Problem Definition
ConnectCo is one of four national mobile telecom operators, serving 10 million subscribers across the country. Over the past three years, the company invested $4.2 billion in 5G spectrum acquisition and network rollout, bringing 5G coverage to 65% of the population. The executive team expected this investment to drive meaningful revenue growth through premium pricing, new service tiers, and reduced competitive switching.
However, the results have been disappointing. Average revenue per user (ARPU) has grown only 4%, from $48 to $50 per month. Only 30% of subscribers actively use the 5G network despite 65% population coverage. Meanwhile, annual customer churn remains stubbornly high at 18%, meaning ConnectCo loses 1.8 million subscribers every year and spends $300 per customer to acquire replacements. The company's enterprise and IoT business is small at $180 million annually (3% of total revenue), though it is growing rapidly at 35% year-over-year.
The CFO has engaged your firm to evaluate the return on ConnectCo's 5G investment and recommend a path forward. Specifically, she wants to know whether the company should: (a) double down on 5G monetization for consumers, (b) pivot investment toward enterprise and IoT services, or (c) cut 5G capital expenditure and redirect resources to customer retention. What would you recommend, and why?
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If asked, please share that:
- ConnectCo operates in a mature market with four national carriers and two MVNOs
- Competitors have invested similarly in 5G but some have achieved higher ARPU growth through bundled offerings
- The company owns fixed-line broadband infrastructure in 40% of its coverage area
- Customers who subscribe to both fixed broadband and mobile (bundle customers) show 30% lower churn and 15% higher ARPU than mobile-only customers
- Network operating costs are $1.8 billion per year; marketing and sales spend is $960 million, of which $540 million goes to replacing churned subscribers
- The 5G spectrum licenses are sunk costs; ongoing 5G network maintenance adds approximately $200 million per year to operating costs
- Regulatory conditions require maintaining minimum 4G coverage standards for another 8 years
Exhibit 1ARPU and Churn Trends (2022-2025)
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| ConnectCo Monthly ARPU | $48 | $49 | $49 | $50 |
| Competitor A Monthly ARPU | $47 | $49 | $51 | $53 |
| Competitor B Monthly ARPU | $45 | $47 | $49 | $51 |
| Industry Average ARPU | $47 | $48 | $50 | $52 |
| ConnectCo Annual Churn | 17% | 18% | 19% | 18% |
| Competitor A Annual Churn | 14% | 13% | 12% | 11% |
| Competitor B Annual Churn | 16% | 15% | 14% | 13% |
| Industry Average Churn | 15% | 14% | 13% | 12% |
Source: ConnectCo case file
Exhibit 2Revenue Breakdown by Segment ($M)
| Segment | 2022 | 2023 | 2024 | 2025 | CAGR |
|---|---|---|---|---|---|
| Consumer Mobile | 5,760 | 5,880 | 5,880 | 6,000 | 1.4% |
| Enterprise / IoT | 73 | 99 | 133 | 180 | 35.0% |
| Wholesale / Roaming | 167 | 171 | 157 | 120 | -10.5% |
| Total Revenue | 6,000 | 6,150 | 6,170 | 6,300 | 1.6% |
Source: ConnectCo case file
Question 1Structuring
How would you structure your evaluation of ConnectCo's 5G investment and future strategy?
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
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- Share the problem definition details above
- If the candidate asks, confirm that the $4.2B was split roughly 40% spectrum ($1.7B) and 60% network build ($2.5B)
- The company's weighted average cost of capital (WACC) is 8%
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A strong framework would include:
1. Current State Assessment
- a) Revenue analysis: total revenue, ARPU trends, revenue mix (consumer vs. enterprise vs. wholesale)
- b) Cost structure: network operations, marketing/sales, churn replacement costs
- c) Profitability: contribution margins by segment, overall EBITDA trajectory
2. 5G Investment ROI (Forward-Looking)
- a) Incremental revenue attributable to 5G (consumer ARPU uplift, new services enabled)
- b) Ongoing costs to maintain and expand 5G (exclude sunk spectrum costs)
- c) Competitive necessity: would ConnectCo lose subscribers without 5G?
