E1. Focus of the Report
Our Report “The Revenue Drill – Squeezing the most out of 2G/ 3G” is a strategic toolkit for unfolding the new revenue opportunities around 2G/ 3G as well as reviving the existing 2G/ 3G services to their fullest.
Despite all the excitement about 4G, it is important to note that although 2G connections have been declining since 2003, it still accounts for 70% of the total connections globally, and 2G will remain the second largest mobile technology for the rest of the decade. Moreover, 3G (which currently accounts for close to 30% connections globally) will continue to grow with the increasing penetration of smartphones, tablets, and other mobile broadband devices. In total, 2G and 3G will account for more than 80% of the total connections globally over the next 4 years.
In particular, 2G/ 3G will remain the most common mobile technology in Latin America, Africa, Middle East, Central and Eastern Europe, and Asia-Pacific (Excluding South Korea and Japan) for the next 4-6 years.
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The purpose of our research is to help:
- Mobile operators in formulating the right 2G/ 3G strategy over the next five years;
- Mobile operators that are mainly targeting price-conscious users, and the new bottom of the pyramid take up;
- Mobile operators in identifying the profitable 2G/ 3G opportunities across Latin America, Africa, Middle East, Central and Eastern Europe, and Asia-Pacific;
- Tier 2 mobile operators, that are severely reeling under competitive pressure from emerging market trends (such as increasing dominance of device manufacturers and OTT players), and finding it difficult to generate revenues;
- Mobile operators that are forced to postpone their breakeven timelines;
- Mobile operators that are struggling to manage high operating cost, and are continuously losing investor confidence;
- Tier 1 mobile operators, that are interested in best utilisation of their 2G/ 3G network bandwidth, and;
- In opportunity spotting and scenario planning for network technologies (2G, 3G, 4G) with short term and long term cost-revenue implications.
E2. Scope of the Report
Here, we must specify that the Report is technology-independent: That is, the Report's sole purpose is to maximise revenues and profits from all the network resources irrespective of the level of technology you are currently operating at: 2G, 3G, or transitioning from 2G to 3G (or even transitioning from 3G to 4G). The report explores various ways by which you can identify and implement appropriate strategies to drive growth and innovation.
Keeping in sync with the theme we begin our Report with (Chapter 2) preparation for boosting 2G/ 3G Profitability – by overcoming the market challenges, making winning strategies, and identifying the competence required to boost up the profit margins.
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The first section of the Chapter talks exclusively about disruptively overhauling the old business strategies. It has been widely observed in the telecom market, especially in the case of MNOs, that although everything is fine: customer base is increasing, users are subscribing to the services, the operators' portfolio is in place, but that's not reflecting into ARPUs. The reason is your customers are idle, either partially or fully. But, the question is: Why? One of the reasons is that somehow you are ignoring their needs or competition is offering better solutions or your users are looking for better solutions. Here comes the role of disruption – no matter what you offer - devices/ services/ software, you need to revamp them time and again to make them more useful and appealing to your users. You need to acclimatise and transform your offerings, otherwise you will be outdated.
We next tried to identify that what will drive the maximum revenue in medium term – voice, SMS/ MMS or broadband, and why operators need to re-examine their 2G/ 3G data strategy in emerging markets. The chapter further analyses the emerging trends in data pricing, mobile broadband, VAS business models, and prepaid/ postpaid strategies with exclusive cases.
A section is on Mobile Virtual Network Operators (MVNOs), and how MNOs can broaden their reach by collaborating with MVNOs and incrementing their revenues. Moreover, why and how an operator can itself enter a Greenfield market with minimal costs by operating as an MVNO has been analysed and interpreted.
Bharti Airtel's entry into emerging markets of Africa has been presented as a case study which would help mobile operators and vendors in devising a foolproof strategy by avoiding potential mistakes which many make in such initiatives.
Further, we have gauged the attractiveness of Greenfield markets and how mobile operators and vendors can identify particular segments which can be potential business cases, and which none of the other players have so far deduced.
