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Can Mobile Operators Afford a Mobile-Only Strategy?

With 4G rollouts in many developed mobile markets reaching completion, it might be time to check the balance of the state of the mobile industry.

Looking at campaigns around the world it is clear that what you see are ‘me too’ strategies. The advertising campaigns and the marketing hyperbole around them might suggest that a particular operator has now done something unique or very special, but if one looks beyond the advertising blurb it is clear that the campaign is nothing new and/or that what is on offer can be very easily matched by their competitors in the market.

Voice and SMS revenue has been stagnant and in many situations has declined and is declining further. Certainly, extra revenues have been generated through mobile data, with more devices connected to the network; but in the end this is also a commodity product and increased competition will always make it difficult to increase the prices in this market.

Because of a lack of revenue growth we now see increased cost-cutting, which is leading to increased industry consolidation. This, of course, is aimed at limiting competition and would allow the remaining operators to use their dominant positions in the market to increase prices. As mentioned in last week’s analysis, regulators in both the USA and Europe have already stepped in and either rejected such mergers outright or placed very heavy conditions on such transactions, making it doubtful whether—under those conditions—such mergers would actually benefit the parties involved.

So is it time for mobile-only operators to start looking beyond the mobile market? Several operators—notably Vodafone—have already bought into fixed operators, but this has not yet created a significant shift in the industry. Most still limit their operation to mobile-only. Those operators that do operate in both markets on a larger scale simply keep the business separated in order to avoid cannibalisation. There is little or no activity around interesting innovations covering both networks. At best these operators offer a bit of bundling, which basically is price competition and does not lead to the innovations the market is interested in.

The over-the-top (OTT) players, as they are called, are far more innovative and are moving further and further into this market, adding true value to the basic mobile product. Developments here, of course, also include the utilisation of big data. Mobile operators could also move in this direction, using their services to attract wholesale customers interested in using the mobile networks to build different content-based mobile products around the telecoms elements of the service.

So far we have not seen any spectacular new initiatives from the mobile operators, and this seems to be the general trend in the industry. In the meantime others will build more interesting services around the mobile services and the operators will continue to complain that those operators are having a free-ride and so on.

It would be much better if the operators took the future into their own hands and started looking at their business models to see if they are still on the right track—rather than simply trying to protect their incumbent market they could look outside the box to see what else they can do with their valuable asset.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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