June 3, 2008
The role of ‘service enabler’ holds greater revenue potential for mobile network operators than the role of on portal content service provider, according to analysts on Tuesday.
Research house Analysys Mason said that over the past five or six years, mobile operators have focused on becoming content service providers in order to avoid being marginalised as mere bit pipes.
But the trend towards unrestricted mobile internet access, as well as the increasing number of online brands and handset vendors that are entering the mobile market, will pose a significant competitive threat to operators’ portal businesses, the analyst said.
“Mobile operators are best placed to become service enablers in the content value chain by exploiting their unique assets, which focus on transmission, billing and consumer insight,” said Mike Grant, analyst with Analysys Mason. “These assets are essential to the success of content providers in the MME (mobile media and entertainment) market, and the ‘service enabler’ revenue streams (including traffic, billing and advertising revenue) appear to be the most sustainable for mobile network operators in the long term.”
Already in many Western European countries, the off portal market accounts for the majority of MME revenue and is expected to continue to grow as more major mobile operators adopt flat rate data plans and an open approach to mobile internet access.
Moreover, handset vendors such as Nokia and established online brands are becoming increasingly significant players in the MME value chain, posing a real threat to mobile operators’ own branded content offerings.
As a result mobile operators will need to closely examine their core assets and identify potential areas for further investment in order to maximise their revenue potential from acting as service enablers.
Last month, telecoms.com parent and analyst house Informa Telecoms & Media said that even mobile operators in emerging markets will have to follow their more mature counterparts in the adoption of radical new business models if they are to protect their profit margins. 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.
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.
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