Before moving on to the next chapter, we took into perspective the OTT Challenge (Communication and Media) and how operators can turn 'threats' into 'opportunities', especially in regards to the sudden upswing of OTT players. It's gradually becoming difficult to charge for communications services, so most OTT providers are forced to give their core messaging, voice, and video chat features free of cost. OTT providers are exlporing many revenue streams like ad-based or free-to-use basic functionality and paid premium functionality. How can MNOs adapt to these business models to offer cheaper/ free basic communication services? The Chapter critically analyses OTT battleground and strategies that are going to help telcos to overcome the challenges from OTT players.
As mobile broadband is definitely one of the biggest growth drivers for the industry, we have dedicated our next Chapter (3) to it. The chapter extensively covers the mobile broadband opportunity both globally as well as regionally. It provides an analysis of diverse consumer behaviour and usage patterns across different geographical regions, and related forecasts. Further, we have studies consumer behavior by segmenting it effectively, and presented few innovative pricing models, while side by side studying churn management, providing strategies to cut churn and retain customers. This chapter offers necessary tools to operators for devising right mix of offerings for exploring mobile broadband opportunity.
In Chapter 4 we have explored the most Profitable 2G/ 3G Mobile Services and Business Models to remain competitive in the future. The chapter contains an in-depth analysis of some of the most promising mobile services such as Mobile Advertising, Mobile Apps, M-Commerce, M-Health and Mobile Multimedia. Each section is loaded with some of the most successful/ noteworthy cases to make you easily visualise the revenue opportunities around them.
Chapter 5 provides ideal roadmaps for network modernisation and ways to minimise the total cost of network management.
Traffic migration offers significant advantages for network operators as the spectrum on which operators are running their 2G, 3G networks can be used to launch 4G network that can potentially bear 5 to 10 times more traffic. This is one of the major reasons that several operators across the world are considering decommissioning of 2G, 3G networks. However, it might not be always a wise decision, especially when an operator can generate more revenues from the 2G, 3G networks.
We have included certain 'progression' guidelines for operators as to how they might move from 2G to 3G and beyond with a case study on the network upgradation and modernisation strategies of Maxis Malaysia.
The Chapter further covers the important topics in modern mobile networks such as Evolved Packet Core (EPC), PCRF, Fixed Mobile Convergence (FMC), and Wi-Fi. All these are covered in detail with their strategic importance and ideal approaches towards them.
Chapter 6 is a complimentary section on LTE. Although the focus of the report is to generate maximum revenues from 2G/ 3G, this particular chapter has been provided as a food for thought to all the operators that are still on earlier technologies (2G/ 3G or WiMAX), and when and why they should launch LTE (however, the chapter is equally handy for the operators that have already launched LTE). Besides explaining and analysing the advantages of LTE, we have studied the global LTE deployment trend and uptake of leading LTE operators. Lastly, several global and regional forecasts on LTE subscribers and revenues for the next five years have been presented for evaluating the LTE market revenue opportunities.
We took into our ambit the past few years and for this particular study we regionally explored some of the prominent mobile operators, device makers, infrastructure providers and interviewed several telecoms experts, C-level and mid-level executives.
Information Sources: Major sources include both face to face and telephonic interviews with telecom industry experts and consumers. It also includes various surveys that were conducted in different regions of the world. Other sources comprise of organisations’ websites and financial reports, books, trade journals, magazines, white papers, industry portals and numerous government sources.
Forecasting Methodology: We used extensive database of macroeconomic and sector specific data to generate industry forecasts. We used Judgment based methods like the Delphi method and Extrapolation; Time series methods like Exponential smoothing, Cyclical and seasonal trends and Statistical modeling, as well as the Survey method. The initial baseline projection is computed with the most recent market data. After an initial baseline forecast, all probable future macroeconomic and industry specific occurrences and assumptions are taken into consideration to generate the final forecast.
Key Questions Answered:
- What are the new avenues of growth for 2G/ 3G offerings?
- Why operators need to alter their voice and messaging strategy?
- How can operators leverage maximum gains from low consumer spend markets?
- What are the new verticals (m-commerce, m-health and m-entertainment etc.) MNOs can explore to generate more revenues?
- How to collaborate with other players in the ecosystem for shortening your time to market?
- How the scenario would shape up between content aggregators/ developers and MNOs in the Mobile VAS arena?
