Mobile operators are starting to uncover new business models that help to address the problems posed by saturated mobile markets and high handset subsidies. Thats the conclusion of a report just released by Informa Telecoms & Media, Future Mobile Operator Business Models: Broadband, Partnerships, Wholesale and Mobile 2.0.
The report notes that European mobile operator Telefonica O2 recently announced that its SIM-only service, Simplicity, now has almost half a million customers and accounts for one third of its online sales. The SIM-only concept was pioneered by discount MVNOs in northern Europe and, says Informa, is now being embraced enthusiastically by mobile operators. The analyst says it holds two key attractions for mobile operators. Firstly, it allows them to accelerate the migration from pre-paid to post-paid price plans. Secondly, it significantly reduces subscriber acquisition and retention costs. SIM-only customers keep their existing phones, so operators do not need to resort to costly device subsidies.
With the impending credit crunch in many developed markets, we believe that SIM-only services are extremely attractive to consumers who are prepared to keep their old phone in return for lower subscription and usage fees, says Mark Newman, Chief Research Officer at Informa Telecoms & Media.
The SIM-only business model is one of several strategies analyzed the report, which argues that operators in developed markets need to undertake a thorough review of their businesses and strategies if they are to retain their levels of profitability amidst the onslaught from lean, fast-moving Internet companies and business cultures.
While SIM-only services are an effective tool to win market share, reduce subscriber acquisition costs and spend on customer retention, mobile broadband is a brand new revenue stream for mobile operators, the report says. HSDPA dongles are among the top-selling devices for mobile operators in a number of European markets and made up more than 50% of the global total of 30 million HSDPA subscriptions at the end of 2007. Informa is predicting that the number of 3.5G-connected laptops will rise to 184 million by 2012.
At the heart of the debate about future mobile operator business models is the extent to which mobile operators risk being relegated to the role of dumb pipes.
Mobile operators have spent the last 10 years trying to develop services that reduce their dependency on voice, says Newman. But, beyond SMS, they have had limited success. With the arrival of Internet services on the mobile screen, this is set to change. But will it be (the Internet companies) or the mobile operators that end up reaping the rewards?
To benefit from the fusion of mobility and the Internet, says Informa, mobile operators need to start thinking about what services, functionalities and capabilities they can offer third parties offering services over their networks.
Mobile operators need to think of Internet companies as their partners, or even as their customers, if they are to share in the success of Internet-on-your-mobile services, says Newman, adding that in many cases, this goes against their natural instinct of competing with such service providers.
For more information about the report, click here.