The Book of Boost 2014-2018

Published: February 2014
No. of Pages: 145
    ReportsandReports

Boosting Business Bottom Lines via Lean Strategies, Brand Building and Breakthrough ARPUs while Optimising CAPEX/ OPEX, with Network Management Techniques of the Future...and much more

Executive Summary

E1. Introspection

The Book of Boost: At TeleResearch Labs we always take pride in differentiating ourselves from our peers. The reasons which led us to choose this particular…shall we say ‘theme’ springs from the telecoms happenings globally in the past couple of years, and we realised it’s high time the telecom industry needs a boost now. 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. What are the current challenges that are holding them back to Invest, Innovate or Monetise? That’s what The Book of Boost endeavours to answer.

In particular we analysed:

  • Progression towards NGNs like LTE/ LTE Advanced, with selective case studies.
  • Effective PCRF modules based on consumers/ devices/ markets segmentation.
  • Different ways operators are managing their networks and where all they are making mistakes.
  • Newer ways to collaborate with mobile device makers, app developers, ISPs, MVNOs and OTT players.
  • How to explore pricing keeping devices/ consumer segmentation at the core.
  • SMS/ MMS business models that can help operators to fully extract revenues from these services which many consider passé.
  • The lesser known paths to optimise your CAPEX & OPEX.
  • Majority of operators’ business bottom lines are at the stage of no profit/ no loss. How can they come back in the game by ramping up revenues and reaping profits again?
  • Towards which side be investments inclined in future and what would be their probable gestation period, and ways to win investor confidence?

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 – The Book of Boost!

E2. Towards Boosting Revenues & Profits!

The Book of Boost begins by fully understanding and appreciating the various challenges vis-à-vis mobile & wireless services, and also attempts how to work around those to ensure seamless operations while minimising costs for CSPs, device makers, MVNOs, NEMs and ISPs.

There has been a spurt in M&A in the past couple of years. However, operators face many risks, such as high amount of political uncertainty in the Gulf region and North Africa, severe macroeconomic issues in Southern Europe, and a questionable regulatory climate in the Indian subcontinent. Operators are clamouring to leverage the growth potential in emerging Asian economies; however, ownership issues have come up as hot topics in the region, mainly in Indonesia and Vietnam. The changing risk scenario creates rising uncertainty regarding deal valuations and draws greater management examination and investor caution.

So, in Chapter 2, we have regionally covered the 6 continents and studied 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 & infrastructure providers, device manufacturers and the new breed of players like OTT providers and app developers. Ironically, telecom 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 & others; Internet calling & 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 lifestyle. 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 be more 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 and acquisitions are significant in upcoming market segments. 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 above issues, peculiar geographical-based problems operators face, such as bleeding ARPUs, network failures, churning subscribers, unfavourable regulatory policies, grey market products, devices’ incompatibility, failure to recover RoIs - All have been aptly analysed so that MNOs, device makers, network vendors, app developers and ISPs get a better grasp of the real hurdles out there and can devise appropriate roadmaps/ collaborations to come back on the track – from which many are slipping fast.

Over the past few years, the answer to the question “Is Lean better?” has usually been in the affirmative, as companies big and small have adopted it in a bid to taste its popularity. And yet, while Lean thinking gets popularised globally, the real question lingers: “Why do some organisations find success with Lean strategies while others fail?” Our Report analyses the concept and the different ways you can implement lean strategies for consistent growth.

Chapter 3 is about market revival with altering, differing strategies to overhaul your product portfolio.

The Chapter contains a detailed analysis of mobile apps and business models/ strategies on MNOs/ Vendors/ App stores and developers as well as related forecasts.
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–fodder.

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. The service was the first of its kind to be launched in the African nation and is generally regarded as a successful implementation that should be used as a model for other emerging economies.

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.

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.

And, latest/ upcoming technologies to entice even the most stubborn prospective subscribers have been thoroughly covered – like the concept of context awareness, public security LTE, 3G/ 4G-enabled VAS and tid-bits like mobile QR codes, NFC and accessories in context of their current value in operators’ income.

There are smart devices being launched like intelligent watches, health and fitness monitors, and monitoring devices for pets. All of the mobile future forecasts have a centralised concept. The future of mobility lies in the concept of context awareness and providing intelligence based on that context.

