Making a Case for Mobile Operators

Mobility continues to shape and restructure our private and working lives in fascinating and incredible ways. Cellular networks and short-range technologies such as WiFi are its primary enablers. On the cellular front, mobile operators and wireless carriers have shouldered the immense cost of rolling out infrastructure and licensing spectrum. But are they participating in due measure as mobile opportunities expand?

The 2015 publication by The GSM Association (GSMA) called “The Mobile Economy” is a recommended read for anyone with a stake in this industry. The report takes stock of where mobile stood in 2014 and the direction it is taking as we move towards 2020. The real jaw dropper is the $3 trillion contribution from the industry itself towards the estimated $78 trillion worldwide GDP in 2014 (according to the World Bank). That’s almost a 4 % share towards our global GDP.

Operator revenue growth to slide

Looking ahead, the mobile industry is striding forth with confidence at an average annual growth rate of roughly 4 %. That’s good news. Unfortunately not for all. Mobile network operators’ (MNO) year-on-year revenue growth is predicted to fall from around 5 % as measured in 2012 to 2 % as predicted for 2020 by the GSM Association. In other words, MNO revenue growth is eroding. You might contend a slowdown in expansion is better than contraction per se. Answering these two questions might shift your perception however:

1. Who has invested the most to date in the mobile industry?
2. Who has empowered most of us with the anywhere-anytime paradigm over the past two decades?

How to rollout new network infrastructure despite dwindling revenue growth?

Acquiring costly spectrum from governments and rolling out country-wide cellular networks with the latest technology is an expensive business. In 2014 MNO’s spent over $200 billion worldwide (capex) to increase coverage and capacity for us all. Shouldn’t we give credit where credit is due?

The problem with 24-month contracts

Incredible but true: the data explosion on mobile networks fueled by smartphones ought to result in higher per-bit pricing until such time that capacity is in excess, going by the perennial law of supply and demand. One would expect operators to get an ARPU (average revenue per user) boost . Instead, price wars in fierce, competitive environments spur operators on to sell low-cost, tiered plans that offer megabyte/gigabyte buckets of monthly data based on 24 month contracts. It’s difficult to predict the behaviour of customers in terms of their data consumption habits over such a long contract period. One thing is certain though, empowered by ever new mobile devices and applications, their data usage is sure to increase over time. Consistent bandwidth on cellular networks is and will thus remain a sought-after commodity. As a result, MNOs’ are under more pressure than ever to upgrade their infrastructure and find novel approaches to avoid next-gen all-IP networks from being more than just “dumb pipes” that other providers use to rake in profits with higher-margin services.

Change is the only constant

Mobile network operators in developed markets are gearing up to the future and crafting new, sustainable business models by

• merging with other regional operators for network sharing and creating more negotiation clout when purchasing infrastructure through economies of scale
• moving from unlimited data plans to tiered versions and finally to value-based contracts
• making strategic acquisitions or entering partnerships to combine mobile services with fixed-line telephony, Internet access (cable/DSL), and TV in converging quad-play world
• treating data based on traffic type to ensure Quality of Service (QoS) and ultimately customer satisfaction
• working on deals with providers who wish to provide a consistent mobile user experience for their prized services
• slashing handset subsidies
• developing alliances, partnerships, joint ventures with market leaders in promising verticals such as M2M/IoT, Connected Car, Mobile Wallet, video streaming, location-based advertising and app development.

Proponents of the network neutrality who advocate the Internet’s continued success depends on a level playing field for all may not like any of this. Yet acquiring spectrum and rolling out wireless networks doesn’t come on the cheap and business models need to adapt to the changing markets.

Mapping out the future

Next to keeping their networks geared to next-generation technology, operators simultaneously need to identify the most lucrative business cases from the swath of opportunities unfolding. Conferences, forums and trade shows are ideal places to learn from peers in a complementary sector and rub shoulders with technology experts and thought leaders.

Conferences, forums, trade shows and seminars according to mobile/wireless topic over the past 2-years - Source: 2015 wi360 Event Guide

wi360 maintains a free wi360 Event Guide focused exclusively on the mobile and wireless industry which is continuously updated through the year.