3G - 3.5G Economics - Early results and strategic options

This publication has been discontinued on November 23, 2011.

Introduction

As mobile network operators are confronted with growing problems, and we are seeing the increase in the launch of innovative services, often coming from the fixed internet, this study poses the question about the sustainability of mobile network operators: who will win? What will mobile network operators eventually become: access providers, content providers or consumer multi-media equipment distributors? Based on the status of 3G and 3.5G development in advanced or emerging mobile markets, this study describes the various strategies observed and identifies potential drivers for acceptable long-term MNO economics. If value added service offers broaden the horizon in terms of development, price pressures, set by users, regulators and growing competition present a real challenge to mobile operators, which requires creativity and excellence in execution.

The combination of these elements is the only way to guarantee revenue growth sustainability in the medium term in a mobile telecommunications market that seems to have reached a plateau, adequate profitability to continue to attract investors, and holding consumer interest to avoid commoditisation of services while maintaining the capacity to develop innovative services.

• What are the strategic drivers for mobile network operators in a market that seems to have reached a plateau in growth?
• What is the new ecosystem with mobile internetisation? Closed or open environment?
• What are the winning services? their contents? the associated terminals?
• What are the long-term economics and purpose for mobile network operators? Will they be content distributors?

• Mobile network operators and MVNO:
  • Evaluate potential drivers for sustainable growth
  • Refine proactive strategies
• Fixed and integrated network operators:
  • Evaluate interest in entering the mobile market
  • How to take part in network convergence?
• Equipment suppliers:
  • Understand mobile market needs
  • Service provider, terminal provider, partner?
• Investors and analysts:
  • What are the issues?
  • What are MNO long-term prospects?
  • What is the growth potential?

• MNO
• AT&T/Cingular
• Hutchison 3G
• KDDI
• NTT DoCoMo
• O2
• Orange
• SK Telecom
• SprintNextel
• Telefonica Moviles
• TIM
• T-Mobile
• International
• Verizon Wireless
• Vodafone
• MVNO
• Amp' d Mobile
• Blyk
• Sugar Mama
• Ten
• Virgin Mobile
• Xero Mobile

1. General Context

• 1.1. Early feedback on 3G
• 1.2. Competition Expansion
• 1.3. Rate pressure
  • 1.3.1. Voice call termination
  • 1.3.2. SMS call termination
  • 1.3.3. International mobile roaming
• 1.4. Momentum in digital content distribution
• 1.5. Primary diagnostic elements

2. Optimisation Strategies

• 2.1. Organisational Strategy
  • 2.1.1. Strategic convergence activities
  • 2.1.2. Pursuing and restructuring alliances
  • 2.1.3. Geographic refocusing/selective acquisitions
• 2.2. Technology and network strategy: primary cost elements
  • 2.2.1. Technology rationalisation
  • 2.2.2. Network infrastructure rationalisation
• 2.3. Spectrum and spectrum efficiency

3. Service and content strategies

• 3.1. Internetisation, basic trend in mobile
• 3.2. New ecosystem with mobile Internetisation?
  • 3.2.1. Business models and rate models
• 3.3. Lessons and outlook
• 3.4. Service portfolio management, new emerging services
  • 3.4.1. Emerging uses and services
  • 3.4.2. Other emerging uses and services

4. Marketing strategies

• 4.1. Segmentation
• 4.2. Subscriber loyalty at the heart of the process
• 4.3. Subsidising handsets, purchase motivation

5. Conclusions from MNO strategies

6. What P&L for mobile network operators?

• 6.1. A Western European mobile network operator' s business model
• 6.2. Primary conclusions and results

7. Appendix: Update on the situation in the various countries mentioned

• 7.1. Germany
• 7.2. Metropolitan France
• 7.3. Italy
• 7.4. Spain
• 7.5. United Kingdom
• 7.6. Americas
• 7.7. Asia

