2006 to be a “watershed”

Informa Telecoms’ annual Mobile Industry Outlook 2006 report highlights a growing optimism within the mobile sector. The survey, of more than a thousand “senior industry professionals”, indicates that two thirds are more confident about the industry’s prospects in 2006 than they were last year.

However, the report cautions that 2006 will be a watershed year when the structure of mobile markets and the strategies of operators begin to change in response to a number of major threats. The report homes in on the five major trends in the marketplace that will drive operator strategies in the coming year.

Changing business models. High subscriber acquisition costs (principally as a result of handset subsidies), high churn levels and falls in the price per minute of mobile voice telephony will place pressure on operators. 60% of the operator respondents expect subsidies to decrease or remain the same in 2006.

Convergence and ‘quadruple play’. These will become more widespread as fixed-line operators such as France Telecom, Telecom Italia, BT and NTT resort to desperate measures to rescue their ailing PSTN businesses. This involves the deployment of IP-based networks to slash operating expenses and roll out of converged fixed-mobile-TV-broadband services that will allow the end-user to make ‘mobile’ calls at home or in the office at PSTN rates. 56% of respondents anticipate that integrated fixed and mobile operators will benefit most substantially from convergence-IP-broadband.

Rise of the MVNO. 2006 will see the rapid evolution of the mobile virtual network operator concept and operators’ realisation that a wholesale strategy can, in some cases, be more profitable than a retail business. The report predicts that in 2006 there will be more operators adopting a wholesale/ MVNO model to find away around the handset subsidy dilemma.

VOIP driving down price of voice. The impact of IP and, in particular, VOIP, will become a major concern for mobile operators in 2006. The report predicts that VOIP will take its first major bite out of the mobile voice cash cow next year. Despite this, the survey found that only 30% of mobile operator respondents saw VOIP as a threat.

Growth of direct-to-consumer mobile entertainment. Mobile operators have experienced mounting frustration with their inability to derive meaningful revenue streams from mobile content services in 2005. Many are now starting to come to the view that off-portal strategies, where revenues are derived principally from traffic and billing services, may be a more lucrative approach.
Informa Telecoms & Media’s Chief Research Officer, Mark Newman, concludes: “Until now, spectrum ‘ownership’ has allowed mobile operators to control the marketplace. Over the next five years operators will lose this control. With the breaking down of the barriers to entry, price competition will inevitably follow. And if operators are to preserve profitability they will have to either cut costs, develop new revenue streams, or both.

“2006 will be a watershed year for change. Operators will, increasingly, look to cut costs – through the use of IP, outsourcing parts (or all) of the network, and by reining in handset subsidies. At the same time they must continue to look for new revenue streams. New mobile entertainment services may be part of the mix but more coherent wholesale strategies and innovative pricing schemes designed to take more traffic away from the fixed network could ultimately provide greater rewards.”

Globally Informa believes the top five growing market will account for 47% of total additions in 2006. China will grow fastest, accounting for 22% of all new subscribers; India comes next with 9%.

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