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Analysys's industry discussion session yesterday morning in London, entitled 'Strategies for enhancing shareholder value in maturing mobile markets', drew together over 50 senior professionals from across the mobile industry to discuss alternative approaches to enhancing value in today's mobile telecoms market. Representatives from the major mobile operators and financial institutions heard speakers and fellow delegates highlighted the following issues:
* Sharing radio access networks can enable operators to generate cost savings that could increase free cashflow by up to 20% for a typical European operator.
* Operators should consider utilising the cost benefits released through network sharing to reduce data tariffs and invest in service enablers for mobile content and advertising.
* Operators should consider introducing value-priced wholesale data tariffs, with prices based on the type of content delivered by content providers, as a means of sharing in the value delivered by content providers to consumers.
* The USD460 billion global advertising market can make a significant contribution to the USD600 billion mobile telecoms market. Mobile operators are typically very well placed to capitalise on existing customer relationships to deliver value to consumers and advertising partners alike.
The first part of the event included presentations from three senior industry professionals on a series of industry topics:
Network sharing: Amit Nagpal, Head of the Mobile Practice at Analysys Consulting explored various approaches to network sharing. He discussed Vodafone/Orange's recent ground-breaking announcement on network sharing in the UK - in particular the sharing of the entire 3G radio access network (including existing built cell sites as well as new sites to be built) as well the future possibility of sharing of 2G networks. Amit estimated the potential size of benefits of sharing 2G and 3G networks for a typical mobile operator in a large European market and highlighted that these could result in an increase of up to 20% in free cashflow if taken straight to the bottom line.
New mobile content services: Andrew Bud, Executive Chairman of mBlox provided his perspective on the steps operators need to take to promote growth in multimedia services. In particular Andrew stressed that operators and content providers cannot think of this market as simply moving the Internet model over to a mobile platform. One key barrier to the widespread availability (and hence take-up) of mobile content is the separate data traffic charges levied by mobile operators for the transfer of content. Andrew argued that mobile operators should offer a series of wholesale data tariffs to mobile content providers enabling customers to access content at a single headline price that includes all data carriage costs. Crucially, these wholesale tariffs should be based on value, according to the types of content offered by the content provider. Whilst a few operators (e.g. 3) do currently offer wholesale data services, those services need to become more widespread and sophisticated to facilitate the supply of such a wide range of content and to ensure operators share equitably in the value being created through mobile content services.
Mobile advertising: Patrick Parodi, Chief Marketing Officer at Amobee and Chairman of the Mobile Entertainment Forum demonstrated the potential size of the European mobile advertising market (USD1 billion by 2010) and the types of services for which advertising was best suited. Patrick discussed the importance of customer permission in the success of mobile advertising and how customers would be tolerant of advertising if they could see the value of this. To illustrate this point, Patrick presented some of the findings from user trials undertaken by Amobee in conjunction with four mobile operators. Nine times as many users chose to download a game funded by advertising as those who chose to pay for the same game.
The presentations were followed by a highly interactive Q&A session directed at the panel speakers and chaired by Dr Mike Grant, Head of Media Practice at Analysys Consulting. Discussions focused primarily on the value chain and the barriers to the take-up of new mobile content services. The panel agreed that the investment required by mobile operators in new service platforms/enablers was relatively modest in comparison with the costs of network deployment and that a bigger concern lay in the mindset of major mobile operators. In particular there was a concern that operators are not paying sufficient attention to alternative business models and new revenue streams given the current dependence of the industry's financial performance on traditional voice services.
The session also explored the role of operators in mobile advertising - again there was agreement that a mobile operator's knowledge of its customers' usage, behaviour and demographic characteristics provides it with the means to extract substantial additional value in delivering advertising services to consumers. What was less clear was the extent to which mobile operators would be willing to forgo their ambitions of being the major provider of content in order to capitalise fully on the potential of these markets.
The discussion concluded with an audience vote on the use to which potential savings from network sharing were likely to be put. Many participants indicated they that felt the majority of the cost savings would work its way through to lower customer tariffs, primarily as a result of competition between the operators in each market. At the same time, they believed that investment in service-enabling technology was both strategically important and relatively low in cost.
19.04.2007, Analysys
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