varied depending on the customer’s location and the services used. Wind also
differentiated itself from its direct competitors by providing access to more mid-tier devices and
providing device subsidies for those who signed a postpaid contract. Wind offered a rate plan line-up that
included unlimited talk, text, and data for a much lower price than any other postpaid carrier. Although
Wind’s coverage was limited, with customers reporting frequent losses of signal and dropped calls, and it
throttled12 data speeds after a certain amount of data usage, the low cost, high data rate plans resonated
well with its target market.

Mobilicity began in February 2010 as a prepaid-only mobile provider, with coverage initially in Toronto
and then expanding to Edmonton, Vancouver, and the Ottawa region throughout the remainder of the
year. The last network expansion was in Calgary in April 2011.

12 Throttling involved reducing data transfer speeds on the network, affecting the speed at which customers could browse
the Internet and use their applications.

Chatr began in July 2010, with coverage in Toronto, Ottawa, Calgary, Edmonton, Vancouver, Quebec City,
and Montreal. Chatr was owned by Rogers. It provided its customers with a simple mobile solution by
allowing them to choose unlimited plans within a certain coverage area, referred to by Chatr as the
customer’s “Chatr zone.” When customers were outside of their Chatr zone, their services were available on
a pay-per-use basis. Customers were only able to identify when they were outside of their Chatr zone by
either entering a code to view a coverage map or checking their account balance after making a phone call.

TELUS was Canada’s fastest-growing national telecommunications company, reporting $11.4 billion of
annual revenue and 13.3 million customer connections in 2013. These connections included 7.8 million
wireless subscribers across three wireless brands: TELUS, Koodo, and PC Mobile. The remainder of
TELUS’s revenue came from the company’s wireline business, including home phone, Internet, television
and health.

Unlike Rogers and Bell, TELUS decided not to pursue investments into the media industry. Instead, it
focused on healthcare and, in 2013, TELUS Health became Canada’s largest electronic medical records
provider. This health solution, empowered people living with chronic conditions to better manage their
own health and made possible more sustainable and affordable care, among other benefits. Additionally,
TELUS focused on giving back to the communities in which it served and on being environmentally
friendly. Between 2000 and 2013, through the philosophy of “we give where we live,” TELUS and its
team members contributed more than $350 million to charitable and not-for-profit organizations, and
volunteered 5.4 million hours of service.

TELUS differentiated itself in the market by delivering exceptional customer experiences across all lines
of business, with the objective of being the most recommended company in Canadian communities. One
way that TELUS was able to quantify the success of this approach was through the metrics reported by
the Commissioner for Complaints for Telecommunications Services (CCTS).13 The CCTS released an
annual report on all reported customer complaints directed at telecommunications companies. Despite
customer complaints to the CCTS growing on aggregate by 26 per cent year-over-year, complaints about
TELUS decreased by 27 per cent in 2013. Its focus on providing exceptional customer experiences also
benefitted TELUS financially, as it posted an industry-leading average monthly churn rate of 1.03 per
cent in 2013. Another indicator of the company’s success in delivering superior customer experiences was
the Likelihood to Recommend metric,14 a key measure in the telecommunications industry and one on
which TELUS prided itself (see Exhibit 9).

The wireless segment drove $6.13 billion of TELUS’s overall revenue in 2013, with 87 per cent of the
customer base composed of postpaid subscribers. Revenue was up 5 per cent from the previous year,

13 The Commissioner for Complaints for Telecommunications Services was an independent body that helped customers to
resolve issues they had with their telecommunications provider.
14 Likelihood to Recommend was measured by dividing the number of people who responded “Probably” or “Definitely” when
asked if they would recommend a service by the total number of survey respondents.

reflecting 307,000 subscriber net additions and a 1.6 per cent increase in ARPU. Furthermore, TELUS
generated an industry-leading lifetime revenue per customer15 of more than $4,350.

Prior to the acquisition of Public, TELUS’s wireless business consisted of three brands: TELUS Mobility,
Koodo, and PC Mobile. Each brand had a unique service offering and structure supporting TELUS’s
overall strategy.

TELUS Mobility was TELUS’s full-service, premium brand, with the majority of activations coming
from postpaid customers. The brand’s target market consisted of customers who were highly educated,
family-oriented, had disposable income, and used technology to make their lives easier.

With a network that covered 99 per cent of Canada and operated on leading 4G LTE technology, TELUS
offered Canadians speed and reliability of service wherever they were in the country. TELUS’s flexible
SharePlus rate plan suite also made it easy for families to share data across multiple devices. Additional
offerings such as roaming and long distance packages made TELUS a great choice for those who
travelled frequently or had family abroad.

To complement its breadth of services, TELUS also offered the latest and greatest devices. Working with
brands such as Apple and Samsung, TELUS focused on curating an enticing selection of premium
devices. Beyond device selection, the company focused on high-quality accessories that added to the
device experience, including portable chargers, fitness trackers, and wireless headphones.

TELUS’ focus on enhancing customers’ device experience led to a new corporate store layout, which
focused on displaying accessories and creating a relaxed environment. To maintain control over the
customer experience, TELUS focused mainly on corporate-owned stores and dealers for distributing
products, with a portion of their distribution going through third-party retailers.16

In line with TELUS’s focus on customer experience, maintaining a strong customer support network was
also a pillar of its service offering. This network included call centres, social media channels, and
websites, namely telus.com and the TELUS Neighbourhood.

Koodo was started by TELUS in 2008 and was considered its flanker, mid-market brand. The Koodo
brand was launched with the intent of disrupting the Canadian wireless market and tapping into a younger
demographic than TELUS’s target market.

Unlike other companies, Koodo focused on promoting self-serve, lower-cost support channels for customers
to receive support, such as social media sites (Facebook and Twitter) and Koodo’s unique community
forum, run by Koodo Ambassadors—a loyal group of passionate customers who voluntarily answered other
customers’ questions they posted on the forum. While Koodo focused on self-service, it recognized that
online support was not for everyone and so established partnerships with call centres worldwide.

15 TELUS calculated customer lifetime revenue by dividing ARPU by the churn rate.
16 A third-party retailer was a partner (e.g., Walmart or Best Buy) that sold TELUS products and services alongside other
carriers’ products and services.

For carefully crafting this culture of support, Koodo was ranked highest in Satisfaction with Customer
Care for three consecutive years by J.D. Power.

Koodo’s target market skewed younger, consisting of young adults in college or university. These
customers were primarily value seekers who may not have fully trusted telecommunications or were
dissatisfied with traditional customer service. They were used to trading their time to save money, and
relied heavily on the Internet for information and making purchasing decisions. To attract this target
segment, Koodo offered a simple, transparent suite of rate plans and took a “no hidden fees” approach
toward billing. Hidden fees were a key pain point in the industry.

Leveraging the TELUS network, Koodo offered customers national LTE coverage. With a simple
postpaid rate plan suite, Koodo attracted customers shopping for themselves and looking to save on their
monthly bill. To keep things simple, Koodo maintained a lean line-up of additional offerings, including
extended device warranty, call forwarding, and long distance add-ons for select countries. Koodo also
offered prepaid services, although the majority of its customer base was postpaid.

While Koodo had some premium phones in its line-up, the majority were mid-tier to low-tier devices.
Koodo appealed to its target consumers—who valued price over the latest technology—by offering a
selection of older generation Android and iPhone models.

