Business consultancy project

Expected Commercial Value.

Considering that the different pricing strategy will be applied in the short-term and long-term outlines, the different feasibility analysis calculated according to the service conditions. Besides, the service users will be monitored weekly, and the actual figures will be compared with forecasted ones. The second stage feasibility will be updated according to the actual payment outcomes. These comparisons will enable to assess the customer response rate and implement required adjustments in the service design.

Table 21 The Short-Term Expected Value (in AZN)

Short Term Evaluation for first 6 months
ASSUMPTIONS	Nov-19	Dec-19	Jan-20	Feb- 20	Mar-20	Apr-20
Active subscribers	3,800k	3,800k	3,800k	3,800k	3,900k	3,900 k
Smartphone penetration rate	56%	56%	57%	57%	57%	57%
Expected customer segment	207k	208k	211k	211k	290k	291k
Acquisition Rate	3%	3%	4%	5%	6%	6%
MFS users	6,224	6,230	8,455	10,559	16,530	18,625
SERVICES (Average transaction amount per utility)
Utility, mobile phones bills etc.	20	20	20	30	30	30

Others (insurance, govern. pyts, TV etc.)	10	10	10	15	15	15
Entertainment (gambling, games and etc)	5	5	5	5	5	5
Total bill payment Volume per subs	35	35	35	50	50	50
Total Cash Volume	218	218	296	528	827	931
DIRECT REVENUE
Fee rate receivable from Bank	2.0%	2.0%	2.0%	2.0%	2.0%	2.0%
Total revenue from payments	4.4k	4.4 k	5.9k	10.6k	16.5k	18.6k
DIRECT EXPENSES
Top-up expenses	2.5%	2.5%	2.5%	2.4%	2.4%	2.4%
Total expense for top-up	5k	5k	7k	13k	20k	22k
PROFIT/(LOSS)	(1.09)k	(1.09)k	(1.48) k	(2.11)k	(3.31)k	(3.73)k
Total LOSS (in K)						(12.8) k

The first six months calculation was done based on monthly estimation usage. Presumably, the number of users will be modest in the first stage of implementation, and consequently, the considerable turnover is not expected. The only saving will be the decrease in money collection cost even though the saving will be minimal but can have a positive influence on gross margin in the growth of economies of scale in the long run.

Table.22 The Long-Term Expected Value (in AZN).

Long-Term Evaluation	2nd Period	3rd Period	4th Period	5th Period	6th Period
TARGET CUSTOMER	May-Oct 20	Nov20- Apr21	May-Oct 21	Nov21-Apr22	May-Oct 22
Active subscribers (on average)	3,967 k	4,150k	4,350 k	4,550k	4,750k
Smartphone penetration rate	58%	60%	64%	65%	68%
Expected customer segment (on average)	295k	610k	905k	1,158k	1,600k
Acquisition Rate	9%	14%	16%	16%	19%
MFS users (on average)	154	445	140	187	303
SERVICES (Average Transaction Amount Per Utility)
Utility, mobile phones bills etc.,	50.00	50.00	60.00	65.00	70.00

Others (insurance, govern. pyts, TV etc.)	20.00	30.00		40.00		55.00		75.00
Entertainment (gambling, games and etc)	10.00	20.00		30.00		45.00		65.00
QR payments in retail stores						30.00		70.00
Total bill payment Volume per subscriber	80.00	100.00		130.00		195.00		280.00
Total Cash Volume	12,306 k	51,605k		109,350k		220,424k		512,726k
Direct REVENUE
Deductible fee for ordinary payment	0.5%	0.5%		0.5%		0.5%		0.5%
Deductible fee for micro-payments *	46k	258k		421k		337 k		545k
Receivable fee from Bank **	1.4%	1.4%		1.4%		1.4%		1.4%
Micro crediting by customer behavior ***						176,339		410,181
Total revenue from payments	276k	1,110k		2,288k		4,280k		10,016k
Direct EXPENSE
Top-up fee****	2.3%	2.0%		1.8%		1.6%		1.4%
Total expense for top-up	277k	1,000k		1,915k		3,399k		6,873k
Profit (Loss) (in K)	(0.9) k	109k		373k		881k		3,143k
Cumulative Revenue for the Total Period									4,505 k

Starting from the second stage, the service fee will be applied for the usage. The different pricing strategy will be applied based on the amount of payment. The payment below 10 AZN, 0.05 AZN will be applied to each payment and the amount of the above 10 AZN the 5% of the total payment will be deducted as the payment fee.

The next 5-period feasibility analyses were based on different assumptions, and in the last fifth and sixth period, the additional micro crediting service will be introduced according to customer behavior. Meanwhile, it is also planned to include the QR payments availability to the service in Y 2022.
The main items of long-term business feasibility estimations were indicated below.

* Deductible fee calculated based on the assumption that the payment of subscribers below and above 10 AZN will be changed respectively and gradually the amount above 10 AZN will be increased.

**The receivable money from 70% of the money collection share which will be paid back from Pasha Bank
*** Calculation based on the assumption that Micro credits will be given 10% of customers who generate a big proportion of the monthly money transactions.
**** Based on the increase in money transaction from MFS the money collection from other resources will be reduced, and consequently, the overall money collection cost will be declined.
Even though in the first and the second-period company will get the negative revenue but starting from the third-period company will start to get the positive bottom line, and with the increase of customer acquisition and the payment usage company will receive the substantial revenue increase. Consequently, the service will be favorable in the long run and will be considered as a new revenue stream with the growth of economies of scale.
Supplementary Actions.
In addition to the critical parameters of the service, some additional layout was contemplated. In order to sustain the high ARPU customers loyalty to Azercell, it is planning to add the service as free of charge add- on service in some campaigns. Another action is considered for the decrease of top-up fee costs by reducing the indirect costs and attracting the high commission merchants.

8.