- d) Payback period on remaining recoverable investment
3. Growth Levers
- a) Consumer: bundling strategies, premium 5G tiers, fixed-mobile convergence
- b) Enterprise/IoT: current growth trajectory, addressable market, margin profile
- c) Churn reduction: root cause analysis, retention economics, bundling impact
4. Strategic Options Evaluation
- a) Double down on 5G monetization: required investment, expected returns, timeline
- b) Pivot to enterprise/IoT: market size, capability gaps, competitive position
- c) Cut capex and focus on retention: risk of competitive disadvantage, short-term savings vs. long-term position
- d) Hybrid approach: selective 5G investment combined with churn reduction
What the interviewer is looking forShow guidanceHide guidance
A good candidate will organize their analysis around at least three pillars: current financial performance, 5G return on investment, and strategic options. A strong candidate will explicitly separate sunk costs from forward-looking economics. An excellent candidate will also consider competitive dynamics, customer segmentation, and the interplay between churn, ARPU, and lifetime value.
Push the candidate if they focus only on cost reduction or only on revenue growth. The case requires evaluating trade-offs across both dimensions.
Question 2Numeracy
If ConnectCo reduces annual churn from 18% to 14% through fixed-mobile bundling and loyalty programs, what is the annual profit impact? Assume the programs require $80 million in annual investment.
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
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- Current subscribers: 10 million
- Current churn: 18% (1.8 million lost per year)
- Target churn: 14% (1.4 million lost per year)
- Customer acquisition cost: $300 per subscriber
- Average monthly ARPU: $50
- Variable cost to serve each subscriber: 35% of revenue (network usage, billing, support)
- Retention program annual cost: $80 million (bundling subsidies, loyalty rewards, dedicated retention team)
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Step 1: Subscribers retained
- Current churn: 18% of 10M = 1,800,000 lost per year
- Target churn: 14% of 10M = 1,400,000 lost per year
- Additional subscribers retained: 400,000
Step 2: Customer acquisition cost savings
- 400,000 fewer replacements needed x $300 CAC = $120 million saved
Step 3: Incremental revenue from retained subscribers
- 400,000 subscribers x $50/month x 12 months = $240 million additional annual revenue
Step 4: Variable costs for retained subscribers
- Variable cost at 35% of revenue: $240M x 0.35 = $84 million
- Incremental contribution margin: $240M - $84M = $156 million
Step 5: Net annual profit impact
| Component | Amount |
|---|---|
| CAC savings | +$120M |
| Incremental contribution margin | +$156M |
| Retention program investment | -$80M |
| Net annual profit impact | +$196M |
The churn reduction program generates approximately $196 million in annual profit improvement, representing a return of roughly 2.5x on the $80 million investment. This alone would add roughly 3 percentage points to ConnectCo's EBITDA margin.
What the interviewer is looking forShow guidanceHide guidance
The candidate should identify three distinct components of profit impact: (1) savings from reduced acquisition spending, (2) incremental contribution margin from retained subscribers, and (3) the cost of the retention programs. A strong candidate will recognize that retained subscribers generate contribution margin, not just revenue, and will net out variable costs. An excellent candidate will also note second-order effects such as improved word-of-mouth, reduced network congestion from more stable usage patterns, or the compounding effect over multiple years.
If the candidate struggles, prompt them: "What costs does ConnectCo avoid when it doesn't need to replace a churned subscriber?" and "What revenue does it keep?"
Question 3Judgement & Insights
Please review Exhibit 3. Which customer segment offers the highest return on investment, and what does this imply for ConnectCo's strategy?
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
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- Share Exhibit 3 (Customer Lifetime Value by Segment)
- If asked, confirm that bundle customers require a one-time equipment and installation cost of approximately $150 per subscriber on top of the standard CAC
- The fixed-line broadband market in ConnectCo's coverage areas has approximately 30% penetration from ConnectCo's own network; the remaining 70% is served by cable or fiber competitors
- ConnectCo's current bundle penetration is 18% of its subscriber base (1.8 million of 10 million)
Exhibit 3Customer Lifetime Value by Segment
| Metric | 5G Consumer | 4G-Only Consumer | Bundle (Fixed + Mobile) |
|---|---|---|---|
| Subscribers | 3.0M | 5.2M | 1.8M |
| Monthly ARPU | $52 | $46 | $58 |
| Annual Churn Rate | 16% | 21% | 11% |
| Avg. Customer Tenure (months) | 75 | 57 | 109 |
| Customer Acquisition Cost | $320 | $280 | $420 |
| Incremental Capex per Sub | $180 | $20 | $150 |
| CLV (at 65% contribution margin) | $2,215 | $1,424 | $3,689 |
| CLV-to-CAC Ratio | 6.9x | 5.1x | 8.8x |
CLV formula: (Monthly ARPU x 0.65 x Avg. Tenure in months) - CAC
Blended metrics check: weighted average ARPU = $50/month; weighted average churn = 18%
Source: ConnectCo case file
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Key observations from Exhibit 3:
1. Bundle customers are the clear winner on unit economics. At a CLV-to-CAC ratio of 8.8x, bundle customers generate 28% more return per acquisition dollar than 5G consumers (6.9x) and 73% more than 4G-only users (5.1x). Their 109-month average tenure versus 57 months for 4G-only means ConnectCo earns revenue from them nearly twice as long.