In terms of distribution, Koodo leveraged a hybrid strategy whereby phones and rate plans were sold both
by third-party retail partners, such as Walmart and Best Buy, and at corporate-owned kiosks in malls.

Its focus on customer support and transparent service offering earned Koodo the highest Likelihood to
Recommend score, of 85 per cent, across all national carriers in 2013.

TELUS owned and managed the postpaid segment of Loblaws’ PC Mobile brand, while Bell managed the
prepaid segment. PC Mobile postpaid was launched in the summer of 2013 and, leveraging the well-
established brand of Loblaws and TELUS’ expansive network, it grew quickly. The brand attracted a mix
of deal-seeking generation X17 families that religiously collected PC points (part of a rewards program
offered by Loblaw Companies), lower income baby boomers18 who were empty nesters and did not need
anything beyond the basics, and millennials19 who were looking for an alternative to the major telecom
players in Canada.

Offering an array of four smartphones and three nationwide plans, PC Mobile prided itself on being clear
and simple. It offered a suite of rate plans that protected customers from large, unexpected bills. Subscribers
were notified when they approached their monthly voice or data limits, and were then given the choice to
either cut off their service for the rest of the billing period or add more minutes or data to their plans.

Distribution was managed out of Loblaws’s wireless storefront, The Mobile Shop, located in local grocery
stores. The Mobile Shop also carried other brands, including Koodo and TELUS Mobility. This multi-
carrier distribution method made it easier for customers to compare carriers’ phones and plans.

17 Generation X was the name given to the generation born between roughly 1961 and 1980; it followed the baby boomer
generation and preceded the millennial generation.
18 Baby boomer was the name given to people born between roughly 1946 and 1964, when birth rates across the world
spiked.
19 Millennial was the name given to the generation born between roughly 1981 and 2004; also known as generation Y.

As MacLean considered what to do with the Public brand, he was struck by not only the importance but
also the breadth of decisions to be made. Could Public be successful in this competitive marketplace
without cannibalizing TELUS Mobility, Koodo, or PC Mobile’s current sales? Would it be better to shut
down the brand and migrate those customers to either TELUS, Koodo, or PC Mobile’s customer bases?
Besides migrating existing Public customers to one of TELUS’ existing brands, shutting down the brand
would involve halting all new customer acquisition efforts. Given that Public’s coverage would be
upgraded to a national network, MacLean’s team would also need to determine whether Public’s current
rate plan pricing should remain the same, keeping in mind that the $19 plan would need to be maintained
under the Public brand until December 31, 2014, to meet the acquisition approval requirements.
Furthermore, existing customers could not be migrated to internal brands until January 1, 2015.

If Public were able to compete in the marketplace, should the company continue focusing on the same
target market and value proposition, and determine ways to reduce costs or increase revenue without
jeopardizing churn? With many current customers being budget-conscious by necessity, it would be
important to find the appropriate balance between which revenues could be increased and which expenses
could be reduced, while still meeting consumers’ wireless needs.

Alternatively, should Public be repositioned and launched with a new brand image and a new value
proposition? If so, which customer segments should Public target, and how might this affect Public’s
existing customers? Would it be possible to re-brand without alienating current customers? TELUS knew
it would be important to maintain a low churn rate with its newly acquired Public customers to achieve
value for their acquisition. If Public were to make a big change to its brand, how could it invoke
confidence in its existing customers that the company was here to stay?

MacLean knew that regardless of which option he chose, a strategic marketing plan was required to
convince the leadership team that it was the right decision. Keeping in mind how each option would affect
ARPU and churn would be an integral part of earning decision buy-in. With no time to spare, MacLean
got to work.

Note: EBITDA = earnings before interest, tax, depreciation, and amortization; EPS = earnings per share; GAAP = generally
accepted accounting principles
Source: TELUS Communications, TELUS 2013 Annual Report, accessed May 24, 2017,
http://about.telus.com/investors/annualreport2013/files/pdf/en/ar .

The concept of prepaid relates to how customers pay for their plan. When on a prepaid plan, customers
pay the total amount, which is determined by how much service (i.e., talk, text, and data) they need for a
given amount of time, upfront. This means that once the plan’s services are used in full, the customer is
without service until another service purchase is made, creating cost certainty. Prepaid plans also provide
both accessibility—because customers do not need to pass a credit check when activating the plan—and
the flexibility of no required contract.

Note: ARPU = average revenue per user
Source: Company files.

Source: Company files.

Source: Company files.

Note: Big Three = Bell Canada Enterprises, Rogers Communications Inc., and TELUS Communications; EBITDA = earnings
before interest, tax, depreciation, and amortization; ARPU = average revenue per user; COA = cost of acquisition
Source: TELUS Communications, 2013 Annual Report, accessed August 17, 2017,
http://about.telus.com/investors/annualreport2013/files/pdf/en/ar ; Bell Canada Enterprises, BCE Inc. 2013 Annual
Report, accessed August 17, 2017, www.bce.ca/investors/annual-report/2013-annual-report ; Rogers Communications
Inc., Rogers Communications Inc. 2013 Annual Report, accessed August 17, 2017,
www.rogers.com/cms/investors/pdf/annual-reports/2013_Annual-Report .

Source: Company files.

Note: The number in each segment is the estimated market size in number of users, e.g., there are 359,000 “Safety Users”;
K = thousand; M = million; DIY = do-it-yourself
Source: Company files.

Source: Company files.

Note: L2R = likelihood to recommend
Source: Company files.

Owner Brand L2R Score

TELUS Corporation

TELUS 69%

Koodo 85%

PC Mobile 75%

Public Mobile 70%

Bell Canada Enterprises
Bell 58%

Virgin 75%

Rogers Communications Inc.
Rogers 56%

Fido 70%

Chatr 75%

Independents Wind 78%

Mobilicity 67%

8B17A049

Teaching Note

TELUS: THE PUBLIC MOBILE BRAND ACQUISITION DECISION

Professor Michael Taylor, Brooke Cooper, and Sarah Dickson wrote this teaching note as an aid to instructors in the classroom use
of the case TELUS: The Public Mobile Brand Acquisition Decision, No. 9B17A049. This teaching note should not be used in any
way that would prejudice the future use of the case.

Copyright © 2017, Richard Ivey School of Business Foundation Version: 2017-09-18

SYNOPSIS

At the end of 2013, TELUS Communications (TELUS) acquired the small wireless telecommunications
carrier Public Mobile Holdings Inc. (Public), which operated in the lower, price-sensitive tier of the
market through 400 retail stores in Toronto and Montreal. TELUS had previously not competed in the
lower tier of the market, which had a history of low revenues per customer and low customer
retention. David MacLean, director of Mobility Marketing at TELUS, faced the decision of what to do
with this newly acquired firm. He was considering the market positioning options, brand portfolio
implications, and financial impact of his decision. MacLean’s options included migrating Public’s
customers to one of the company’s existing brands, continuing to operate the firm as an independent
brand, and repositioning the brand to improve profitability. At the time of acquisition, Public had just
finished 2013 with a loss of CA$55 million.1

The case provides a detailed description of TELUS’s competitive environment at the time it purchased the
small brand Public. TELUS is one of the “Big Three” telecommunications companies in the Canadian
mobile carrier market; the other two are Bell Canada Enterprises (Bell) and Rogers Communications Inc.
(Rogers). The case includes financial performance data for all three companies, as well as a market map
of how each competes within the three price/service tiers of the market. It is a complex market, and the
core offering of each of the major competitors is relatively undifferentiated. The case describes some of
the market complexity to give students the opportunity to explore how a firm can differentiate in a market
with little product differentiation.

