Informa Telecoms

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Future challenges for the mobile operator
business model
Mark Newman, Chief Research Officer
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More than one phone for every person in Europe
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Subscription growth forecast
Source Informa Telecoms Media
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ARPU is on the slide in most European markets (
annual change)
4Q04 1Q05 2Q05 3Q05
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But people are making more phone calls..
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But people are making more phone calls..
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Never have there been so many opportunities for
mobile operators

• Mobile entertainment and 3G
• Mobile television
• Mobile commerce and payments
• Fixed mobile substitution
• Fixed mobile convergence
• Mobile broadband

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But there may be even more threats than there are
opportunities

• Internet technnologies and economics
• Faster and faster, but why?
• Wi-fi and wimax
• Broadband pipe versus public network
• Closed business models
• The love-hate relationship between handset brands
  and mobile operators

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Key themes

• Mobile entertainment and 3G
• Mobile vs Internet economics
• Public network vs broadband pipe
• Fixed mobile convergence
• Mobile operators and handset manufacturers

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Do the maths! mobile data and 3G are still
flattering to deceive
Mobile Entertainment and 3G

• Average European ARPU Euro 30
• Voice ARPU Euro 25
• SMS ARPU Euro 4
• Mobile data ARPU Euro 0.5-1

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Mobile content spend breakdown
Mobile Entertainment and 3G

• 2006

• 2010

Source Informa Telecoms Media
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There is genuine excitement about the potential
for mobile music
Mobile Entertainment and 3G

• Devices and UIs are rapidly improving
• Vodafone has cut the prices of downloads to the
  same level as online downloads
• Music companies believe in mobile music
• HSDPA will bring down the cost and time of full
  track downloads
• Hutchison has already recorded 50 million
  downloads
• Operators are starting to wholesale data capacity

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Games and gambling are flattering to deceive
Mobile Entertainment and 3G

• Prices are too high
• Poor gaming experience
• Long tail
• Too many devices, form factors, technical
  challenges

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While the TV industry rolls out time-shifted
television, mobile operators set their sights on
broadcasting
Mobile Entertainment and 3G

• Subscription or advertising?
• Operator-tv company relationships
• Video versus television
• Personal TV or mobile TV?

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Mobile Entertainment and 3G
Operators are reviewing their role in the mobile
content business

• Off-portal strategies
• Cutting back content teams
• Data wholesale and MVNOs
• User generated content

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Mobile versus Internet economics
GSM versus TCP/IP only one winner?

• Not so much telly addicts as Internet addicts
• Open versus closed business models
• High cost versus low cost. Expensive versus cheap
  (free)
• Microsoft, Google, Skype versus mobile operators
  (fast companies versus slow ones)
• Wi-fi and VOIP versus telephony businesses
• Do we need mobile operators?

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Public network versus broadband pipe
Was cellular technology ever designed for
high-speed broadband communications?

• 70 of calls are made from the home or the
  office
• Is 3G coverage good enough to offer mobile
  broadband in the home?
• FMC takes the initiative away from the public
  mobile network to the broadband pipe

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Fixed mobile convergence
Has anyone bothered asking their customers if
they want FMC services?

• Fixed home and family, mobile personal
• Technology choices and timetables
• IMS operator-centric Internet wishful
  thinking?
• Handset availability
• Fixed mobile substitution now youre talking

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Mobile operators and handset manufacturers
And the balance shifts back in favour of the
global handset brands?

• The lunacy of handset subsidies
• Are long contracts the only strategy for
  reducing churn?
• Play videos on your MP3 player
• The Korean and Japanese models

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What are we going to do now?

• Cut costs
• Set up a wholesale business voice and data
• Price entertainment services competitively
• Invest in a long term strategy to serve
  enterprises
• Take an open mind to IP based services
• Take an open mind to FMC
• Welcome Microsoft cautiously!

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And remember, SMS became a bigger industry than
Hollywood despite operators, not because of them!
Mark Newman Chief Research Officer Informa
Telecoms Media Tel [phone]
4263 Mark.newman_at_informa.com