2. Churn reduction, not ARPU, is the primary driver. The bundle ARPU premium over 4G-only is $12/month (26%), but the churn reduction from 21% to 11% is a 48% improvement. The tenure effect compounds the ARPU advantage, making churn the dominant variable in lifetime value.
3. 5G alone does not significantly improve unit economics relative to its cost. 5G consumers pay only $6/month more than 4G-only subscribers, and when the $180 incremental capex per 5G subscriber is factored in, the adjusted CLV-to-CAC ratio narrows to roughly 6.4x. The 5G premium is insufficient to justify accelerated capex on its own.
4. The largest opportunity is converting the 5.2M 4G-only segment. This is the biggest segment with the worst economics. Moving even 20% of them (roughly 1 million) to bundles would shift them from the lowest to the highest CLV tier.
Strategic implication: ConnectCo should prioritize fixed-mobile convergence and bundle penetration over standalone 5G consumer monetization. Where ConnectCo owns fixed infrastructure (40% of coverage), it should aggressively cross-sell bundles. In remaining areas, partnerships with fixed-line providers or fixed wireless access (FWA) using 5G could extend bundle reach.
What the interviewer is looking forShow guidanceHide guidance
The candidate should compare CLV, CLV-to-CAC ratios, and segment sizes to draw strategic conclusions. A good candidate will identify that bundle customers have the highest CLV-to-CAC ratio. A strong candidate will also observe that 5G-only consumers have modestly better unit economics than 4G-only but require significantly more capital expenditure per subscriber, narrowing the true ROI gap. An excellent candidate will connect this back to the strategic question: the highest-ROI action is to convert existing mobile-only subscribers into bundle customers, not to push 5G adoption alone.
Key insights to look for:
- Bundle CLV-to-CAC ratio (8.8x) is 28% higher than 5G consumer (6.9x) and 73% higher than 4G-only (5.1x)
- The churn differential is the primary driver of bundle superiority, not ARPU alone
- ConnectCo has only 1.8M bundle customers out of 10M total, suggesting large conversion headroom
- However, ConnectCo only owns fixed infrastructure in 40% of its area, limiting organic bundle expansion
- 4G-only is the largest segment (5.2M) with the worst economics, making it the highest-priority conversion target
- 5G consumer premium over 4G ($6/month ARPU uplift) is modest relative to the capex required
Question 4Creativity
What new revenue streams could ConnectCo pursue using its 5G network that do not rely on increasing consumer ARPU?
Hint · Creativity
Brainstorm in buckets (e.g. internal vs external, short vs long term) so ideas stay structured and you can see gaps.
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- ConnectCo's 5G network covers 65% of the population, including most industrial and commercial zones
- The company has 2,400 cell tower sites and 6 core data center locations
- Current enterprise/IoT revenue of $180M is primarily from basic connectivity contracts
- Major industries in ConnectCo's markets include manufacturing, logistics, agriculture, healthcare, and financial services
- 5G network slicing capability is technically ready but not yet commercially deployed
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High-priority opportunities:
1. Private 5G Networks for Enterprise ($400M+ addressable market) Offer dedicated, on-premises 5G networks to manufacturing plants, warehouses, and logistics hubs. These replace Wi-Fi with more reliable, lower-latency connectivity for robotics, autonomous vehicles, and real-time quality control. ConnectCo can charge $50K-$500K per site annually. This leverages existing spectrum and network expertise.
2. Network Slicing as a Service ($200M+ addressable market) Sell guaranteed-performance virtual network slices to enterprises requiring specific latency, bandwidth, or reliability SLAs. Use cases include remote surgery for hospitals, real-time trading floor connectivity, and autonomous vehicle corridors. Pricing is premium (3-10x standard enterprise rates) because customers pay for guaranteed performance.
