An ultimate guide to mobile operator wizardry involved in building profitable businesses beyond 2013; portfolio planning ahead NGN up-grades, and trends of monetization; best practices in mobile-fixed partnerships, resource allocation & re-utilization; with referential case studies– straight from the horse’s mouth.
Mobile Business Setups – for Revival & Profitability: The reasons which led us to choose this particular project springs from the telecoms happenings globally in the past couple of years. After a decade of extraordinary growth, when telecom players had been generating huge revenues and had great profit margins, the industry is today at a point where even many established players are struggling for their survival. And it’s high time even for the players that are in safe position today to review and restructure their mobile business setups to remain profitable in the future.
We sought to analyse the various new opportunities that all the players in the telecom market can grab to grow and become more profitable in the years to come. But what are the current challenges that are holding them back to Invest, Innovate or Monetise? And how the players can reinvent themselves to counter those challenges and quickly enhance their competitiveness - that’s exactly what the Report endeavours to answer.
In particular we analysed:
- Majority of operators’ business bottom lines are at the stage of no profit/ no loss. How can they return to strong growth?
- Towards which side be investments inclined in the future and what would be their probable gestation period, and ways to win investor confidence?
- Progression towards NGNs like LTE/ LTE Advanced, with selective case studies.
- Different ways operators are managing their networks and where they are making mistakes.
- Effective PCRF modules.
- The lesser known paths to optimise CAPEX and OPEX.
- Newer ways to collaborate with mobile device makers, app developers, ISPs, MVNOs and OTT players.
- How to explore pricing keeping consumers at the core?
- SMS/ MMS business models that can help operators to fully extract revenues from these services which many consider passé.
Such and many other matters we examined led us to come up with a unique research – A research which isn’t bent on any particular technology, country or fraternity – But rather, is specifically targeted at – Boosting up revenues for ALL connected to the Mobile Phone – be it mobile network operators at any stage of technology, device makers, app developers, ISPs, MVNOs, OTT players et al. Truly, a one for all, and all for one project – Towards Revival & Profitability!
E2. Towards Boosting Revenues and Profits!
The Report begins by fully analysing the various challenges that the mobile industry is facing today. In Chapter 2, we have regionally covered the 6 continents and observed each one from its unique perspective. Following are the most prominent risks that are holding back telecom players or going to be a spoilsport in the coming years and the players in the value chain must strategise accordingly.
1. Investors’ Confidence at an all time low, Regulations adding more woes
The global telecom market has gone through a flurry of events that has largely been in the favour of consumers, telecom network and infrastructure providers, device manufacturers and the new breed of players like OTT providers and app developers. Ironically, the network operators that once used to be the face of the telco market have now become mere spectators. This is not going to be the ideal condition for the telco industry to grow, generate wealth and add value to the end users for a longer period of time. And that’s the reason, investors that once looked at the telco market as very lucrative are now doubtful on the returns.
Operators have managed their capital expenditure and balanced it well with free cash flow and dividends but strict capital expenditure control can restrict them to formulate new services at a fast pace. They must remain committed to invest in new growth avenues and at the same time monitor technology and consumer developments accurately to make sure their financial investments remain on the right track. Moreover, regulatory uncertainties are impacting operators’ desire to invest in new markets. It is crucial for regulatory bodies to formulate pro-investment policies so that operators form workable stances on a range of issues and also to facilitate the relationship between fixed and mobile policies. All these parties must work in cohesion to achieve transparency over regulatory approaches.
2. Business Models not in line with Digital Services Opportunities
MNOs need to approach customers from a fresh perspective by letting go of their legacy strategies as values move from minutes of usage to volumes of data. Rather than battling churn, MNOs should target revenues from new services and think up a broader array of pricing models for monetising such services.
Other players like device manufacturers, network equipment vendors and independent software vendors will have equal opportunity by enabling and cooperating with each other in building platforms to offer digital services portfolio.
3. Innovation taking over Loyalty
Take a look at the few disruptive innovations that shifted the loyalty and changed the course of telco market with their fascination – LTE vs. WiMAX; Android vs. iOS, Symbian, BlackBerry and others; Internet calling and messaging vs. traditional communication services and last but not the least mobile apps vs. websites. Each of them has simply shaken the dominance of the other and in some cases even derailed the other from the track. With ever-growing innovations players in the telecom market need to spot the next big thing as early as possible and align themselves accordingly. Failing to do so, even the established players can lose their hold on the market and can even disappear to be present in the book of legends.
