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Mobile
Future Forward
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mobile industry's premier thought-leadership summit that
attracts some of the most influential minds in the
mobile industry who are very instrumental in shaping the
industry and in managing its growth of revenues and
profits. Extraordinary Speakers. Invaluable Insights.
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Sept 10th. Seattle. B There.
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Synchronoss,
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Operator's Dilemma (And
Opportunity): The 4th Wave
A Mobile
Future Forward Paper
http://www.chetansharma.com/OperatorsDilemmaFourthWave.htm
Subscribe to the best research in mobile.
Introduction
In 2012, the global mobile industry revenue will
hit $1.5 trillion. This revenue has tripled in the last 10
years. Mobile operator’s revenue reached a new milestone at the
end of 2011. The total global mobile operator revenue exceeded
$1 trillion for the first time. The operator profits have more
than doubled in the last 10 years. The trifecta of fast
broadband networks, well-designed mobile computing devices, and
the insatiable supply of content, applications, and services has
unleashed consumer demand for more like never before. If we look
at the history of the mobile industry, the first generation was
primarily focused on voice and this era persisted for a good
10-15 years before 2G messaging and very basic data services
were introduced. A decade later, data services started to become
more interesting as 3G networks enabled faster access speeds and
new applications. When Apple released iPhone in 2007, followed
by Google’s Android in 2008, the industry was turned on its
head. While the implications were apparent at the time, the
far-reaching impact of these new devices on how people work and
live is still unraveling.
The changing face of the industry also impacted
the business models, the revenue streams, and the value chain
power structure. For much of the last three decades, voice has
dominated the revenue streams for almost all operators. However,
in 2013, voice revenues will fall below the 60% threshold
globally. The drop in voice revenues has been compensated by the
rise of messaging revenues and the data revenues. However, some
nations and operators have started to experience declines in
messaging revenues. The access revenue stream is still very much
a growth story and is rising fast for almost all the operators.
We studied the revenue growth patterns for 65
leading operators in 30 major global markets to understand when
the revenue in certain segments rise, stagnate and fall. The
underlying data yields some interesting and consistent patterns
that are instructive on how things might shape up over the
course of the next decade.
The sigmoid or the S-curve growth has been well
understood and applied to various disciplines. To understand the
various revenue growth curves, we segmented the operator
revenues by voice, messaging, and access and correlated them
with subscription growth. In a majority of the cases, as the
subscriber penetration approaches 70-90% band in a given
segment, the Net-Revenue starts to hit its peak, stagnates for a
bit and declines. The amount of time the revenue curve stays
in the stagnation phase depends on the market competitive
dynamics and usage profile of the subscribers in a given
country.
The first revenue curve of voice is already in
decline for majority of the developed markets like the US,
Japan, and Western Europe. The second revenue curve of messaging
is on the decline in some nations like the Philippines,
Netherlands, Taiwan, Spain, and Italy while approaching
saturation in countries such as the UK, France, and the US. Both
these curves are on the rise in developing countries, which are
still in the subscriber growth phase. The third revenue curve of
access is in the growth mode around the world for all nations;
however, the margin pressure on this revenue base is the
strongest of the three as the operators rush to meet the growing
data demand that is doubling every year in most major markets.
We are likely to see the growth continue for the next 3-4 years
before this curve also starts approaching its peak. At this
stage, all three revenue curves will be in decline. This means
that the net revenue for some of the operators and for some
nations will start to go down, in some cases precipitously. This
will happen to operators around the world at different time
intervals, unless the fourth revenue curve starts to take shape
in the near term to help cushion the decline.
The growth of revenue in this fourth curve will
be critical. For some operators, a weak fourth curve will be
fatal. They won’t be able to arrest the fall in the overall net
revenue and investor pressure will force them to consolidate or
learn to live with lower margins or go out of business.
As such, it is important to understand the
importance of the fourth curve and formulate strategies that
extend the lifetime of the previous three curves such that net
revenues and net profitability stay healthy over the course of
this decade. The most interesting dynamics of this fourth curve
is that other racers are not only the fellow operators but some
new well-funded service and application providers. They are
using new gear, are not constrained by the same rules, can
change gears at will, and are ruthless in their execution. All
this renders the traditional telecom organizational structure
and the way of life - obsolete.
Based on the strategy chosen, the operators will
likely fall into three major buckets: access only, enabler, and
digital lifestyle solution providers. The operator might play
all three roles depending on the vertical in a given country.
However, without playing a significant role in the latter two
categories, operator revenues over the long haul will start to
resemble those of utilities – billions of dollars in revenue but
the margins might shrink to 8-12% from the current 30-40%.
The next 2-5 years will be critical for operators
worldwide. The strategies they pursue and the investments they
make will define their future existence for the coming decade.
Operators who are investing heavily in the 4th curve
have a good shot at seeing the end of the decade but a good many
will succumb to the powers of the growth curves, leading to
consolidation in almost all markets or they will gradually morph
from operators to utility providers. Many will be caught
unawares by the shifting sands of revenue and their inability to
mutate to compete effectively in the IP world.
Operator’s dilemma – The 4th wave
analyzes the four mobile revenue curves in detail and discusses
the strategies needed to increase the net revenue and the
investment areas that can lead to new revenue and healthier
margins for operators around the world.
Download Paper (2 MB)
Your feedback is always welcome.
Chetan Sharma
We will be discussing a
number of issues raised in this paper in our annual mobile
executive thought-leadership summit -
Mobile Future Forward on
Sept 10th in Seattle. Confirmed speakers include:
Abhi Ingle, VP, Advanced Solutions, AT&T; Antonio
Benjamin, Global CTO, Citi; Biju Nair, EVP and Chief Strategy
Officer, Synchronoss; Bobby Morrison – President, Verizon;
Carlos Domingo, President and CEO, Telefonica R&D; Dan Deeney,
Partner, New Venture Partners; Dave Whalen, VP/GM, Intel; Ed
Cantwell, SVP, West Wireless Health Institute; Erik Ekudden,
Head of Strategy, Ericsson; Erik Moreno, EVP, Fox; Frank Meehan,
Executive, Horizons Ventures; Glenn Lurie, President, AT&T
Mobility; Hank Skorny, VP/GM, Intel; Houk Reed, VP, Tekelec;
Jana Messerschmidt, VP, Twitter; Jeff Smith, CTO, Numerex; Kevin
Packingham, SVP – Product Innovation, Samsung; Marianne Marck,
VP – Engineering, Starbucks; Mark Anderson, CEO, Future in
Review; Mark Young, VP – Mobile and Connected Devices, NBC
Universal; Michael Bayle, SVP and GM, ESPN Mobile; Mike
Woodward, President - Americas, HTC; Mung Ki Woo, Head of
Mobile, Mastercard Worldwide; Neville Ray, Chief Network
Officer, T-Mobile; Oke Okaro, Global Head of Mobile, Bloomberg;
Renee James, SVP, Software and Services Group, Intel; Stephen
Bye, CTO, Sprint; Stephen David, former CIO, Proctor & Gamble;
Steve Elfman, President, Sprint; Tim Chang, Partner, Mayfield;
Wim Sweldens, President, Alcatel-Lucent Wireless.
We will be keeping a close eye on the trends in the wireless
data sector in our blog, twitter
feeds, future
research reports,
and articles.
The next US Wireless Data Market update will be released in Aug
2012. The next Global Wireless Data Market update will be issued
in Sept 2012.
Disclaimer: Some of the companies mentioned in this paper are
our clients.
