Examining the strategic choices of operators:At tefficient, we’ve been having our ears to the ground for some time picking up and summarising operator data on how 4G LTE adoption is developing globally. An absolute majority of operators who have launched 4G LTE still fail to report their 4G LTE customer number, their 4G LTE device penetration and their 4G LTE traffic level – but it’s on its way up.
And for those that do report, the third quarter of 2013 represents a shift: No longer is 4G LTE a niche service for a few early adopters – instead it is mainstream. At least in parts of the world.
Three criteria need to be fulfilled to be able to count a user as a 4G LTE user. This analysis introduces the 4G LTE cube which visualises the strategic choices operators have when it comes to all three. So far, strategies differ very much – and they affect adoption strongly.
Which operators in the world have advanced the furthest in incorporating operator Wi-Fi – based on hotspots and/or homespots – into a solution to offload mobile data and enhance the mobility of Wi-Fi-only devices? Which are their figures? What are the strategies and drivers behind? How has monetisation been solved? Are strategies different for telcos, cellcos and cablecos?
How should we apply what’s happening elsewhere onto our local competitive context? What should we be prepared for?
tefficient was asked to prepare and faciliate a workshop – focusing on these questions – for key stakeholders within an international operator group.
Why CAPEX? Today, most executives would answer that CAPEX is necessary for two reasons: To grow (or sustain) revenue and to reduce OPEX.
In reality, not all CAPEX is productive. Investment decisions might prove wrong. The return on an investment can be lower than expected when competition does the same (or the opposite). Implementation delays might lead to that the window of opportunity is missed.
Since mobile telecom – compared to other mature industries – is a CAPEX intense business, CAPEX efficiency is important.
This analysis introduces a simple way to compare CAPEX efficiency – looking at the effects on both revenue and OPEX. It shows that some mobile operators have a track record of high CAPEX efficiency, whereas others have not.
Denmark has had it for more than 10 years, Belgium got it a year ago and now EU proposes it for all of EU: Maximum effective binding period of 6 months for consumer mobile contracts.
What happens to a mobile market when such a change is introduced and why is this change actually so significant?
This analysis shows that when Belgian consumers no longer are locked into long contracts, it has a major impact. The question is also if the transition is over in Belgium: Danish figures suggest it might get worse.
Since the EU commission – as part of the 11 September 2013 “Connected Continent: Building a Telecoms Single Market” plan – is proposing that EU consumers should have a similar right to cancel contracts after six months, the question is obviously: Is this also your future?
An amazing growth story comes to an end: Smartphone penetration isn’t really growing any longer in mature markets. Smartphones are still sold in high volumes, but the difference is that they’re now primarily sold – subsidised or not – to existing smartphone owners, who upgrades.
In 2007, there was an untapped demand for smartphones. With penetration rates approaching 70%, this demand is now fulfilled.
Also maturing markets show signs of saturation – at penetration levels less than 20% – since income level is proven to be the primary factor behind smartphone penetration.
The need for the 30 USD smartphone crystallises from this analysis. But operators must also upgrade networks for mobile data – and make mobile data hassle-free also for prepaid customers.
Austria, with a population of 8.5 million, used to have five mobile network operators, making it one of the most competitive mobile markets in Europe. Now there are three left.
When Hutchison-Whampoa, the owner of ‘3’, made a bid on Orange, the European Union needed 11 months to approve it. EU appears to have changed their thinking since. It’s roaming that is under scrutiny now: If operators would agree to abolish roaming fees within EU, maybe EU could be more forgiving to national M&A?
Consequently, European operator executives are publicly advocating the need to cut the number of mobile operators to three per country. If Telefónica’s bid for E-plus in Germany is approved by KPN’s shareholders and by the EU, it will be the ultimate starting signal for Europe’s march towards national consolidation: If it can be done in EU’s largest country, why not elsewhere?
But since Austria serves as the 4-to-3 precedent of Europe, let’s check what the first six months with three mobile operators did to the business results.
Who are the operators with the most advanced vision for monetisation of big data? How have they positioned themselves and their products? Which ecosystem are they targeting? What are the actual opt-in and opt-out figures? How is the privacy issue dealt with? How much revenue is created so far?
These questions were answered in an analysis provided to a global provider of business support systems.
Triggered by Vodafone’s 7,7 BEUR cash offer for cableco Kabel Deutschland and the emphasis Vodafone has put on communicating the importance of being able to offer quad-play (fixed broadband, TV, voice and mobile) in the German market, the question has to be asked: Isquad-play a competitive necessity?
This analysis compares data from operators that have taken the quad-play road: Orange France, SFR, Movistar Spain, Virgin Media, Swisscom, TDC and Orange Poland.
Their take-up might be impressive – driven by significant discounts – but what effect has it had on customer loyalty?
The first mobile operators have already reached the tipping point where handset revenue exceeds service revenue. The only reason why the average handset revenue isn’t higher than 14% of total revenue is subsidisation: Handset cost averagely stands for 30% of operator OPEX.
The increase in handset sales is bad news for the EBITDA margin of operators. Even with a positive gross margin on handset sales, total EBITDA margin is diluted. The issue is deeper than handset subsidisation: Even when at its best, handset retail is a low margin business. Should operators opt-out?
Analysis of operator business upsides and downsides when launching 4G LTE. Commissioned by Comptel. Live presentation of an extract of the analysis, titled “Pinpoint the right customers: LTE handsets in wrong hands will dilute margin” to Comptel’s customers at two occasions during MWC in Barcelona.
A special analysis, commissioned by Comptel was launched shortly after.