The case examines the mobile phone business and the elements that drive profitability for mobile phone
carriers, including average revenue per user (ARPU), churn rate, and customer lifetime value. TELUS
serves several market segments with a portfolio of brands. The case specifically examines the company’s
purchase of a small, independent, money-losing, low price-point competing carrier and the resulting
decision that the company faces for integrating the new brand into its portfolio of offerings without
diluting the company’s profitability.

1 All currency amounts are in Canadian dollars unless otherwise specified.

This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization.

Page 2 8B17A049

LEARNING OBJECTIVES

This case provides students with the opportunity to complete the following objectives:

• Analyze the strategic options for integrating an acquired brand, within a broader strategic positioning

and profitability framework.
• Conduct a systematic value map and evaluation of the acquired firm’s competitive advantage, relative

to different segment needs/priorities, and relative to the advantage (or parity) with competitors.
• Evaluate a multi-tier, multi-brand portfolio in a complex competitive environment.
• Analyze and understand a capital-intensive, hyper-competitive subscription business.
• Evaluate differentiated brand positioning in a market with few tangible points of differentiation.

POSITION IN COURSE

This case is suitable for both undergraduate and MBA programs, in a core marketing course. It also fits
well in a competitive strategy course and a brand management course. It provides a good opportunity to
teach complex decision-making, positioning, market dynamics, and competitive strategy.

RELEVANT READINGS

• David A. Aaker and Erich Joachimsthaler, “The Brand Relationship Spectrum,” California

Management Review 42, 4 (2000): 8–23.
• David A. Aker, Building Strong Brands (New York, NY: Free Press, 1995).
• Frederik D. Wiersema and Michael Treacy, “Customer Intimacy and Other Value Disciplines,” Harvard

Business Review (January–February 1993). Available from Ivey Publishing, product no. 93107.
• Neil T. Bendle and Charan K. Bagga, “The Confusion About CLV in Case-Based Teaching

Material,” Marketing Education Review 27, no. 1 (27–38).

ASSIGNMENT QUESTION

This case allows the instructor to use a general assignment question, such as the one detailed below.
Alternatively, the instructor can select questions from the teaching plan, in the section that follows the
general assignment question, to provide more specific assignment questions.

General assignment question: David MacLean, the director of Mobility Marketing at TELUS, is
considering several options to integrate the acquired brand Public. What is your recommendation for
MacLean? How can MacLean use this opportunity to strengthen TELUS’s market position and
profitability in the competitive wireless telecommunications business?

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TOPIC

Introduction, Decision Criteria, and Constraints
Opening remarks
1. What are the three alternatives available to TELUS for the newly acquired firm?
2. What should be MacLean’s overriding goals when considering the Public decision?
3. What issues should MacLean consider to make his decision about the Public brand?
4. What are the constraints that MacLean must work within?

Brainstorming
5. What alternative should TELUS select?
6. What are the merits of one brand versus a portfolio of independent brands?

TELUS
7. How do companies maximize profits in a high-fixed-cost, service-subscription

business like the wireless carrier business?
8. What is your assessment of TELUS’s performance—financially and in the market?

Differentiation and Competitive Advantage
9. Within the three-tier market structure, how does a firm such as TELUS create a

sustainable competitive advantage?
10. How are wireless competitors differentiated in the same market? What are the

points of differentiation in each tier of the market?
11. What points of differentiation are opposing brands attempting to compete on within

each tier?

Wireless Consumers
12. The case discusses three tiers of customers in the market. What is the main

difference between these three high-level segments?
13. What metrics and criteria should be used to determine which segments are most

attractive (e.g., most lucrative or most strategically important)?
14. Which tier is most attractive?
15. What buying criteria do consumers in various segments use to select a wireless

carrier?
16. Why does everyone not simply focus on the top tier, the most lucrative customers?
Price-Sensitive Wireless Consumers
17. Where is Public positioned in this three-tier market?
18. What are the main buying criteria of each of the four price-sensitive segments?
19. How attractive is each of the four price-sensitive segments?

Public Mobile
20. What did TELUS get for its investment in Public?
21. What is your assessment of Public’s performance?
22. Why did 222,000 customers choose Public as their service provider? What does this

mean for TELUS’s decision?
23. What is your assessment of the strength of the Public brand?

Evaluation of Alternatives 24. What is your assessment of the three alternatives?
What Happened

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ANALYSIS

Introduction, Decision Criteria, and Constraints

Opening Remarks

We are all familiar with mobile phones from a user’s point of view; however, the case provides a view of
the wireless business from the following perspectives:

• The carrier
• Profitability
• A multi-brand portfolio management

TELUS is one of the Big Three wireless service providers in Canada, and it has a clear overarching goal
of sustained profitable growth.

1. What are the three alternatives available to TELUS for the newly acquired firm?

• Shut down the Public brand and migrate customers. This alternative assumes that customers will

migrate to one of the other mid-market TELUS brands; most likely, Koodo Mobile (Koodo). Then,
merge operations and re-banner the retail locations under the new brand.

• Maintain the status quo (i.e., continue to operate the firm as an independent brand).
• Reposition Public for profitability.

2. What should be MacLean’s overriding goals when considering the Public decision?

MacLean’s goals should include the following objectives:

• Choose on an alternative that will have a positive effect on TELUS (market position and financial

impact).
• Strengthen the firm’s market position to drive profitable growth as follows:

– Provide a competitive advantage for a target segment.
– Leverage TELUS’s competitive advantage to create high likelihood to recommend (L2R)2 ratings.

• Have a positive financial impact on the company as follows:
– Have a positive impact overall on corporate performance, including earnings before interest, tax,

depreciation, and amortization (EBITDA), ARPU, and churn rate.

3. What issues should MacLean consider to make his decision about the Public brand?

For the analysis of this question, the instructor can prepare a keyword list of considerations and decision
criteria on the board.

MacLean should consider the following potential issues:

• The decision’s overall benefit to corporate performance (EBITDA, ARPU, churn rate)

2 The Likelihood to Recommend rate is measured by dividing the number of people who respond “Probably” or “Definitely”
when asked if they would recommend a service by the total number of survey respondents.

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• The role the decision plays in the portfolio (e.g., how will it help the firm acquire a new customer

segment and how will it help build a funnel of customers that can be migrated from prepaid to
postpaid)

• Whether the plan instils shareholder confidence
• Upholding L2R and corporate values
• Feasibility and ongoing operating structure
• The effect of his decision on existing customers and employees
• Adherence to federal government acquisition requirements
• Minimizing undue implementation challenges
• Choosing an alternative with a high likelihood of success

4. What are the constraints that MacLean must work within?

MacLean must work within the following constraints:

• Adhere to federal government acquisition requirements (e.g., TELUS must maintain a $19 plan until

December 2014).
• All customers must migrate to TELUS’s High Speed Packet Access network.

Brainstorming

We often find it useful to have a short brainstorming session early in the case discussion to allow
opposing ideas to be presented and many issues and factors to be identified. This is done before we
structure the analysis and apply some of the learning concepts of the case. This brainstorming section is
intended to surface a lot of information, but not necessarily reach any conclusions.

5. What alternative should TELUS select?

There is a detailed response to this question in the latter sections of this TN. At this point in the
discussion, it is important to find supporters of each of the three alternatives, and ask them why this is the
optimal approach, or why other alternatives are not optimal.