4. Underuse of Customer Analytics and Failure to target the RIGHT AUDIENCE
The successful MVNOs like Virgin Mobile have been able to build great brand equity in highly competitive markets just by focusing on users and their lifestyles. This calls for a big shift in the approach from operators that used to focus more on network and less on the users. MNOs need to have detailed business intelligence about their customers so that they can identify the segments that will remain profitable for longer period of time. These factors will help them understand customer mindset and in reusing network data in collaboration with other parties to offer services with unparalleled QoS. Improved information can also assist operators in cutting OPEX while meeting regulations from governing bodies. How this can be done has been aptly covered inside the Report.
5. Improper M&A and Partnership Strategy
The nature and associated risks of mergers and acquisitions have changed despite a surge in such activities. But mergers, acquisitions and collaborations are crucial in the converging mobile market. However, operators need to clearly differentiate between when they should acquire and when they should collaborate.
A detailed analysis with solutions have been presented on the geographical-based problems faced by MNOs, ISPs, Fixed-line operators, MVNOs, Device manufacturers, Network infrastructure providers, App developers, and Independent software vendors. The issues that are broadly analysed include declining ARPUs, network failures, churning subscribers, unfavourable regulatory policies, grey market for mobile devices, devices’ incompatibility and failure to recover RoIs - so that you get a better grasp of the real hurdles out there and can devise appropriate roadmaps to come back on the track – from which many are slipping fast. Besides, the report also explores various ways by which you can implement lean strategies to drive growth and innovation.
Chapter 3 is about preparation for revival and profitability - to counter the market challenges, to make winning strategies, and to achieve the competence required to boost up the profit margins.
The first section of the Chapter talks exclusively about disruptively overhauling your business strategies. It has been widely observed in the telecom market, especially in the case of MNOs, that although everything is fine: customer base is increasing, users are subscribing to the services, the operators’ portfolio is in place, but that’s not reflecting into ARPUs. The reason is your customers are idle, either partially or fully. But, the question is: Why? One of the reasons is that somehow you are ignoring their needs or competition is offering better solutions or your users are looking for better solutions. Here comes the role of disruption – no matter what you offer - devices/ services/ software, you need to revamp them time and again to make them more useful and appealing to your users. Acclimatise and transform your offerings, otherwise you will be outdated.
We next took into perspective the VoIP challenge and how operators can turn ‘threats’ into ‘opportunities’, especially in regards to the sudden upswing of OTT players. It’s becoming progressively tough to charge for communications services, so most OTT providers are forced to give their core messaging, voice and video chat features free of cost. OTT providers are exlporing many revenue streams like Ad-based or free-to-use functionality and paid premium functionality. How can MNOs adapt to these business models to offer cheaper/ free basic communication services?
With the advent of VoLTE HD Voice, and other innovative VAS (based on LTE/ LTE Advanced) what are the challenges that will put pressure on OTT players and how long they are going to be a challenge for MNOs? The Chapter critically analyses OTT battleground and new technologies that are going to help telcos to challenge OTT players.
A section has been provided on MVNOs. Starting an MVNO is quite simpler compared to an MNO; however, tasting the success is a different ball game altogether. Even in a market that is crowded with MVNOs, there must be room for some innovative propositions. Success will be achieved by focusing on a segment and its specific need – and offering something you are really good at. The future is about connecting machines to machines and identifying niches in different verticals and leveraging the data growth. PosteMobile is a classic example that evolved its business model from traditional mobile services to a range of financial services on mobile. No doubt the operator has been adjudged as the most innovative MVNO in 2013.
Roaming is undoubtedly going to remain a hot topic this year and beyond. Roaming on 4G/ network collaboration on profit-sharing basis/ hotspotting/ 4G in business use/ portfolio planning in local and overseas markets have been studied in this Chapter that could be lucrative for operators in the coming years. Currently mobile roaming is a US$50 billion market and will reach around US$91 billion by 2018. The share of LTE roaming revenue will be approximately 45% in 2018 from just 6% in 2013.
Entering a new market is always accompanied by a lot of risks and requires a foolproof strategy to counter the challenges that might come in the way of reaping out the investments. Taking this into perspective we have provided a section on viral go-to-market strategies inside the Chapter, with a case study on Bharti Airtel – Which would help the operators that are looking at newer business opportunities in emerging markets such as Africa and Asia Pacific.
