Mobile operators must evolve or die

James Middleton

May 12, 2008

2 Min Read
Mobile operators must evolve or die

Mobile operators in more mature markets will need to adopt radical new business models over the next five years if they are to protect their profit margins, analysts have warned.

Researchers at parent, Informa Telecoms & Media, said that while mobile operators in emerging markets will continue to enjoy strong revenue growth in the short to medium term as they fulfil strong demand for basic connectivity, even they will have to embrace new ways of running their businesses when growth inevitably slows.

“For the last ten years mobile operators have been building strategies, platforms and services for the delivery of new non-voice services which, they hope will compensate for the inevitable decline in voice revenues,” said Mark Newman, chief research officer at Informa. “But it’s been tough going and non-SMS data revenues have been disappointing,” he said.

Newman said the situation has improved over the last year or two with many operators reporting year on year revenue growth of 30-40 per cent or more in non-SMS data services. But he warns that the nature of the non-voice mobile is on the cusp of radical change.

In its latest report, ‘Future Mobile Operator Business Models: Broadband, Partnerships, Wholesale and Mobile 2.0’, Informa notes that the focus is moving away from a limited number of services provided by the operator to internet access and operators’ non-SMS data revenue base is in the process of shifting from services to basic access. The services users are beginning to use on their mobiles are provided by internet players rather than mobile operators.

As such, the analyst expects that mobile operators can look forward to a period of growth in mobile broadband connectivity. But to capitalise on this opportunity, operators need to invest heavily in new high-capacity networks, effectively marking a transition to becoming ISPs. To avoid the fate of fixed-network ISPs, mobile operators will then either need to partner with internet firms and share revenues and/or develop a smart-pipe strategy. This involves ‘exposing’ different parts of their networks to third party service providers and monetising access to them.

Advertising is touted as a lucrative new revenue stream which would complement an internet access strategy but Informa does not believe that it will translate into a significant operator revenue stream within the next five years.

In its report, the analyst said that at the same time as they pursue this strategy mobile operators will need to continue to seek ways to reduce opex levels. Lower handset subsidies, outsourcing and network sharing, all offer huge scope for lowering opex levels, as does the migration to all-IP infrastructures.

About the Author(s)

James Middleton

James Middleton is managing editor of | Follow him @telecomsjames

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