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| Today mobile phone is 24/7 on. Today’s consumers are more differentiated than before. Service providers are driven by competitive pressures in mature markets and by subscriber growth in emerging markets. As mobile penetration reaches the saturation point, mobile operators need to compete on new services and quality rather than on price. This will fuel the growth of valueadded services (VAS). By Ahmet Ozalp, CEO, Telenity |
The mobile industry is moving at a rapid pace undergoing significant change despite the economic downside. It has already reached the 4 billion mark of mobile subscriptions worldwide and it is expected that one third of all mobile users worldwide will be on 3G and “4G” networks by 2013. Moreover, a proliferation of vertically integrated app stores is emerging fast. Today mobile phone is 24/7 on. Today’s consumers are more differentiated than before. Service providers are driven by competitive pressures in mature markets and by subscriber growth in emerging markets. As mobile penetration reaches the saturation point, mobile operators need to compete on new services and quality rather than on price. This will fuel the growth of value-added services (VAS).
Differentiated consumer
In the mature markets, consumers are relatively wealthier, but cautious in spending, they have more choices but they are more difficult to impress and less patient and demand more value for money. A study conducted by consumer labs reveals that most university students always use their mobile phone to wake up by mobile alarm, listen to music, download ringtone, and contact their friends by SMS and sometimes by video call. When in car or in public transportation, they play with the mobile phone to access maps, games, or chat with friends, do homework with friends, surf the Internet, access social networking sites or contact friends to decide what to do in the evening. The mobile phone has become the fourth media screen.
Open is good
In the mature markets, service providers have reached beyond traditional voice and text messaging to offer new value through demand for richer communication. Voice communication is no more the primary criteria for the consumers in selecting a carrier. Operators focus on core services and fully utilize their distinctive assets for peripheral services through 3rd party developers. More than 30% of service provider revenues come from nonvoice services.
Voice remains the ‘killer application’
In the emerging markets, consumers are young, relatively low spenders on prepaid plans generate traffic but no significant revenues. Service providers focus on increasing mobile penetration including the rural markets. For example, the African market is the fastest growing mobile market globally (43%) compared to global average of 18%. The high growth of new subscriber base of 300 million fuels demand for relatively affordable ($40 USD) low-end mobile phones but the high broadband cost limits the uptake of data services. Therefore, operators are slow in building their VAS offering. On average, VAS revenue accounts for less than 9% and voice still remains the primary source of revenue. This segment has low averagerevenue- per user (ARPU). The challenge for the operators is finding ways to increase ARPU.
Resulting strategies
Up to here, our main point has been the following: The mobile industry is vastly different in the emerging vs. mature markets with respect to revenue and profit drivers. While voice and text messaging on relatively less capable handsets remain the revenue driver in emerging markets, data and value added services are the areas for competitive battles in mature markets. Therefore, different strategies are needed for each group.
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In emerging markets, call completion rates can be radically improved simply by deploying solutions that encourage call completion or call initiation. Smartly designed solutions that integrate voice mail, missed call notifications, remote party available notifications and a high usage subset of the unified messaging features will increase call completion in emerging markets. Operators should not pass the opportunity to do much more with their existing network at marginal costs. Call completion suites enable operators in emerging markets to do just that.
In mature markets, operators have to cope with preferred handsets that are generating industries of their own. When handsets were cool, the end user still recognized the value of the mobile network. When handsets are absolutely fantastic, the end user focuses so much on the handset that the network behind it is taken for granted and seldom appreciated. Indeed, the only time many users even remember their mobile network is when the signal is too weak. Mobile operators in mature markets need to cope with this.
We believe an effective way for mobile operators may be to embrace “hybrid applications” or “through the network” applications as an alternative to “over the top” applications. These hybrid applications can still be sold at an application store and may possess features that function as OTT. However, these applications also come with features that rely on the mobile network. So, these hybrid applications are cool in ways some OTT applications are but they also depend on the services of the mobile network to make the operator an active participant in the value chain, hence the name hybrid.
Location based services make good candidates for hybrid applications. It is true that handsets can determine their own location (even indoors without GPS). However, location information that is solely driven by the handset comes with the following restrictions: Not all handsets have GPS capability, handset-driven triangulation is not granular enough for all applications, and other methods promoted place an added burden on the handset battery. It can be argued then that there is value for application developers when location is easily provided by the network without battery considerations and with an increased granularity for all handsets regardless of GPS presence. If location based applications such as a buddy finder service is integrated with location information provided by the network, all handsets can be covered. Integration with social networking tools such as Facebook further increases the usability factor for end users.
Another area is mobile marketing. This is also an area that can be offered over the top as well totally under the control of the mobile operator. However, as with the location based services area, we argue that a hybrid approach may generate the best results. OTT applications are again at a disadvantage because they cannot integrate themselves in session setup and again lack sufficiently granular location information for all users with any handset. Cooperation with the mobile network can lead to ideas such as placing an ad based on calling data, where privacy rules allow. Integration with predictive intention tools will enable an application to target mobile users with greater profiling.
Conclusion
It is well recognized that emerging markets are still riding on the strength of subscriber growth and voice-driven revenues. In such markets, operators need to realize that their answer-toseizure rates have a long way to improve and not all of it is due to network coverage or quality issues. Call completion solutions will encourage end users to do more on their existing assets and operators in emerging markets should capture that by deploying call completion suites.
In mature markets, value added services are the only area where high quality voice and data networks can be differentiated from the competition. The problem has been the success of some over-the-top applications offered on handsets that are perceived to be greater value than the networks they connect to. To get their fair share in the value chain, mobile operators need to find ways to cooperate with OTT applications and drive revenue from their success. This can be achieved through hybrid applications that leverage both the mobile network and the capabilities of the new generation handsets.
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