Consumer segment currently accounts for the major source of revenue for operators. This segment is going to remain the focus area of operators in the foreseeable time due to its size; however, the enterprise segment holds really immense potential for MNOs. The worldwide mobile service revenue (voice, messaging, handset data plans, mobile broadband and enterprise apps, and management services revenues) from business users will reach US$360 billion by 2018. On the other hand, the enterprise cloud-based services would double by 2018 from the current size of US$18.3 billion in 2012. MNOs must strive to engage with enterprise segment and align themselves to offer innovative business solutions. The Report tells how and where the opportunity is.
Chapter 4 has been devoted entirely to consumer engagement and relationships – With the focus on continually, and disruptively evolving your VAS strategies and enhancing QoS to keep your subscriber base not only intact, but on an upward swing. Special focus has been put on consumer segmentation, pricing and service bundling – so that operators don't make the mistake of 'putting all their eggs in one basket.' Business models on prepaid and postpaid offerings with illustrative cases have been provided to maximise your revenue.
Chapter 5 provides ideal roadmaps for network development and ways to minimise the total cost of network management.
An ‘excellent’ network doesn’t necessarily imply huge investments. Based on our study of various operators’ network models across different geographies, we have endeavoured to outline simple steps whereby an operator can draw in considerable revenue with minimum network investment. And, by the way, not every operator out there is on the verge of 4G. We haven’t left that out of realm and a section of this Chapter analyses optimum service delivery mediums/ pricing packages for such mobile operators, with appropriate business models wherever possible, with a case study on the network upgradation and modernisation strategies of Maxis Malaysia.
We have included certain ‘progression’ guidelines for operators as to how they might move from 2G to 3G and beyond, while keeping CAPEX and OPEX tamed. For example, in Canada, Bell and Telus formed a network sharing agreement stating that they will overlay their EVDO network with HSPA+ to launch their LTE services - Bell did so in September 2011, while Telus launched its LTE services in February 2012. Similarly, Net4Mobility is a joint venture in Sweden between Tele2 and Telenor, whereby both developed their LTE network together. A case has been presented on Bharti Airtel to further explore the concept.
Side by side we have studied PCRF module in-depth, with effective business models as well as an interesting case study on Verizon Wireless’s approach towards PCRF. Besides, there’s an exclusive case study on LTE – pitting the pioneer TeliaSonera with three big telcos – Verizon Wireless, SK Telecom and NTT DoCoMo, which could help those on the verge of planning LTE launches soon/ or those who have already deployed commercial LTE, to monetise it effectively.
And yes – We haven’t left out the exciting possibilities for fixed-line operators. They would be here to stay, albeit, how they reform their business strategies in the advent of NGN mobile and wireless arena would be the focal point on how they perform in the coming years. Can fixed-line and mobile operators team up somewhere whereby both jointly reap increasing revenues? The Report includes certain roadmaps and suggestions for such fixed-line and mobile operators.
In Chapter 6 we have explored the most profitable mobile services and evolving business models to remain competitive in the future.
Operators have been investing heavily in the network and infrastructure development, however, old business models would not be sufficient for them to survive and therefore they must identify new revenue streams and build business models to further drive profitability and growth.
The chapter starts with the mobile business model of the future that would leverage advertising to offer free mobile services to the users while generating revenues from third parties such as media companies and retailers. We have profiled three case studies to learn from the pioneers as to how they are leveraging customer data and mobile network intelligence to offer intelligent advertising solution. The chapter covers cases on mobile marketing and wallet platform WEVE, AT&T AdWorks, and global advertising alliance by Telefónica Digital and Pinsight Media+.
The next section explores the future of value added services and how the latest technologies would entice even the most stubborn user. Many such technologies and their applications have been thoroughly covered – like the marketing application of geolocation services, concept of context awareness, and the commercial application of mobile QR codes.
Let’s check Layar, a company working on augmented reality. It has developed an application that maps a live camera image of the user’s surroundings with relevant information. An image of a storefront on the street could contain overlaid information about existing sales and promotions. One could point a camera at an image in a magazine and the app could suggest an online boutique to purchase the dress advertised. Another example is the world's largest taxi app “myTaxi”. It connects customers with taxi cabs in different cities on the basis of the relative location of the customer to the taxi, time, desired destination, cost and other factors. Apart from basic features like online booking and fare calculator, the app has some really interesting features like making cashless and cardless payment, option to rate/ save as favourite a driver (he will be on preference list on next request) and live tracking of your taxi's arrival with details such as the driver's picture, name, remaining distance and arrival time. We have covered these and few other concepts of the future of mobility within the Chapter.