6. What are the merits of one brand versus a portfolio of independent brands?

This is an opportunity for instructors to introduce the spectrum of brand strategy alternatives, ranging
from a single unified brand to a brand portfolio strategy. The instructor can prepare a keyword list of
considerations and decision criteria on the board.

Draw a sample brand spectrum on the board, such as the one shown in Exhibit TN-1, or you can also refer
to the board plan (see Exhibit TN-15).

The brainstorming discussion should raise the following topics, among others:

• Brand equity (awareness, preference, image)
• Cost of marketing separate brands
• Positioning and target segment fit (resonance)

Page 6 8B17A049

• Diversity of offerings within the company’s portfolio
• Diversity of distribution and service, and the cost to deliver customer value

TELUS

7. How do companies maximize profits in a high-fixed-cost, service-subscription business like

the wireless carrier business?

A series of major factors contribute to financial success in this high-fixed-cost business, which relies
almost entirely on subscription revenue. The main contributing factors are listed below:

• Revenue maximization is the key driver of success in this very high-fixed-cost business. The

performance indicators are calculated as ARPU × number of users.
• There will always be a need to control the operating expenses and capital expenditures of the network

(which is not within the scope of this case decision).
• The variable cost to serve each customer is very low. Not all customers are the same, which ignores

network utilization rates and other more complicated technology issues related to serving different
types of client usage.

• Success is driven by the ability to reach the following goals:
– Maximize revenue, which consists of growth in the number of customers and ARPU. Growth

could be generated from data consumption beyond the consumer plan, price increases, and/or the
customer’s rate plan selection.

– Minimize cost of acquisition (e.g., sales and marketing costs such as device offers, bundling
offers, and rate plan discounts).

– Minimize churn, which means managing the cost of retention.
– Achieve operational efficiency. For example, improve market access to maximize value to the

customer, and lower the cost to operate in that location.

A key driver in this industry is revenue maximization (as noted in the first item above). Over 7.8 million
subscribers contribute an average of $61 each (see case Exhibit 5). The total number of customers in the
market is 28 million users (as mentioned in the case). The market extends from premium to price-
sensitive consumers. To understand how to capture 7.8 million customers across a price spectrum of
segments, we need to consider demand curve economics.

Demand Curve Economics

Demand curve economics, as shown in Exhibit TN-2, and the company’s goals to maximize total revenue
raise the following implications:

• At each point in the market, there are some customers who are willing to pay a given rate for service.
• The network has a finite amount of capacity.
• The goal is to maximize revenue by attracting high ARPU rates.
• Ideally, to maximize revenue, the capacity of the network should be filled solely with Segment #1

(premium-tier) consumers. However, this is the primary target for all competitors.
• The network has capacity for more than solely Segment #1 users.
• The marginal cost to serve one more customer is very low.

Page 7 8B17A049

• Because there is excess network capacity beyond Segment #1, Segment #2 supplements the revenue;

because there is excess network capacity beyond Segment #2, Segment #3 supplements the revenue;
and so on.

• Because the network has a finite amount of capacity (as mentioned in the second item above), the
firm will never want to displace a Segment #4 customer with a Segment #6 customer.

• The firm needs multiple price levels of products to fit each segment.
• Multiple price-point offerings alone are insufficient to attract customers in each segment. Beyond

price level, multiple market positions each require a target segment, a value proposition, a brand
position, and offering-packages with characteristics that provide a competitive advantage to attract
different segments.

• Price and product alone are insufficient. In this highly competitive field, with very little tangible
difference between competitors’ products, it is important to have unique positioning and consumer
brand messaging.

8. What is your assessment of TELUS’s performance—financially and in the market?

TELUS seems to be a strong financial performer, based on the following factors:

• Its EBITDA is 45.8 per cent of revenue, only slightly behind industry leader Rogers, and ahead of Bell.
• It has become one of the Big Three and leveraged its first mover advantage to generate 28 per cent

share of the wireless market in Canada, slightly behind Rogers, which has 34 per cent.
• Its blended ARPU is $61, which is higher than either Bell or Rogers.
• Its cost of acquisition is lower than direct competitor Bell (Rogers’s cost of acquisition is not known).
• Its blended churn rate is 1.41 per cent, which is the lowest of all three main competitors.

TELUS seems to be doing well in the market, based on the following factors:

• The company’s brands in the premium and mid-market tiers (TELUS, Koodo, and PC Mobile) have

the industry’s top L2R ratings, a key driver in low churn rate and customer retention.
• The company has created a clear market position for each of its brands, which seems to be resonating

with each brand’s respective target in each market tier.
• The TELUS brand has a clear differentiated market position of high customer service. Its strong L2R

rating, at 69 per cent, is the highest among premium-tier competitors. In addition, while complaints to
the regulator across the industry rose by 26 per cent, complaints about TELUS decreased by 27 per
cent in 2013. With an industry-leading churn rate of 1.03 per cent in postpaid subscribers, it appears
that real service performance and perceived market position as a superior service provider are aligned.

• The Koodo and PC Mobile brands have the highest L2R rating in the industry. Each mid-market
brand has a strong brand image—independent of TELUS. Koodo has a set of volunteer brand
ambassadors who propagate the brand’s strength. PC Mobile has a brand association with one of the
strongest private labels in Canada (President’s Choice).

• Sustainable superior customer service is difficult to achieve, and usually can occur only when
customer service is a core plank of the organization’s culture. It is even more difficult to achieve in
large, widely distributed, and decentralized organizations that have multiple customer touch points
(e.g., retail, online, and telecentre). It seems that TELUS has had some success in this area. If this is a
core part of its culture, it can be a sustained competitive advantage because it is hard to duplicate.

Page 8 8B17A049

DIFFERENTIATION AND COMPETITIVE ADVANTAGE

9. Within the three-tier market structure, how does a firm like TELUS create a sustainable

competitive advantage?

To evaluate competitive advantage, it is important to consider direct competitors in the same target
market (e.g., TELUS versus Bell or Rogers; or Koodo versus Fido Solutions or Virgin Mobile).
Depending on the value-oriented segments, differentiation can be achieved through service (e.g.,
customer service or channel outlets), offerings (e.g., rate plans and features such as long distance and
roaming), phones, price, network, and company values (e.g., community involvement, corporate social
responsibility initiatives, and sustainability).

Companies can also create barriers, which can either make it challenging for new entrants to enter the
industry or make customers reconsider their willingness to leave. Competitive barriers include the high
capital cost of entry in this industry, among other considerations (e.g., cost of the network, spectrum
availability, type of spectrum, and the ability to provide multiple product offerings such as Internet,
television, home phone, and wireless). Retaining customers and enticing them to stay may include various
methods, including loyalty offers, bundling discounts, brand stickiness, contract structure (e.g., requiring
customers to pay out the outstanding balance on their device if they leave), and considerable effort to
change suppliers (e.g., having to move multiple subscribers from one account).

10. How are wireless competitors differentiated in the same market? What are the points of

differentiation in each tier of the market?

Classical thinking indicates that a firm can choose to create a competitive advantage under one of three
leadership categories: product (or technology) leadership, cost (or operational excellence) leadership, or
customer intimacy (or the best total solution).3

The instructor should draw a three-dimensional axis on the board like the one shown in Exhibit TN-3 and
ask students how the Big Three players differentiate and compete under the three main categories.

