Technology | Media | Telecommunications

Thursday, May 22, 2008

Radical New Mobile Apps Business Models

Mobile operators in mature markets will need to adopt radical new business models over the next five years if they are to protect their profit margins, according to a market study by Informa Telecoms & Media.

Emerging market mobile operators will continue to enjoy strong revenue growth in the short to medium term as they fulfill strong pent-up demand for basic connectivity. But even they will have to embrace new ways of running their businesses when growth inevitably slows.

"For the last ten years mobile operators have been building strategies, platforms and services for the delivery of new non-voice services which, they hope will compensate for the inevitable decline in voice revenues" says Mark Newman, Informa Telecoms & Media Chief Research Officer. "But it's been tough going and non-SMS data revenues have been disappointing."

The situation has improved over the last year or two with many operators reporting year-on-year revenue growth of 30-40 percent or more in non-SMS data services. But the nature of the non-voice mobile is on the cusp of radical change.

The focus is moving away from a limited number of services provided by the operator to Internet access. Operators' non-SMS data revenue base is in the process of shifting from services to basic access/connectivity. The services they are beginning to use on their mobiles are provided by Internet players rather than mobile operators.

As such, mobile operators can look forward to a period of growth in mobile broadband connectivity. But to capitalize on this opportunity, operators need to invest heavily in new high-capacity networks.

It will see them effectively transition to becoming Internet Service Providers (ISPs). To avoid the fate of fixed-network ISPs, mobile operators will either need to partner with Internet firms and share revenues and/or develop a smart-pipe strategy. This involves exposing different parts of their networks to third party service providers and monetizing access to them.

Advertising is touted as a lucrative new revenue stream which would complement an Internet access strategy but Informa Telecoms & Media does not believe that it will translate into a significant operator revenue stream within the next five years.

At the same time as they pursue this strategy mobile operators will need to continue to seek ways to reduce Opex levels. Lower handset subsidies, outsourcing and network sharing, all offer huge scope for lowering Opex levels, as does the migration to all-IP infrastructures.