European Operators Seeking to Expand to Emerging Markets

Mobile network operators, which once provided a simple phone and messaging service, are evolving, catering to consumer needs to offer a multi-platform technology experience via the mobile phone. But this change, when the mobile network operators become providers of a rich mobile experience, requires investments and new strategic approaches to make business sustainable and competitive in front of new strong market entries and fresh patterns of consumption. So says the analyst, Frost & Sullivan, as part of its study, Performance and Strategic Analysis of Key Western European Mobile Groups.

“This increasingly constant demand for data has led large Western Europe mobile groups Deutsche Telekom – T-Mobile; France Telecom – Orange; Telefonica; and Vodafone Group to show signs of improvement with expected fourth quarter earnings in 2010,” notes Maggie Sin Ying Luk, research analyst for Frost & Sullivan Europe’s Telecommunications Research Team.

The increasing trend in data demand is illustrated by the growing data revenue stream among these major mobile network operators. This data crave, resulting from the increased penetration of smartphones and other high-end devices, is leading these key Western Europe mobile groups to begin discussions around geographic expansion.

“With growing mobile penetration, mobile groups are facing an intensely price competitive and regulated environment,” says Luk. “In order to generate a diversified income stream, expanding geographic operations from Europe, particularly to attractive emerging markets, becomes one of the market trends.”

She adds that both France Telecom – Orange and Vodafone Group have a large presence in Europe, Africa, and the Middle East. Deutsche Telekom Group covers a majority of European countries, while Telefonica has vast coverage in the Americas.
Vodafone Group’s strategic focus in 2011 will be on Europe, Africa and India (where the demand for telecommunications services is growing rapidly), Frost believes, while developing new services and corporate segments. France Telecom – Orange will implement cloud computing services to reach a goal of generating €500m by 2015. It also hopes to become the number one videoconferencing provider in France. In Germany, Deutsche Telekom Group will continue a nationwide installation of its 4G network. It also plans on introducing new b2b cloud services outside of Germany. Telefonica plans to capitalize on both the Strategic Alliance Agreement signed with China Unicom, as well as its new partnership with Jasper Wireless, says Frost.

The analyst says that the financial and performance analysis of the four largest Western European telecommunications groups is a strong insight for evaluating the trends of the industry in Western Europe. While revenue streams from data are continuing to grow, overall revenue growth remains stagnant. Geographic expansion and service diversification will open up new streams of income for mobile groups, but it will not be the solution to low profit numbers. “Strategies must be developed to monetize the data traffic in order to solidify the sustainability of telecommunications services providers and operators,” concludes Saverio Romeo, senior industry analyst for Frost & Sullivan Europe’s Telecommunications Research Team.

For more information on the research, contact joanna.lewandowska@frost.com