Mixed signals on carrier strategies 05-14-05

Mixed signals on carrier strategies:

A clear message from recent quarter results is that service providers can simultaneously report record subscribership and low financial results. Most of mobile operators have impressive records of customer base growth, but even if their revenues and earnings are growing, they do not follow the same rate. ARPU is at best flat and cost of customer ownership (purchase, keep it loyal, ..) is increasing as a result of fierce competition and relatively poor quality and variety of mobile services. Voice and SMS are still the dominant mobile services while non-voice services are still limited and very expensive, when available. Fixed-line operators have not better results. With access line number decreasing and long-distance rates plummeting, revenues are decreasing faster (8-10%) than subscribership (2-4%).

At the same time, disruptive technologies are to be introduced to allow the introduction of new services. The hype is to drive revenue growth, but more pragmatically, invested sums are big (remember 3G licenses, shift from a TDM-based infrastructure to an IP backbone, ...and many other examples). Furthermore, service providers are just emerging from very uncomfortable situation with heavy debt and low liquidity. Many service providers cannot resist explaining current situation with competition (falling prices, higher costs) and consumer's low enthusiasm to pay (high) fees.

The carrier cash-cow from the old good time is definitely over. Whatever they want to do, they have to change their business model and find new ways to market service enhancements and new value-added services. Is it credible to commercially launch 3G services in a tiny market when customers want national and worldwide coverage? DoCoMo was struggling with its FOMA service until it covers a substantial part of Japan. Same for 3G in the UK. Coverage and interoperability were key in the SMS success, but where is the MMS success? Customers have too long to wait until those two conditions are satisfied. In addition, most of new services have a real lack of valuable content. Amid a lot of noise on mobile multimedia, most people are still using their cell phone for voice. Fixed services are not really better positioned (look at the carrier reluctance to introduce VOIP services).

Service providers should be well inspired to increase their ability to market new services and speed their introduction. The user is no more just a subscriber, but he is a customer, able to dictate what he wants, what he is ready to pay for and how much. On the other side, SPs have to keep their eyes on the bottom line and improve their ROI. The current situation is not sustainable, so they should try to find another strategy.