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.

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.

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 cloud computing has the potential of ubiquitous connectivity. 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.

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 this year and ahead. 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.

Chapter 4 has been devoted entirely to consumer engagement and relationships – With the focus on continually, and disruptively evolving your VAS strategies and enhance 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 case studies have been provided to maximise your revenue.

Chapter 5 talks about effective network management and minimising costs.

An ‘excellent’ network doesn’t necessarily imply huge investments. Based on our study of various operators’ network models across differing 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 & OPEX tamed.

Network sharing is an effective way for operators to lower their financial burden. They can adopt passive sharing of sites and towers as well as active sharing of network. LTE network possesses a flat all-IP network makeup which is most suitable for active network sharing. Operators opting for this can save atleast 40% more than their counterparts operating on a passive network sharing architecture. The backhaul cost, accounting for around 50% of the CAPEX and required for deploying RAN equipment in urban and metropolitan areas can also be shared by the operators. 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 indepth, 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.

The next concern almost all operators have in common is mammoth data traffic. We have done a comparative analysis of different ways to manage traffic offloading within the Report so that your networks function seamlessly.

In Chapter 6 we have come to the epitome of our research: Boosting the bottom lines/ profit margins of all concerned players.

The first section of the Chapter speaks exclusively about disruptively overhauling your business strategy vis-à-vis service offerings/ mobile devices/ operating systems/ pricing.

It has been widely observed in the telecom market, especially in the case of MNOs, that although apparently everything is fine: customer base is increasing, users are subscribing to the service, the operator 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 product and services, otherwise you will be outdated.

We also 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. The only way to make money is to use those networks as passages for paid content. OTT providers are contemplating 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 enjoy high margin business? The Chapter critically analyses OTT battleground and new technologies that are going to help telcos to challenge OTT players.

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 potential for growth in the corporate segment is higher than in consumer market in view of the rapidly rising competition for consumers’ spending. To leverage this potential business models for corporate customers must be based on new themes to provisioning alongside collaborative approaches to service development and delivery.

As the customers’ mindset accelerates operators must adapt their service offerings and customer experience to accommodate these changes so as to build upon customer engagement.

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.

Another section speaks about mobile devices and related forecasts: Smartphones, Tablets and Phablets. Technologies, not just limited to M2M but also NFC and multi-screen content, are incrementing the value of interconnectedness of devices. Whether high-end or low-end devices, there is room for all, with an interesting case study on Huawei.

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? 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, a combination of fixed and mobile network will be the business model that will work best in the coming years and will facilitate the needs of next generation connectivity and mobility. The Report includes certain roadmaps and suggestions for such fixed-line and mobile operators.

“Old tricks” will not be sufficient to win the new games. So, what should be your approach and how can you retain and prolong your success in the telecom market? The Report rounds off with thought provoking guidelines for all the players in the value chain (viz. MNOs, MVNOs, Device/ Chip OEMs and NEPs) that will help you transform and emerge as a game changer.

E3. Methodology

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 & 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.

Who Needs This Report?

  • Mobile Operators – For a better understanding of the current telecom market dynamics across the globe. The study provides global opportunities and competition, Business Case Studies and guidelines to boost your current market position.
  • Mobile device ODMs – For understanding the unique marketing opportunities in unserved/ underserved regions.
  • Mobile device OEMs – For strategising their production and pricing.
  • Content Vendors – For the possible changes that content development might go through and issues of adaptability solved.
  • App Developers – To find out unexplored revenue opportunities in apps.
  • Consumer Electronics Companies – For coming up with, and integrating mobile Internet into consumer durables.
  • Processor Vendors – For streamlining their products for mass market adoption.
  • Wi-Fi, Bluetooth, GPS semiconductor vendors – To overcome security concerns, and to exploit newer opportunities/ partnerships with device makers.

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?
  • In an environment of rising security issues, how to explore a credible cloud computing model to improve client trust?
  • 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 avoid churn?
  • 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 & 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 & 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 so as to turn them into strategic advantages?

Key Findings

  • Mobile device manufacturers & 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.
  • 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.

Published By: Teleresearch Labs
Product Code: Teleresearch Labs.7


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