Poor analytics gets Telefonica optimistic about mHealth in emerging markets

This time last year the 40 person team at O2 Health announced it’s “consumer health push” and we’re yet to see it materialise. It’s quite unsurprisingly really as their Managing Director considers mHealth to be just a “buzzword”.

In sharp contrast today Mobile Health Live reports on how Matthew Key, Chairman & CEO Telefónica Europe (O2’s parent), recently spoke in London of the groups optimism for the mHealth opportunity after seeing take up of a consumer mHealth service offered by their Tivo brand in Brazil.

This supports the claims made in the recent PWC report that emerging markets are the key to growth for the mHealth market but one look at the data for me and it’s quite obvious they’re very much analysing the details and missing the big picture:

Telefonica points to take-up in Brazil for new service

Telefonica Digital says a health advice service in Brazil has attracted 360,000 mobile subscribers since its launch in the first quarter of this year. The service is offered by Vivo, the mobile operator in which Telefonica holds a majority stake. The figure was mentioned by executives during a media and analyst event held by Telefonica Digital in London last week in which health was one of the sectors tipped by the company for future growth.

The Brazilian health advice service costs BRL2-3 (US$1-1.5) per month to access, a charge which is paid directly by consumers. The operator noted that in emerging markets users generally have to pay for health services themselves unlike in wealthier countries where the government or another payer such as an insurance company is responsible.

Brazil and Chile are the two Latin American countries about which Telefonica is most optimistic for the future prospects of mobile health. Despite their differences it believes certain health services can be recycled between its markets in Europe and Latin America although sometimes that process can work in unusual ways.

During his keynote presentation at last week’s event Matthew Key, Telefonica Digital’s chief executive, pointed to a telecare service called Help at Hand recently launched in the UK. The service geo-fences a user so if they stray outside a specific area then an alarm is triggered. It is designed for mental health patients. However in Latin America the same service has attracted interest as protecting users’ personal security rather than their health.

So how much is this mHealth service in Brazil actually worth to the MNO?

360,000 subscribers
BRL2-3 per month. In UK GBP that’s £0.95 per month max or £11.40 per year
£4,104,000 per year in revenue
Optimistic operating profit prediction for a Medical call centre ~12%
NB this is a high estimate, assumes zero investment costs, few medical call center businesses ever break even, etc

Optimistic Profit Projection = £492,000

How much O2 UK was making in 2005 from NHS Direct

In 2005 O2 UK’s smaller subscriber base rival Vodafone UK reported that more than 250,000 of their UK subscribers had made a call to the 08454647 NHS Direct health advice line. There is no reason why O2 customers didn’t make at least this amount of such calls.

Average call duration 10 min
Per min call cost £0.35p/min
Average call cost £3.50p
Total revenues £875,000
Realistic operating profit prediction for a mobile operator charged premium rate telephone line 80%
NB this is a low estimate, premium billing requires zero investment costs – it’s already a core service – and unlike most premium rate services “low call” numbers require little/no outpayment for the service provider – in this case the NHS

Profit generated in 2007 = £700,000

Comparison of the mHealth opportunity in the UK and Brazil

Of course neither of these back of the envelope calculations calculate the cost of credit to a mobile account etc but these will all be heavily in favour of profits for the UK service where many of the mobile subscribers will be paying for the call from their mobile bill that’s paid via regular direct debit contract, etc.

The population in Brazil (190 million) is more than 3 times that of the UK (62 million) and the Vivo network has a similar market share as O2 UK (each has approx 25% of all connections in their countries) so while this article is in no way meant to be dismissing the massive mHealth opportunity in Brazil it does highlight the naivety of enthusing about a mHealth opportunity in the Brazilian market while completely ignoring the much more profitable consumer mHealth market in the UK where 7 years ago a single NHS call service was actually generating more profit for O2 without them having to do anything but bill their existing customers.

About 3G Doctor

The Corporate Blog of 3G Doctor
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One Response to Poor analytics gets Telefonica optimistic about mHealth in emerging markets

  1. Pingback: “Biggest threat to investment in mobile health startups? Not enough unique intellectual property” « mHealth Insight: the blog of 3G Doctor

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