The three-axis model can be applied to assess the level of differentiation and competition among the Big
Three companies in the Canadian wireless carrier business (see Exhibit TN-4). The primary competitive
area is the struggle for customer relationships. To compete in this area, the three companies use a
multiple-brands portfolio, unique brand positioning within each tier, customized offering packages to
attract specific customer sub-segments in each market tier, and multiple differentiated customer
interface/service points (e.g., retail, kiosk, online, call centre, and others).

Ultimately, the biggest differentiator for a company in the telecommunications industry is the customer’s
perceived level of service, which refers to friendliness and helpfulness through multiple touch points of
the organization. This differentiation is difficult to achieve for a company with a variety of support
mediums, and it is challenging to replicate across the organization. However, once the firm has won the
loyalty of a customer thanks to its level of service, the customer is less likely to leave for a competitor and
more likely to use positive word-of-mouth marketing or refer friends.

3 Frederik D. Wiersema and Michael Treacy, “Customer Intimacy and Other Value Disciplines,” Harvard Business Review
(January–February 1993). Available from Ivey Publishing, product no. 93107.

Page 9 8B17A049

11. What points of differentiation are opposing brands attempting to compete on within each tier?

The case identifies a series of points of differentiation that each of the brands uses to compete in this
market. Exhibit TN-5 summarizes the various potential differentiators.

Within each tier, each competitor emphasizes a different strength to gain advantage and add value in the
market (see Exhibit TN-6).

Note to the instructor: These charts can be difficult to reproduce on the board in a classroom. Therefore, a
supplemental PowerPoint file is available (product no. 5B17A049) with this teaching note that includes a
set of charts from the case as an aid for instructors.

Observations of Top-Tier Competitors

• Very little differentiation exists; all three companies have competitive parity on most elements.
• Although TELUS and Bell share a network—which means that their networks are identical—Bell has

positioned itself as offering superior network coverage. On the other hand, Rogers claims that it offers
a seamless international roaming connection (potentially negating Bell’s advantage) for a segment
whose customers travel internationally (e.g., business travellers).

• TELUS has identified service as a competitive weakness of its competitors. The company has
exploited this fact by adding resources into developing service capability for TELUS’s advantage.

Observations of Mid-Market Tier Competitors

• Very little differentiation exists; all three companies have competitive parity on most elements.
• Fido Solutions (Rogers) and Virgin Mobile (Bell) both offer loyalty programs that generate discounts,

while Koodo (TELUS) does not.
• Koodo (TELUS) has identified service as a competitive weakness of its competitors. The company

has exploited this fact by adding resources into developing service capability for Koodo’s advantage.
If it is difficult to duplicate—and if there is a segment that values this feature over loyalty program
discounts—service capability can be a sustainable advantage.

Observations of Price-Sensitive Tier Competitors

• Very little differentiation exists; all three companies have competitive parity on most elements.
• Wind Mobile has managed to create a point of differentiated advantage in its rate plans and customer

interface compared to other discounters, but these advantages are competitive parity to the mid-
market competitors.

• TELUS has the ability to deliver superior customer service, which is a potential point of
differentiation for Public.

What do the above points tell us? We now know which competitive elements within each tier offer
TELUS, Koodo (and PC Mobile), and Public a differentiated advantage. Analyzing the various customer
segments can determine which of them values those elements that are strengths for the firm.

Page 10 8B17A049

WIRELESS CONSUMERS

12. The case discusses three tiers of customers in the market. What is the main difference

between these three high-level segments?

The case describes the high-level segmentation of the three market tiers, which are graphically depicted in
the Market Segmentation diagram (see Exhibit TN-7). The main difference between tiers is price and the
value added that each segment is willing to pay for. The prepaid segment discussed in the case is split
predominantly between the mid-market and price-sensitive tiers. Segmentation usage profiles (see case
Exhibit 7) provide some insight into why a customer within each tier would select or prefer one brand
over another.

13. What metrics and criteria should be used to determine which segments are most attractive

(e.g., most lucrative or most strategically important)?

The following metrics and criteria should be considered when determining which segments are most
attractive:

Value Creation

• Value proposition:

– Where does the company add value?
• Fit:

– How well does a company’s offering fit with the customer’s needs or wants?
– What is the impact of a customer’s life stage and how does it relate to the company’s ability to

meet the customer’s needs (e.g., data usage or migrating from postpaid to prepaid).

Competitive Environment

• Competitive intensity:

– How many competitors are fighting for a share of a segment?
– What is the stickiness of customers, or willingness of customers to move to a competitor?

• Competitive advantage:
– Where does the company have an advantage and a likelihood to be preferred over the

competition?

Value Capture

• Market size:

– Where is there a market opportunity that is sizable enough to make the effort worthwhile?
• Market growth rate:

– Which segment is growing the fastest, representing future revenue growth?
• Customer profitability and value:

– Which customer types are most valuable or profitable?
– What is the customer lifetime value and churn rate? In a service subscription business, these two

elements are interlinked.)

Page 11 8B17A049

– What is the cost of acquisition and retaining customers?
– What is the cost to serve customers?
– What bundling (i.e., upselling) opportunities are available?

At this point, the instructor may choose to give a mini lecture on customer lifetime value, with
information from Neil T. Bendle and Charan K. Bagga, “The Confusion About CLV in Case-Based
Teaching Material,” Marketing Education Review 27, no. 1 (27–38).

14. Which tier is most attractive?

The variable cost to serve a typical customer in each segment does not vary greatly. Therefore, the most
profitable customers are those who are least price sensitive—the premium tier. Due to the customers’ life
stage, this segment seems to also have the best bundling or upselling opportunity.

15. What buying criteria do consumers in various segments use to select a wireless carrier?

The priority of the buying criteria differs by segment and sub-segment. As the case indicates, the
following factors are considered when consumers select a carrier:

• Type of phone (top-tier phones such as Samsung or iPhone always available from Big Three carriers)
• Customer support
• Proximity to store
• Network coverage, reliability, and speeds
• Rate plans
• Previous experiences with carriers, which influences decision-making

Based on information provided in the case, Exhibit TN-8 outlines the priority of the top three buying
criteria for each market tier segment.

16. Why does everyone not simply focus on the top tier, the most lucrative customers?

The case provides the following reasons why the sole focus on the top tier is not optimal:

• The top tier sees the most intense competition between the Big Three as they fight over the most

lucrative customers.
• The overwhelming majority of the Big Three’s revenue comes from postpaid customers, who consist

largely of the top two tiers and account for 83 per cent of the total market. By service provider,
postpaid customers account for 86 per cent of Bell’s customers, 85 per cent of Rogers’s customers,
and 87 per cent of TELUS’s customers.

• Market growth is flattening, and is expected to be stagnant in three years. Almost no growth will
come from this saturated market segment.

• The case indicates that some brand stickiness develops over time. Once consumers become a little
less price sensitive, they stick with their existing brand. Therefore, it is important to get these new
customers early, in the hope of keeping them for a long time. There are almost no new customers
entering the market directly into the premium tier. Any new growth has to come from the mid-market
and price-sensitive tiers.

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PRICE-SENSITIVE WIRELESS CUSTOMERS

17. Where is Public positioned in this three-tier market?

Public’s business is focused on the price-sensitive tier segments. The case provides a perceptual map of
where each segment is broadly positioned relative to price sensitivity and value added. This allows us to
see the differences between the three market tiers and to gain some insight into the price-sensitive tier.
There are four potential targets in the price-sensitive tier: life hackers, deal seekers, new immigrants, and
frugal by necessity.