M2M or Internet of Things is going to create billions of fresh revenue streams in saturated markets such as the US and South Korea. However, these opportunities are not limited to particular geography and will emerge across the globe in different forms. In particular, smart grid is going to emerge as the most important M2M sector for operators by 2018, followed by smart homes. So, have you visualised your M2M portfolio? How are you going to grab the M2M opportunity? Check out the M2M opportunities in detail inside the Report.
After covering so much how could we overlook the rising popularity of cloud computing? The new wave of cloud systems and technologies is creating a buzz and mobile cloud data will make up for 80% of the total data on 4G networks by 2018. Enterprise services will hold immense value, representing a larger and more profitable revenue stream for mobile operators.
Mobile contents have come up as one of the most talked-about industry segments and it’s likely to remain in prominence in future as well. But operators have not been able to leverage this segment as much as content developers and OTT players. Ironically, operators are better positioned to take advantage of this new trend owing to their existing relationship with customers and their reliance on operator billing. The case of NTT DoCoMo vis-à-vis mobile contents, which we have presented, is really encouraging for other MNOs that want to generate revenues from content offerings.
The Chapter contains a detailed analysis of mobile apps and business models/ strategies on MNOs/ Vendors/ App stores and developers. With the emergence and growing importance of apps, mobile network operators have also shown interest in launching their own app stores and/ or collaborating with app developers. But most of the initiatives were not so successful and eventually MNOs decided to dispose their ideas. Now, the question is at a time when apps are in great demand and few players like Apple App Store and Google Play have tasted huge success in their respective app stores then what went wrong with other initiatives? We have analysed the app store launched by Verizon to understand the app economics and take lessons to visualise the other ways in which operators can take advantage of the app–economics.
Talking of mobile platforms, Android and iOS have performed really well for a long time now. However, both of them have certain limitations that are creating need as well as opportunity for new OS. Tizen is one of such OS to join the family of mobile platforms. We have covered and analysed the entry of this new operating system – Which might give Android/ iOS a run for their money in the long run. Besides, other new OS such as Sailfish, Firefox and Ubuntu are also mentioned. Another case is on Apple App Store and Google Play – analysing which might beat the other, and if so, how?
Besides apps, the Chapter covers M-Commerce services in depth, inculcating the various intricacies with all parties concerned, with suggestive business models to serve as roadmaps to all players concerned. The Chapter entails a case study on the M-Payment service M-PESA by Kenya’s Safaricom – as to how the service came into existence and what factors/ marketing strategies made it such a huge success that it became the second-largest source of revenue for the telco for FY 2012. One of the other verticals analysed is M-Health, with modules to break barriers and reap profits from this service which is bound to create ripples in times ahead.
We next discuss mobile multimedia services. The growth in mobile multimedia services directly uplifts the data usage. In 2012 the data plans accounted for around 65% of the total mobile multimedia revenue. This also shows that MNOs are the prime beneficiary of mobile video services. The growth of mobile multimedia services is also attracting advertisers to leverage this medium for marketing their products and services. The impact can be seen as the advertiser’s spend almost doubled in 2012 reaching US$11.26 million from US$6.3 million in 2011. Business models and strategies for profitable launches in new markets have been presented, with a case study on SK Telecom.
Another section speaks about mobile devices and related forecasts: Smartphones, Tablets and Phablets. What influence different mobile device manufacturers will have on each other’s businesses in the coming years and how the market dynamics will shape up with the strong growth of Chinese and Indian device manufacturers? Whether high-end or low-end devices there is room for all, but what would be the USPs for device manufacturers over the next five years. The section presents an interesting case study on Huawei that has registered extraordinary growth in smartphone market by addressing the market with innovative offerings to meet the user's expectations within their budget.
Chapter 7 offers strategic guidelines for securing future profitability. What should be your approach and how can you retain and prolong your success in the telecom market? As now it is evident that “Old tricks” will not be sufficient to win the new games, the Report rounds off with thought provoking guidelines for all the players in the value chain. These guidelines will help you efficiently transform your mobile business setups and emerge as a game changer.
We took into our ambit the past few years and for this particular study we regionally explored some of the prominent mobile operators, device makers, infrastructure providers and interviewed several telecoms experts, C-level and mid-level executives.