Glossary

• Table 1: Western European and North American overview of mobile service usage
• Table 2: Selection of data ARPU shares in overall ARPU
• Table 3: Selection of data ARPU
• Table 4: Selection of 3G data ARPU shares in overall 3G ARPU
• Table 5: Selection of 3G data ARPU
• Table 6: Competitive intensity in Western Europe
• Table 7: Competitive Intensity in North America
• Table 8: Competitive intensity in Asia
• Table 9: Selection of HSDPA deployments worldwide
• Table 10: Comparison of performance and costs between CDMA 1X EV-DO and HSDPA according to KTF
• Table 11: Advantages and disadvantages of UMA and IMS architectures
• Table 12: Selection of convergence offers and their associated technologies
• Table 13: Details of consumer offers
• Table 14: Recent major outsourcing contracts
• Table 15: Candidate bandwidth for 4G
• Table 16: Estimated spectrum needs by 2020 for IMT-2000 and IMT-Advanced
• Table 17: Mobile TV models in Italy
• Table 18: Introduction of a secondary frequency market in Western Europe
• Table 19: Main portals for worldwide mobile operators and revenue share
• Table 20: Overview of i-Mode services around the world
• Table 21: Global agreements between MNO/Internet players
• Table 22: Proprietary solutions from a selection of worldwide mobile operators
• Table 23: Selection of search engines for mobile operators
• Table 24: Web browser loaded on a selection of handsets
• Table 25: Portal-MNO partnerships involved in blogs or social networking
• Table 26: Partnership between MNO and portals in mobile instant messaging
• Table 27: Selection of email software for mobile operators
• Table 28: Selection of partnerships between mobile operators and navigation software
• Table 29: Selection of position determination services offered by MNO
• Table 30: Types of position location services
• Table 31: Selection of homeZone services
• Table 32: Selection of "one handset" services
• Table 33: Selection of VoIP software for mobile operators
• Table 34: Overview of customer retention methods
• Table 35: Comparison of national baseline situations
• Table 36: Primary general indicators in Germany
• Table 37: Primary market indicators in Germany

• Figure 1: UMTS Share in Western Europe
• Figure 2: UMTS Share in major Western European countries
• Figure 3: Western Europe' s position in 3G
• Figure 4: Speed of 3G expansion in Europe and Japan
• Figure 5: 3G market share in late 2004 and end of 2006 in Italy, Japan, and South Korea
• Figure 6: Speed of 3G expansion: Europe, United Kingdom, Italy, Japan
• Figure 7: Attractiveness of 3G services for French mobile subscribers between 15 and 45 years old
• Figure 8: Multimedia mobile phone usage in France and the United Kingdom
• Figure 9: Primary results of the OPA study on mobile Internet use
• Figure 10: Mobile phone usage in Japan compared to the United States
• Figure 11: Outline of advanced mobile services offered by SK Telecom
• Figure 12: 3G Data ARPU
• Figure 13: "Tier 1" EBITDA Margins
• Figure 14: "Tier 2" EBITDA Margins
• Figure 15: Various levels of outsourced services
• Figure 16: Relationship between service provider and MNO: example of the contract between H3G IT/Ericsson
• Figure 17: Gradual deployment of mobile technologies according to the UMTS forum
• Figure 18: Candidate bands for IMT-Advance systems
• Figure 19: Convergent services and cross checking bands (<6 GHz)
• Figure 20: Sharing spectrum for 3.6 and 5 GHz bands
• Figure 21: Vodafone Live! handsets in the four largest Western European markets
• Figure 22: Vodafone share of turnover for mobile multimedia services excluding messaging
• Figure 23: New environment, new usages, new generation of users
• Figure 24: Acceptance of advertising on mobile phones
• Figure 25: Examples of QR codes
• Figure 26: Potential MNO strategies in a changing "Internet" environment
• Figure 27: National mobile characteristics: number of mobile subscribers and mobile penetration rate
• Figure 28: Mobile operator characteristics: number of subscribers per network
• Figure 29: Monthly 3G multimedia ARPU
• Figure 30: 3G multimedia turnover for a mobile operator net of payments to content providers
• Figure 31: Distribution of operational expenses paid by a mobile network operator
• Figure 32: Overall gross margin for 3 and 4G services for a mobile operator and monthly gross margin per subscriber
• Figure 33: Mobile network operator market share in Germany
• Figure 34: Overview of mobile usage in Germany
• Figure 35: Mobile network operator market share in Metropolitan France
• Figure 36: Overview of mobile usage in France
• Figure 37: Mobile network operator market share in Italy
• Figure 38:Overview of mobile usage in Italy
• Figure 39: Mobile network operator market share in Spain
• Figure 40: Overview of mobile usage in Spain
• Figure 41: Mobile network operator market share in the United Kingdom
• Figure 42: Overview of mobile usage in the United Kingdom
• Figure 43: Mobile network operator market share in the United States
• Figure 44: Overview of mobile usage in the United States
• Figure 45: Mobile network operator market share in Brazil
• Figure 46: Mobile network operator market share in China
• Figure 47: Mobile network operator market share in South Korea
• Figure 48: Mobile network operator market share in India
• Figure 49: Mobile network operator market share in Japan

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