3. Edge Computing / Multi-Access Edge Computing ($150M+ addressable market) Monetize ConnectCo's 6 data centers and 2,400 tower sites as distributed computing infrastructure. Partner with cloud providers (AWS Wavelength, Azure Edge) to offer low-latency compute at the network edge. Revenue model is infrastructure-as-a-service with monthly recurring fees.
4. Massive IoT Connectivity Platform ($100M+ addressable market) Deploy a managed IoT platform for agriculture (soil sensors, drone coordination), logistics (fleet tracking, cold chain monitoring), and smart city infrastructure (traffic management, utility meters). Revenue per device is low ($1-5/month) but volume potential is enormous (millions of connected devices).
5. Fixed Wireless Access as Broadband Alternative ($300M+ addressable market) Use 5G to deliver home broadband in areas where ConnectCo lacks fixed-line infrastructure. This extends the bundling strategy to the 60% of coverage area where ConnectCo does not own fiber, creating bundle economics without fiber investment.
Prioritization: Private 5G networks and FWA broadband should be top priorities. Private networks offer the highest margins and longest contracts (3-5 year terms), while FWA directly supports the bundling strategy identified as the highest-ROI initiative.
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This question tests creative thinking and commercial instinct. A good candidate will propose two or three ideas. A strong candidate will prioritize by market size, ConnectCo's right to win, and implementation feasibility. An excellent candidate will identify that 5G's real differentiation lies in enterprise use cases (low latency, network slicing, massive IoT density) rather than consumer speed improvements, and will propose a concrete go-to-market approach.
Push back if the candidate only lists ideas without evaluating them. Ask: "Which of these would you prioritize and why?"
Question 5Synthesis
Based on your analysis, what is your recommendation to the CFO?
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
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Recommendation: Pursue a phased "Retain, Bundle, Monetize" strategy rather than choosing a single path.
Phase 1 (0-12 months): Fix the churn problem
- Launch bundling and loyalty programs to reduce churn from 18% to 14%
- Expected annual profit impact: approximately $200 million (as calculated in Question 2)
- This is the highest-ROI, lowest-risk initiative and funds subsequent phases
- Immediate actions: cross-sell fixed broadband to the 4M mobile subscribers in ConnectCo's fixed-line footprint; launch a loyalty program with tenure-based benefits
Phase 2 (6-24 months): Scale enterprise and IoT
- Invest $100-150 million to build enterprise sales capabilities and launch private 5G and network slicing products
- Target: grow enterprise/IoT revenue from $180 million to $400 million within 2 years (feasible given the current 35% growth rate and expanded product portfolio)
- This diversifies revenue away from consumer ARPU dependence
Phase 3 (12-36 months): Selective 5G monetization
- Deploy Fixed Wireless Access in areas without fixed-line infrastructure, extending bundle reach to the remaining 60% of coverage
- Do not increase consumer 5G capex beyond maintenance levels; let enterprise contracts justify incremental network investment
- Target: convert 2 million additional subscribers to bundle plans, further reducing blended churn toward 12%
What this means for the CFO's three options:
| Option | Verdict |
|---|---|
| (a) Double down on consumer 5G | No. Consumer 5G ARPU uplift ($2/month) does not justify accelerated capex |
| (b) Pivot to enterprise/IoT | Partially yes. Grow this aggressively but it is too small today to be the sole strategy |
| (c) Cut 5G capex, focus on retention | Partially yes. Retention is the top priority, but do not abandon 5G entirely; redirect it toward enterprise and FWA |
Expected combined impact over 3 years:
- Churn reduction: $200M annual profit improvement by Year 2
- Enterprise growth: $220M incremental revenue by Year 3 (from $180M to $400M)
- FWA bundling: additional 2M bundle subscribers generating ~$1.4B in lifetime value
- Total EBITDA improvement: $350-450M annually by Year 3
Key risks: fixed-line bundle strategy depends on competitive response from cable providers; enterprise sales requires new organizational capabilities ConnectCo may need to acquire; FWA economics depend on 5G spectrum capacity in dense areas.
Contributed by CaseDrill practice community
What the interviewer is looking forShow guidanceHide guidance
The candidate should synthesize findings from all prior questions into a coherent, actionable recommendation. A good candidate will pick one clear strategic direction. A strong candidate will present a phased approach that balances short-term profit improvement with long-term growth. An excellent candidate will quantify the expected impact and identify the key risks and dependencies.
The ideal answer acknowledges that none of the three options presented by the CFO is optimal in isolation. The right answer is a sequenced combination.