- How services should be offered in different phases for smooth transition to fixed-mobile convergence (FMC) and what are the new avenues where fixed-line operators can team up with mobile operators?
- What are the latest penetration techniques MNOs are using across untapped markets?
- How to drive consumer adoption of MBB across stubborn regions/ markets?
- How to segment your MBB user class and cater to their personalised needs?
- How could the App community exploit opportunity of doing business with MNOs, Handset Makers and Store owners – and their best propositions?
- What are the current trends in network management and charging solutions?
- How operators can build a robust PCRF solution?
- Why LTE is growing so fast, and how big is the LTE opportunity?
- The worldwide revenue contribution from traditional mobile services (Voice and SMS/ MMS) will exhibit a downward trend in the coming years. At the same time, revenue contribution from broadband services will have a sharp uptake. The trend can be mainly contributed to the increasing penetration and availability of smartphones and other data consuming mobile devices. However, as the devices' ecosystem is not in favour of 4G/ LTE offerings in most of the emerging markets, it would be more profitable to offer 2G/ 3G data services.
- 2G still accounts for 70% of connections globally, however, 2G connections will continue to decline in the coming years with the growing penetration of smartphone and tablets, and users' migration to next-generation networks. Despite all these developments, total 2G and 3G connections will account for more than 80% of the total connections globally over the next 4-6 years with 2G accounting for around 35% connections.
- In 2012, revenue from voice and messaging accounted for 72% of the total service revenue of Vodafone group and data contributed for only 15%. Therefore, although data is witnessing faster growth, operators must protect their voice and messaging revenue with realistic approaches, as VoIP and IP messaging has considerably eroded the traditional voice and messaging revenues.
- Mobile device manufacturers and OTT players have hijacked almost entire attention of customers, and MNOs are currently reeling under that pressure. However, they should not panic but need to safeguard their position and avoid unnecessary risks. Identifying the segments with high profit margin or high volume potential, and holding their position in the market will offer great opportunities to monetise their investment in the long run.
- Our survey revealed that majority of OTT players are in pressure to collaborate with MNOs/ ISPs to ensure QoS and believe that QoS can only be guaranteed by partnering with data providers.
- Smart mobile devices are slowly entering into the workplace and the trend has started impacting the industry in two ways. On the one hand, demand for data and mobility services is growing exponentially, and on the other hand it is also driving enterprises to replace computing devices or promote BYOD.
- The demand for smartphones is growing rapidly and it is going to make more than 50% of the total mobile phones shipped globally in 2013. The worldwide shipment for smartphones will reach 1.7 billion by 2018.
- Most of the activities in the telco industry are currently revolving around mobile broadband. However, it must be noted that fixed line will not only carry at least ten times more traffic than the mobile network during the next 5-8 years, but it will also be crucial for the widespread growth of mobile broadband. In fact, fixed mobile convergence (FMC) will be the business model that will work best in the coming years through optimal use of fixed and mobile technologies.
- The global LTE subscriber base reached 62 million in 2012, exhibiting a year-on-year growth of over 370%. With more number of LTE networks as well as rise in the number of LTE smartphones in the market, LTE subscriber base will grow at faster pace during the forecasted period (at a CAGR of 40% during 2013-2018) and will cross 1 billion by the end of 2018.
Who can benefit from this Report?
For a better understanding of the current telecom market dynamics with a focus on 2G/ 3G revenue opportunities, challenges, and future roadmaps. Business Case Studies, Absolute picture of the MBB subscriber growth and psychology, and recent technological developments (Smartphones, Tablets, Mobile Commerce and Payments, Mobile Multimedia, PCRF, etc.) is a must read for more informed strategic planning.
Device Manufacturers and Infrastructure Vendors
For a better product development and to infuse a competitive edge into the product/ services in sync with the technological developments, end user lifestyles, and operators’ challenges in meeting the market demand efficiently.
Content Providers and Application Developers
To gain an insight into the market expectations and opportunities that mobile market will generate across various markets in the coming years. To prepare for the likely changes that Content Providers and Application Developers must go through to remain relevant and profitable in the market.
With an obvious interest in the current happenings within the mobile broadband segment of Telecoms, the report provides an in-depth analysis for telecom investors. The report will help you in identifying the right choices for your investments.