How European operators are getting smarter
European mobile service providers are in a fierce competition. Voice and messaging revenues are down, and the number of new subscribers is slowing. Operators must compete just to keep their current subscribers.
According to Infonetics, mobile broadband is driving network and business model transformation. Mobile data traffic is growing exponentially, but mobile broadband revenue is not growing to the same proportions. Many mobile network operators are becoming victims of their own success. I recently met with a leading operator in EMEA, and they shared with me that 95% of their capital expenses are invested in data--though it only generates only 5% of their profits.
This scenario requires operators to re-think their business models and network strategies.
According to a research report conducted by STL Partners and sponsored by Tellabs, the days when mobile network operators in Europe were stock market darlings are over. Mobile service providers must innovate to succeed, and service providers can’t afford to be “dumb pipes.”
European mobile network operators are not giving up—they’re addressing innovation needs head-on and based on their core strengths. Here’s a look at how some of Europe’s leading operators are moving forward:
Quality and cost efficiency: Yota in Russia
Yota in Russia is working to improve quality of experience and cost-efficiency. Yota has agreed to build and operate an LTE network for the four major Russian mobile network operators: Megafon, MTS, Rostelecom and Vimpelcom. So, it will increasingly need a smarter network. Without a smart network, the operator cannot deliver a high quality of service to customers or provide dynamic bandwidth allocation.
Aspiring for smart services: Vodafone
Vodafone relies on a cost-efficient, smart network strategy to cope with growing data demands and to protect the profitable enterprise business. But Vodafone hasn’t totally turned down their aspiration for smart services. The operator is also seeking new revenue opportunities with its smart services strategy. Vodafone will continue to drive smart services in collaboration with other operators.
Smart services poster child: Telefonica
Telefonica is the operator with the most complete Telco 2.0 vision* globally. Telefonica has both built and acquired a number of smart services, which have gained traction in various countries. For example, O2’s Priority Moments opt-in service allows users to receive discounts based on their location ? e.g. coffee when users are nearby a branded café. The service has already attracted 6 million users since its launch in July 2011.
No time to waste
While Telefonica may be Europe’s poster child for smart services, it’s not the only operator focused on developing a strategy. Vodafone, Orange, Telecom Italia and T-Mobile are all working together to develop smart services initiatives. Their goal is to generate enough scale to attract upstream developers as well as downstream end-users.
European competition is fierce, and the first step is to move to smart networks--operators don’t have time to waste.
You can learn more about how operators are deploying smart pipe strategies by downloading the full report, or by reading my colleague’s blog posts on Asia Pacific and North American operators.
*Telco 2.0 vision: STL Research defines this as a service that goes beyond just delivering the bits and bytes efficiently. Full Service Telco 2.0 enables operators to provide value-added services such as location-based or presence-related offerings, personal services (like games) and cloud-based CRM for enterprises, to name but a few.
In March 2011, the "Big Four" -- MTS, VimpelCom, MegaFon, Rostelecom and stockholders of Scartel Ltd signed a memorandum of understanding providing the sharing of company?s network and frequency in order to provide mobile communication services of the fourth generation (4G) in LTE standard. In addition, participants of the "Big Four" were given the right to acquire a 20% share of Scartel?s stock in 2014. Also they decided to sign the binding agreement by June 1, 2011, but never did.
The point I would like to emphasize is that, though this specific arrangement may not have been completed, it's a good example of a strategy service providers can consider to improve their competitiveness and adapt to the current market environment.