18. What are the main buying criteria of each of the four price-sensitive segments?

The usage profiles described in the case (see case Exhibit 7) can be used to identify the priorities of each
segment. Exhibit TN-9 outlines the profile observations and top priority for buying of each segment.

19. How attractive is each of the four price-sensitive segments?

To answer this question, we can use the same evaluation criteria outlined in Exhibit TN-9. Each of the
evaluation criteria is listed in Exhibit TN-10. The information in the table can also be depicted on a value
curve (see Exhibit TN-11).

Observations

The four price-sensitive segments have very different profiles. Overall, all four segments have a very low
ARPU, so none of these segments are highly attractive.

• Life Hackers: Although life hackers purchase lower value-added services overall, they desire

flexibility so they can customize a package to get a lot, but pay a little. This is the largest segment in
the price-sensitive tier, and it may want a more expensive device, representing an increased hardware
revenue opportunity. These consumers are likely a low cost to serve. No competitors are currently
focusing on life hackers, so it may be a good time to take a substantial market share of this segment.
The attractiveness of life hackers is moderate–good.

• Deal Seekers: Deal seekers are value shoppers, but they are not the lowest-price buyers. Similar to
life hackers, this segment may want a more expensive device, representing an increased hardware
revenue opportunity. Their deal negotiating behaviour may make them unattractive from a revenue
generating perspective, but they are likely to use self-serve online support, reducing the cost to
support them. This segment makes up 28 per cent of the price-sensitive market, and is one of the two
main targets of the other discount carriers. The attractiveness level of deal seekers is moderate.

• New Immigrants: New immigrants may be in the price-sensitive segment because this is the easiest
way for them to interface with a carrier—through a neighbourhood store. They are the least price-
sensitive of the lower tier, and there may be an opportunity to modestly increase the ARPU without
losing them. Public’s current retail, locations, and service capabilities are strongly suited to serve this
segment. However, this is the smallest of the four price-sensitive segments. The attractiveness level of
new immigrants is moderate.

• Frugal by Necessity: Frugal by necessity customers have no option but to be low-price buyers. They
also require higher customer service from the most expensive service avenue—retail representatives.

Page 13 8B17A049

The combination of lowest revenue and higher cost to serve may make them less attractive. The
attractiveness level of frugal by necessity is low.

PUBLIC MOBILE

20. What did TELUS get for its investment in Public?

TELUS achieved the following goals by pursuing its investment in Public:

• It gained 222,000 customers, who were typically price-sensitive, aged 30–70, new immigrants or

sponsored children, not very tech-savvy, and needing a great deal of customer support.
– A large number of these customers (up to 70 per cent) interrupt their subscription, due to lack of

ability to pay.
– Their average subscription life is 13 months—six months or less for 35 per cent of these

customers—resulting in an overall churn rate of over 6 per cent.
• It gained between $69 million and $76 million in incremental revenue. Across Public’s five rate

plans, ranging from $19 to over $50, the ARPU is $26 (as noted in the case). Note: The ARPU
calculated from the data in provided in case Exhibit 3 is $29.50.

• It inherited an organization that had generated a loss of $55 million in 2013.
• It made a commitment to continue to offer the $19 per month plan for one year.
• It gained an established brand in the market, in two of Canada’s largest urban markets (Toronto and

Montreal).
• It gained 400 retail locations and a retail management network.
• It obtained a license to operate in the G band frequency spectrum, which seems of little value, and

will be shut down.
• It managed to eliminate a low-cost competitor.
• It blocked one of the other Big Three from getting Public.

21. What is your assessment of Public’s performance?

The following points can be made about Public’s performance:

• In just three years, this start-up company secured a spectrum license, became operational, and grew

rapidly to 400 retail locations.
• Public created and implemented a marketing strategy that attracted 222,000 customers.
• The company failed to drive enough revenue to become profitable, reporting a loss in 2013 of $55

million.
• Public currently targets new immigrants (179,000), deal seekers (359,000), and frugal by necessity

customers (215,000), for a total market size of 753,000.
• Some of Public’s customers are in the mid-market price range, not the low-price tier. Approximately

20 per cent of customers have a $45 or $50+ rate plan (see case Exhibit 3).
• Of all Public customers (222,000), 80 per cent are in one of the price-sensitive segments (178,000).

This represents a 24 per cent market share of the target segments.
• Public does not target life hackers, which represent 538,000 potential customers, or over 40 per cent

of the price-sensitive tier.

Page 14 8B17A049

22. Why did 222,000 customers choose Pubic as their service provider? What does this mean for

TELUS’s decision?

The case does not segment Public’s customer base, but it does give information about some of Public’s
market strategy, as well as market segmentation. We can conclude that a large part of its customers signed
up with Public because of the following three drivers:

• Comparison shoppers selected Public as the best solution to fit their needs. The devices are not

differentiated. Many of Public’s customers are very price sensitive, so the low-price rate plans (or rate
certainty) are likely the main section criteria.
– Driver (competitive advantage) = Low price
– Likely segment = Deal seekers, frugal by necessity, sponsored youth

• Local shoppers made purchases at their nearest neighbourhood retailer where they experienced
friendly, helpful service.
– Driver (competitive advantage) = Local proximity, and good service
– Likely segment = Frugal by necessity, new immigrants

• Shoppers referred friends to Public, which are very powerful in the new immigrant community.
– Driver (competitive advantage) = Positive customer experience, and word-of-mouth promotion
– Likely segment = new immigrants, sponsored youth

23. What is your assessment of the strength of the Public brand?

Using the David Aaker model of brand equity,4 we can make a high-level assessment the Pubic brand.

• Brand Awareness

– The case does not provide any data on aided or unaided awareness, but we know that Public is
likely known only in Toronto and Montreal. The company’s tight financial situation has likely
prohibited large-scale advertising; instead it relies on its storefront presence to create awareness.
400 stores in two metropolitan areas have likely created substantial market presence, and some
brand awareness.

• Brand Preference/Loyalty
– Likelihood to recommend is one measure of brand preference. Pubic has a 70 per cent L2R rating,

which is quite good for a low-cost supplier. Only Wind Mobile has a stronger rating in the price-
sensitive tier.

– A high churn rate is often cited as a measure of customer dissatisfaction, but in this case, it seems
the high churn rate is an indication of the consumer’s ability to pay, rather than the consumer’s
dissatisfaction.

• Brand Perceived Quality
– Perceived quality in a service business is usually a combination of product performance (in this

case, cell phone hardware and network performance) and customer experience. We know that the
devices sold by Public were lower-tier. The case hints at the G band spectrum having limited
capabilities, presumably speed. Overall, the perceived quality is likely consistent with a low-cost,
low-value provider. (You get what you pay for.)

• Brand Association/Image (Product Image, Company Image, Personality, and Symbol)
– The case does not provide much data on consumer opinions, the impression, or image of the

Public brand, but we do know that it is known as a low-cost alternative to the Big Three cell

4 David A. Aker, Building Strong Brands (New York, NY: Free Press, 1995).

Page 15 8B17A049

phone companies. Likely, some immigrant communities in Toronto and Montreal see Public as
both a friendly and a confusing way to get a cell phone and wireless service.

EVALUATION OF ALTERNATIVES

24. What is your assessment of the three alternatives?

A detailed evaluation of the three alternatives available to TELUS is provided at the end of this teaching
note (see Exhibit TN-12).

