Lets Hear it for Voice

We can watch video clips, download music, take photographs, check the weather and be alerted to breaking news. But the fact remains: making voice calls is one of the core reasons people use their mobile phone. Tony Cooper thinks there’s plenty of growth (and profit) in voice.
Although manufacturers, mobile operators and advertising campaigns seem to be focused on the expanding array of uses and capabilities of mobile phones, it is actually voice which is responsible for 80% of mobile phone operators’ profits.

Voice is still the primary purchase reason for consumers and poses a huge opportunity for mobile phone operators with the right management focus and marketing to push the next phase of growth. The total global voice market is set to pass the $1 trillion mark in the next two years, and with the mobile sector currently holding less than a third of it, there is a lot of potential still to be squeezed from 2G technologies.

Some operators are convinced that competition in voice is based on price and that voice has become a commodity. But they are not giving voice the focused attention it deserves.
Market penetration, segmen-tation of customer needs and innovation of core services will be critical for mobile operators. The small percentage of management solely responsible for voice amongst UK operators is indicative of this – voice deserves strategic direction by focused management.

With the UK mobile industry performing strongly with abundant cash flows, steadily rising EBITDA margins and increasing service revenues operators have a cash cow that needs to be maintained.

By driving revenue in voice and capitalising on an already existing customer base they can look to improve revenue immeasurably.

Leave them kids alone
At the moment there is a strong emphasis by mobile operators on the 18-25s market. With the market saturation of ringtones, wallpaper and music downloads, 18-25s are powerful consumers in this area, but there are other groups of consumers which could also benefit from tailored services, and which could prove profitable for mobile operators.

The self-employed account for 11% of the UK population, and the opportunity to maximise their buying power appears to have been missed thus far. There are also very few services specifically designed for women, and services for the over 60s have only just begun to emerge. Migrant workers are another overlooked potential target group. Perhaps by offering discounted tariffs for calling home/abroad, operators could begin to exploit the wealth of opportunity that remains untouched.

Many services including voicemail and directory enquiries are also being either under-utilised or appear non-existent. For instance, call return or missed call services can add up to 7% to ARPU, but are not commonly being deployed. Alongside this, under 60% of UK mobile phone customers use voicemail which is surely an area with growth potential?

More could also be done by operators in helping customers with storing contact numbers. There is a proven direct link between the number of contacts stored in the phone or on the SIM card, and the amount of calls the subscriber makes.

Although they drive usage, loyalty and customer lifetime value, mobile phone tariffs are still very complex (over 600 variations on offer in the UK, fewer than 20% of them delivering 80% of voice revenues).

Arguably this is a case of too much choice blurring the customer view of what these tariffs actually mean. Customer confusion is encouraging users to swap networks. The fait accompli is simple however: everyone wants the best deal and to save money on their monthly bill.

Prepay still represents two thirds of the total UK market, and its dominance tends to limit overall growth. However, there is a clear correlation between the rate at which subscribers migrate from prepaid to contract and the level of service revenue growth (see diagram). Innovative and improved services are therefore likely to encourage more pre-paid customers to switch to contracts.

The convergence across the technology, media and telecom-munications industries is gathering pace – excitement about the amalgamated future of mobile and media is justified. However, the reality is that voice still constitutes the predominant part of operator income.

The figures speak for themselves with a 1% increase in voice activity greater in value than a 1% increase in data activity by at least five fold. 3G will have its day but right now there is plenty of growth and profit in 2G.

Recognising the importance of voice to the bottom line, operators must re-engage in the voice market – the window of opportunity is still open and operators need to make the most of it.

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