Mobile future

Here is not the output of any crystal ball, but simply few rationales that can help to understand what the mobile future may be. Looking at market evolution estimates, I am surprised that main evaluation criteria are subscriber base and net adds evolution. Mobile future is not just those figures. Starting from known figures (or relatively well assessed figures) such as:

• mobile penetration in large urban areas and developed markets: we can say that coverage is pretty good and penetration is high (around 100%) everywhere in the world (meaning in developed and developing countries); expansion will be limited there outside new services or new technologies.

• acceleration of user subscriptions: we can say that 82% of the second billion subscribers came from developing countries, and it is predictable that the ratio would be higher for the next billion, meaning that operators would have to address lower-income households, mainly in low density areas. The result should mechanically be much lower ARPU, higher costs for operators (to deploy the network and achieve adequate coverage, to market services and to subsidize handsets) and therefore lower margin.

• shorter product cycles: a technology is not yet fully deployed and amortized that half a dozen of alternative or enhanced technologies are ready; and it is true for both infrastructure and handsets. ROI is more and more challenging for operators (and vendors).

How can this situation be sustainable? The common understatement is to claim that new advanced (multimedia) services revenues would offset extra costs. During the past ten years, analysts advocated that the portion of data services would double in the next five years, but in reality growth is still limited (10%- 15%) and much lower than expected (outside some few limited cases). Even in Japan, the most advanced high-speed mobile country, it is not true.

Operators have therefore no choice but to minimize capex and opex. We would probably see in the future different strategies to do that and no one can be escaped:

• Do nothing: do not deploy networks and services in some low-density areas, (it was the case in rural zones in early days of mobility in developing countries and it took years to complete coverage)

• Select niches: deploy first in most interesting areas

• benefit from subsidizes to fill the gap (already the case in some developed markets to complete coverage), or from GSMA low-cost handset initiatives,

• Share the costs: several initiatives are tested, such as network sharing or outsourcing, but is still limited and to be effective and widespread, would need years.

• Search (and hope to find) a good compromise between costs and revenues, but it is the most risky strategy.

In conclusion, mobility is, and would be, the driving force in the telecom market, but I am not sure its future is as rosy as predicted. Reality of the bottom line is still there, and seems different of well smoothed subscriber base curves and targets. Who will pay in fine? “The user must be solvent” is the commercial basic rule!