WHAT HAPPENED

By 2017, three years after TELUS acquired Public, the brand had gone through a significant
transformation. MacLean and his team had ultimately made the recommendation to refresh Public’s brand
and change its value proposition. Despite the executive team’s concern around adding another brand to
the wireless portfolio, they bought into the recommendation.

In order to create a path to profitability, and to differentiate between TELUS, Koodo, and PC Mobile’s
target markets, Public chose to pursue prepaid customers in the life hacker and deal seeker customer
segments. While price was an important consideration for these segments, similar to Public’s original
customer base, life hackers and deal seekers did not require as many value-adding features from their
carrier (see case Exhibit 8). Accordingly, the team chose to provide only subscriber identity module
service (or SIM-only service)5 and online-only support, and to close Public’s retail locations, limiting
sales to be available only online. The pricing structure was also changed, and designed to provide
customers with ultimate choice. Customers were able to choose the length of their plan, along with the
type or amount of talk, text, and data they needed, so that customers had to pay for only what they
required (see Exhibit TN-13). After much planning and preparation, these changes were implemented in
August 2015.

Given that the new value proposition was drastically different from the old one, the team chose to
“grandfather” the customers who joined Public prior to the brand refresh. These customers, referred to as
Pioneer or Legacy customers, were able to keep their original rate plan at the price they were used to
paying, while receiving improved coverage from TELUS’ 4G LTE6 nationwide network. Pioneers also
had the choice of migrating to an in-market plan, if it better met their needs. An important consideration
throughout the brand refresh was ensuring that Public’s brand familiarity was not lost, while also making
sure that customers understood that the value proposition had changed. Along those lines, the team chose
to maintain the same name, but update Public’s logos, reflecting the new SIM-only service (see Exhibit
TN-14).

While it had been challenging to make some of these decisions—and there were many times when the
correct path was unclear—the team was beginning to reap benefits from the changes. Since the brand
refresh, Public was able to increase its customer base, while significantly increasing ARPU and churn.
The next challenge for the team would be learning how to increase brand awareness, while efficiently
scaling acquisition efforts. The Public team was excited for what was in store.

5 SIM-only service meant that Public no longer sold phones, but rather that customers would need to bring their own device.
6 4G LTE = fourth generation long term evolution

Page 16 8B17A049

EXHIBIT TN-1: BRAND SPECTRUM

Single Unified
Brand

(e.g., Starbucks or
Boeing)

Endorsed Brands

(e.g., General Electric
and GE Jet Engines)

Parent Brand and
Sub-Brand

(e.g., General Motors
and the sub-brand
Chevrolet)

A Portfolio of
Individual Brands

(e.g., Unilever or
Proctor and Gamble)

Source: Prepared by case authors using data from David A. Aaker and Erich Joachimsthaler, “The Brand Relationship
Spectrum,” California Management Review 42, 4 (2000): 8–23.

EXHIBIT TN-2: DEMAND CURVE ECONOMICS

Source: Prepared by case authors.

EXHIBIT TN-3: HOW THE BIG THREE PLAYERS DIFFERENTIATE

Source: Prepared by case authors.

Brand Spectrum

Page 17 8B17A049

EXHIBIT TN-4: SOURCES OF DIFFERENTIATED ADVANTAGE

Product Leadership
(or Technology

Leadership)

Cost Leadership
(or Operational Excellence)

Customer Intimacy
(or the Best Total

Solution)
Competitive
Elements

• The package of voice and
data offerings is available
for all to see and easily
copied by any of the
competitors.

• Each player has access to
the same devices to sell to
consumers.

• Network speed, reliability,
and coverage is the
primary technology in this
industry. The network
technology and coverage
of each player has some
minor regional differences,
and some leapfrog
advances as new
technologies are rolled
out, but overall, the
networks are very similar.

• Each competitor has
different roaming
connections and
agreements, which means
the ability to seamlessly
roam without interruption
of service is different
between competitors.

• We do not have sufficient
information in the case to analyze
the cost advantage of one
competitor over the other.

• EBITDA is not a very granular
measure cost advantage, but it may
be a reasonable indicator of
operational efficiency. On the other
hand, this is a high-fixed-cost
industry, so EBITDA is likely to vary
with network utilization, and is thus
not a good indicator of operational
efficiency. A review of the financial
highlights in case Exhibit 5
indicates that EBITDA margin as a
percentage of revenue is fairly
consistent across all Big Three
competitors
– TELUS 45.8%
– Bell 43.6%
– Rogers 46.8%

• Each of the Big Three have other
non-wireless offerings (e.g.,
television, home phone, and
Internet service), and there may be
an opportunity for competitors to
bundle offerings. Although there are
regional differences, all competitors
have similar bundling capabilities
overall. This is more of a
pricing/bundling issue, rather than a
true cost advantage.

• Although each of the Big
Three compete in each of
the market tiers, they
have each carved out a
unique product/market
focus, which creates
some differentiation
between each of the Big
Three. The unique
positions include:
– Multiple brands

portfolio
– Unique brand

positioning within
each tier

– Customized rate plan
packages to attract
specific customer
sub-segments in
each market tier

– Multiple
differentiated
customer
interface/service
points (retail, kiosk,
online, call centre,
etc.)

Degree of
Differentiation
Between the
Big Three

Low–Medium

Low

Medium–High

Note: EBITDA = earnings before interest, tax, depreciation, and amortization

Source: Prepared by case authors.

Page 18 8B17A049

EXHIBIT TN-5: POTENTIAL POINTS OF DIFFERENTIATION

Source: Prepared by the case authors.

EXHIBIT TN-6: POINTS OF DIFFERENTIATION

Page 19 8B17A049

EXHIBIT TN-6 (CONTINUED)

Source: Prepared by the case authors.

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EXHIBIT TN-7: MARKET SEGMENTATION

Source: Prepared by case authors

EXHIBIT TN-8: CONSUMER BUYING CRITERIA

Source: Prepared by case authors.

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EXHIBIT TN-9: PROFILE OBSERVATIONS OF EACH SEGMENT

Segment Profile Observations Implied Top Priority Buying
Criteria

Life Hackers • Frugal by choice
• Heavy phone user
• Value customization and

flexibility
• Device expert

• Rate plan customization
• Value buyer (versus lowest

cost)
• Diversified device selection

High Usage Deal
Seekers

• Get the most for their money
• Very heavy phone user
• Multimedia user

• Rate plan customization
• Value buyer (versus lowest
cost)
• Diversified device selection

New Immigrants • High need for in-person
service

• Cost certainty considered
important

• Minimal usage

• In-person customer service
(native language speaker)

• Referral of a friend
• Low (but not lowest) fixed price

Frugal by Necessity • Low price and cost certainty
• Customer service
• Aspiring for a better phone

• Lowest fixed price
• Customer service
• Mid-range phone selection

Source: Prepared by case authors.

Page 22 8B17A049

EXHIBIT TN-10 EVALUATION CRITERIA

Evaluation Criteria Life Hackers Deal Seekers New Immigrants Frugal by Necessity
Value Creation
Fit with customer
as the top priority
buying criteria

Without more
flexibility in rate plans
and device offering,
Public does not meet
customer needs. This
seems to be easily
solved with some
support through
TELUS.

Without more
flexibility in rate
plans and
device offering,
Public does not
meet customer
needs. This
seems to be
easily solved
with some
support through
TELUS.

Public is meeting
the needs of this
segment.

