The explosion of cheap mobile data is a boon for consumers, but for telecom operators it threatens an implosion of revenue.
“Navigating the Challenges of Data Monetisation,” the latest article released today by Delta Partners, the leading TMT advisory and investment firm, assesses the impact of mobile data growth on telecom operators, highlights key challenges and details potential solutions.
The next wave of growth for mobile telecom operators clearly is mobile data; however, what is less clear is how to monetise it.
Telecom operators invested for years in 3G networks with little return. The arrival of Apple’s iPhone and iPad revolutionised the demand for mobile data, finally creating significant demand for internet on the go.
Now both supply and demand are fully in place.
On the supply side, high-speed networks, affordable data pricing and intuitive-to-use smart devices make it easy for consumers to access the internet on the go. On the demand side, vast appstores, messaging apps and the rise of social networks have further fuelled demand.
The result has been a mobile data explosion, with global mobile data traffic growing 2.3-fold in 2011 alone, more than doubling for the fourth year in a row. The sharp growth is expected to continue, according to Cisco.
“Whilst there is undoubtedly strong demand for mobile data, it poses key challenges for telecom operators’ economics,” says Jan Wuppermann, Associate Partner at Delta Partners in Singapore. “High growth in data traffic, not fully monetised due to unlimited pricing plans, has resulted in insufficient revenues to pay for the additional investments required to cope with that extra traffic. Given that mobile telecom operators in Asia plan to invest USD 60 billion in capex during 2012, the challenge of generating sufficient returns on investment becomes even more prominent.”
Strong growth in demand is expected to continue, with Smartphone sales more than doubling from 315 million today to 750 million in 2014. Tablets are forecast to increase to over 100 million. With no end to this growth in sight, operators need to deal with this data explosion holistically and address four trends that Delta Partners summarises as 4S:
· Saturation.Most countries have few green-field users left to capture, slowing new growth and putting emphasis on up-selling new services to existing users instead.
· Substitution.Mobile data users increasingly prefer to communicate via email, chat and social network updates as opposed to calling and SMS, putting pressure on these traditional cash cows, which historically contributed 70-80% of revenues.
· Specialisation. Telecom operators need to make up for stable or even declining voice and SMS revenues by expanding into new fields like ICT and Media.
· Smart ROIC management.Operators must connect new data revenues with the resulting operational costs and capital investments by choosing the right pricing models, bundles and network solutions.
Unless operators fully monetise mobile data, they risk declining voice revenues and slimmer margins due to higher network investments and not fully monetised traffic growth on the back of unlimited price plans. This risk would significantly bite into future cash flows and thus should be a key priority for operators to address today.
Operators can consider three main strategic programs:
· Commercial management, by re-pricing data services via tiered usage or speed-based service differentiation, bundling data with voice and SMS to combat substitution and charging extra for usage of Skype and other such services
· Differentiation, by focusing on the end-to-end customer experience of data services, ensuring the right set-up, support and trouble shooting, investment in network quality as a tool for basic differentiation, as well as expansion into adjacent businesses such as ICT
· Cost management, by using traffic management solutions (e.g. throttling heavy users, fair usage policies), caching frequently used content and offloading traffic via Wi-Fi or Femtocells
“Delta Partners has developed a ‘Data Health Check’ for telecom operators that systematically uses the three strategic programs to assess the current health and economics of the mobile data offer, ranging from network/IT to marketing, sales and customer care. Our Data Health Check helps operators effectively monetise data,” adds Juan Rio, Partner at Delta Partners in Singapore.
The long-awaited rise of mobile data is being heralded as a saviour to the mobile industry, however monetising the data opportunity will not be as simple as its voice and SMS predecessors. Operators must act decisively in navigating the complex economics of data services and find solutions that will result in growth not only in revenue but also in shareholder value.
To read or download the complete article visit www.deltapartnersgroup.com/our_insights/articles
For more about Delta Partners please visit www.deltapartnersgroup.com
About Delta Partners
Delta Partners is the leading TMT advisory and investment firm in emerging markets. With more than 170 professionals, the firm operates across 50 markets in the Middle East, Africa, Eastern Europe, Emerging Asia, and LATAM. Delta Partners provides three synergistic services: management advisory, corporate finance, and investments from its offices in the UAE, South Africa, Spain and Singapore. Delta Partners delivers tangible results to its clients and investors through its exclusive sector focus on telecom, media and technology, and a unique approach to services, combining strategic advice and a hands-on pragmatic approach.
Contacts
Mia Mutic,
Delta Partners,
+971 (4) 369-2999
mmu@deltapartnersgroup.com/ www.deltapartnersgroup.com
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