Consolidation is the Solution for Challenges Faced by Telecom Operators

The mobile and wireless industry in Europe is facing the crisis of lowered average revenues per user (ARPU) and reduced funds for implementing next-generation networks. This is motivating mobile operators to investigate new opportunities to retain their subscribers and revenue market shares. One of the recent trends emerging in the saturated mobile and wireless markets in Europe, according to the Frost & Sullivan analysis, is consolidation among telecom operators.

“Intensifying competition from new participants has resulted in incumbents devising innovative pricing plans to improve both data and voice ARPU,” notes Frost & Sullivan Research Associate Jayashree Rajagopal, author of the report on Globalisation and Consolidation of the Telecom Industry: Mobile and Wireless Perspective. “Post-paid customers are poised to play an important role since they are the major revenue contributors.”

Promisingly, the number of prepaid customers has been increasing rapidly. In order to retain existing customers and attract new users, it has become necessary to design novel pricing plans that would boost revenues, while also satisfying consumers.

Next-generation technologies are being developed and tested in order to cater to the need for enhanced speed and capacity. A number of services and applications are increasing the use of mobile phones in areas such as healthcare and banking industries in order to improve their efficiency and effectiveness. These services would require better quality of service and capacity.

“However, new participants are not in a position to invest in next generation infrastructure,” cautions Rajagopal. “As a result, they may have to merge with other prominent market players who have the necessary funds to deploy next generation infrastructure.” Certain mobile virtual network operators (MVNOs) that become bankrupt due to the existing competition typically opt to merge with other major telecom participants.

Telecom operators are offering flat-rate plans and other provisions at lower prices to attract customers and augment market share in terms of number of customers. At the same time, with the increase in the use of data services, telecom companies are offering better services to boost data ARPU.

The entry of new participants in the telecom market has resulted in significant price wars. To gain market share, entrants reduce tariffs, resulting in the lowering of ARPU. This intense competition has widened the number of options available for consumers, sparking a trend of huge churn rates. Thus, retention of customers has become the most important challenge for telecom operators

Attracting new subscribers while retaining existing market share with respect to both subscribers and revenues will be critical to success. In order to improve the scale of operation in the countries in which they are operating, many major telecom participants have been looking at merging with smaller competitors.

“Strategic mergers and planned acquisitions will definitely help the partnering telecom operators to address the various challenges together,” advises Rajagopal. “With innovation being the key for developing applications and services, these partnerships should also focus on incorporating innovation into their services to gain revenues in the saturated telecom markets.”

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