Information Sources: Major sources include both face to face and telephonic interviews with telecom industry experts and consumers. It also includes various surveys that were conducted in different regions of the world. Other sources comprise of organisations’ websites and financial reports, books, trade journals, magazines, white papers, industry portals and numerous government sources.
Forecasting Methodology: We used extensive database of macroeconomic and sector specific data to generate industry forecasts. We used Judgment based methods like the Delphi method and Extrapolation; Time series methods like Exponential smoothing, Cyclical and seasonal trends and Statistical modeling, as well as the Survey method. The initial baseline projection is computed with the most recent market data. After an initial baseline forecast, all probable future macroeconomic and industry specific occurrences and assumptions are taken into consideration to generate the final forecast.
Key Questions Answered
- How MNOs can maintain market stickiness and longevity, while securing investors’ confidence?
- How services should be offered in different phases for smooth transition to fixed-mobile convergence (FMC) and what are the new avenues where fixed-line operators can team up with mobile operators?
- What are the revenue opportunities in mobile cloud beyond online storage and media offerings?
- What influence different mobile device manufacturers will have on each other’s businesses in the coming years and how the market dynamics will shape up with the strong growth of Chinese and Indian device manufacturers?
- How to develop strong value proposition by addressing the digital lifestyle opportunities and maximise Customer Lifetime Value?
- How can MNOs leverage maximum gains from low consumer spend markets?
- Where is the real profit in tidbits such as QR codes and NFC, and how MNOs can leverage them to drive customer engagement and uplift new mobile services?
- What are the new verticals (m-commerce, m-health and m-entertainment etc.) MNOs can explore to generate more revenues?
- What are the new ways SMS and MMS can further be exploited by MNOs?
- Why conservative approach of investment (CAPEX) can be a better option in many markets?
- What are the new ways OTT players and MNOs can have a successful collaboration over a longer period?
- What Samsung should not overlook with Tizen?
- Network infrastructure providers need to provide customised solutions to MNOs – The Whys and Hows.
- How to collaborate with other players in the ecosystem for shortening your time to market?
- How the scenario would shape up between content aggregators/ developers and MNOs in the Mobile VAS arena?
- How uncertainties (regulatory hurdles, unstable economic climate, and political issues) can be assessed to turn them into strategic advantages?
- Mobile device manufacturers and OTT players have hijacked almost entire attention of customers and MNOs are currently reeling under that pressure. However, they should not panic but need to safeguard their position and avoid unnecessary risks. Identifying the segments with high profit margin and holding their position in the market will offer great opportunities to monetise their investment in the long run.
- Our survey revealed that majority of OTT players are in pressure to collaborate with MNOs/ ISPs to ensure QoS and believe that QoS can only be guaranteed by partnering with data providers.
- VoLTE has all the capabilities to beat the OTT VoIP services; however, the device ecosystem is currently not in its favour. The penetration of LTE devices is low and limited to developed markets such as the US and South Korea. Price of LTE devices are declining, but it is still not affordable for the masses and we expect that low-priced (below US$100) LTE devices will spread only after 2014.
- Smart mobile devices are slowly entering into the workplace and the trend has started impacting the industry in two ways. On the one hand, demand for data and mobility services is growing exponentially, and on the other hand it is also driving enterprises to replace computing devices or promote BYOD.
- The demand for smartphones is growing rapidly and it is going to make more than 50% of the total mobile phones shipped globally in 2013. The worldwide shipment for smartphones will reach 1.7 billion by 2018.
- Strong demand for Android tablets and the introduction of new iPad mini from Apple have greatly boosted the worldwide tablet market. In fact, tablet market is going to heat up further with the introduction of more affordable devices from Chinese vendors and the introduction of Apple’s iPad mini 2 (by the end of 2013 and most probably at significantly reduced price). We predict the total worldwide shipment for tablets to cross 300 million mark in 2017 and reach close to 345 million in 2018.
- The worldwide mobile service revenue from business users will reach US$360 billion by 2018. On the other hand, the enterprise cloud-based services would double by 2018 from the current size of US$18.3 billion in 2012.
- Most of the activities in the telco industry are currently revolving around mobile broadband. However, it must be noted that fixed line will not only carry at least ten times more traffic than the mobile network during the next 5-8 years, but it will also be crucial for the widespread growth of mobile broadband. In fact, fixed mobile convergence (FMC) will be the business model that will work best in the coming years through optimal use of fixed and mobile technologies.