Public is meeting the
price and service
needs of this segment,
but not the mid-range
device needs. This
seems to be easily
solved with some
support through
TELUS.

Competitive Environment
Competitive
intensity

Low Moderate Moderate Low

Competitive
advantage

Without an improved
offering, Public is at
competitive parity
with other discount
competitors. With
back-office support
from TELUS on
selected device
availability and rate
plan options, it is
possible to create a
competitive
advantage.

Without an
improved
offering, Public
is at competitive
parity with other
discount
competitors.
With back-office
support from
TELUS on
selected device
availability, it is
possible to
create a
competitive
advantage.

Without an
improved
offering, Public is
at competitive
parity with other
discount
competitors. It is
likely that native
language service
capability would
provide a
competitive
advantage.

Without an improved
offering, Public is at
competitive parity with
other discount
competitors. With
back-office support
from TELUS on
selected device
availability, it is
possible to create a
competitive advantage.

Value Capture
Market size
(1.291 million users
= 100%)

538,000 (42%) 359,000 (28%) 179,000 (14%) 215,000 (17%)

Market growth rate Moderate Moderate Moderate Low
Customer
profitability

May require online
support only, which

is a much lower
operating expense.

May require on-
line support

only, which is a
much lower
operating
expense.

Requires
expensive retail

stores.

Requires expensive
retail stores.

Customer
profitability (ranking
taken from case
Exhibit 8)

#2 #3 #1 #4 (lowest in the price-
sensitive segment)

Overall
attractiveness

Moderate–Good Moderate Moderate Low

Source: Prepared by case authors.

Page 23 8B17A049

EXHIBIT TN-11: PRICE-SENSITIVE CUSTOMER PROFILES AND FIT WITH PUBLIC MOBILE

Source: Prepared by case authors.

Page 24 8B17A049

EXHIBIT TN-12: EVALUATION OF ALTERNATIVES

SHUT DOWN
Shut down the brand, migrate customers to one of the other TELUS

brands, and merge operations

MAINTAIN STAUS QUO
Stay the course—make no change

REPOSITION
Re-launch and reposition Public Mobile for

profitability
Impact on Market Position
• Gain 222,000 new Public Mobile customers.
• Potentially unlocks any implied customer stickiness to Public Mobile

when customers are migrated, allowing competitors the opportunity to
acquire customers.

• Does not increase any positioning in the price-sensitive tier.
• Does not create any growth potential, by missing the opportunity to

create a value proposition for any new segments.
• Missed an opportunity to target the underserved life hacker segment.
• Potentially missed an opportunity to diversify the wireless portfolio

away from the postpaid segment (which is slowing) and tap into the
growing prepaid market with an established brand and customer
base.

• Public Mobile has 24% market share of its target
segments (new immigrants, deal seekers, and
frugal by necessity). The positioning has been
successful, but growth potential may be limited
against three other strong competitors in this tier.

• There is an opportunity to leverage Public
Mobile’s brand and position in the market.

• Aggressive promotion to grow market share may
cannibalize some mid-market consumers from the
company’s other brands.

• Missed opportunity to target underserved life
hacker segment.

• There is an opportunity to discontinue lower rate
plans (after the required wait period), to improve
ARPU, but this may reduce the number of
customers and reduce overall revenue; although
higher ARPU is important, this is only beneficial if
overall total revenue increases in this high fixed-
cost business.

• Provides an opportunity to reposition the
brand to capture a new piece of the market.

• There is a good opportunity to use TELUS’s
superior service core competencies to
create a competitive advantage to attract
new immigrants at a mid-market price level.

• Presents an option to curate an offering to
attract multiple segments; life hackers are a
great choice due to segment size and no
competition, but additional segments could
be attracted for more financial benefit.

• There is some risk because TELUS is not
experienced in this space and no other
carrier supports life hackers.

• If the market position changes, some current
customers may feel alienated.

Financial Impact
• As indicated earlier, Public Mobile will increase TELUS’s revenue by

approximately $70 million.
• Public’s 2013 $55 million loss should be reduced when the G band

spectrum is shut down. The case does not give any indication of how
much the OPEX savings might be. In a simple view, the $70 million
revenue should have only brand marketing and selling as a direct
expense, after all customers are migrated to the existing brands.

• There will be some one-time costs in new signage, information
technology integration, and other onboarding costs (assuming the
retail network will continue to operate under one of the two mid-
market brands, likely Koodo Mobile).

• The company’s short-term blended ARPU, churn rate, and cost of
acquisition/user will take a hit while net additions will improve.

• Long term: positive—migration to other portfolios (higher rate plans)
positively affect EBITDA.

• The company invested $229 million, so it is important to ensure that
the firm has a high retention rate to receive that value from those
customers.

• Short-term and long-term financials would be
negatively affected due to Public Mobile’s high
churn, low ARPU, and expensive
distribution/support structure.

• This option does not improve financial positioning
of the brand, and will dilute overall TELUS
financials in the long term.

• Short-term and long-term financials would
be positively affected, with improvements in
the support/distribution structure and an
adjustment to the rate plan/device line-up
structure (incentivize step-ups).

Page 25 8B17A049

EXHIBIT TN-12 (CONTINUED)

Implementation Challenges
• Successfully migrating 222,000 customers while minimizing

customer churn to competitors
• Retaining customers in segments that the company’s current

positioning is not positioned to attract
– Public Mobile’s current customers had the option of selecting

PC Mobile or Koodo Mobile before, but opted to purchase from
Public Mobile.

– Neither Koodo Mobile nor PC Mobile is positioned to attract
customers in the price-sensitive segment. Creating a new low
price offering within either brand could cannibalize the
company’s current higher rate plans.

• Knowing the right levers to pull to ensure
profitability (e.g., how much you can increase
price or what expenses you can eliminate or
reduce without customers churning)

• Creating a value proposition that will
resonate with the new target market and
deliver a competitive advantage. (E.g., will
you have phones? Will you have stores?
What other types of customer service will
you have? What price will your rate plans
be? How does this affect your financials?)

• Ensuring that target market transition does
not alienate the existing customer base
(For example, should they keep their
current rate plan, for how long, what level
of customer service will they be provided?
How will these differences affect new
customer behaviour?)

Other Considerations
• This alternative maintains focus on the three core TELUS wireless

brands.
• It protects TELUS’s long-term ARPU and churn metrics.

• This alternative requires the least effort to
implement.

• This may be an efficient way to enter this
growing market, with an established brand
and customer base.

Likelihood of Success
The likelihood of migrating most customers to higher rate plans and
retaining most customers is low.

There is a moderate likelihood of some growth in
market share with and improved profitability by
shutting down G band operating costs. There is a
low likelihood of overall ARPU or churn rate
improvements. Public Mobile profitability may
improve, but it is unclear if it will be profitable.

The challenge will be simultaneously
repositioning the brand, attracting a new
segment (without alienating existing
customers), increasing ARPU, and reducing
churn rate. The likelihood of success is
medium.

Note: ARPU = average revenue per user; EBITDA = earnings before interest, tax, depreciation, and amortization
Source: Prepared by case authors.

Page 26 8B17A049

EXHIBIT TN-13: PUBLIC MOBILE’S REFRESHED RATE PLAN STRUCTURE

Source: Company files.

EXHIBIT TN-14: PUBLIC MOBILE’S LOGO

Before the Transformation After the Transformation

Source: Company files.

Page 27 8B17A049

EXHIBIT TN-15: BOARD PLAN

Source: Prepared by case authors.