2006 to be a watershed year as mobile industry re-prioritises for continued growth

Informa: Worldwide. A growing optimism within the mobile sector, with 68% of survey respondents saying they are more confident about the industry's prospects in 2006 than they were last year. However, the report cautions that 2006 will be a watershed year when the structure of mobile markets and the strategies of operators begin to change in response to a number of major threats. The report highlights the five major trends in the marketplace that will drive operator strategies in the coming year.

1. Changing business models

The unsustainability of the traditional mobile operator business model will become more apparent in 2006. The high subscriber acquisition costs (principally as a result of handset subsidies), high churn levels and falls in the price per minute of mobile voice telephony will place pressure on operators. The survey showed that:

• 60% of the operator respondents expect subsidies to decrease or remain the same in 2006

• 84% expect the price of voice services to drop by up to a quarter

• 49% expect churn to increase

2. Convergence and quadruple play

These will become more widespread as fixed-line operators such as France Telecom, Telecom Italia, BT and NTT resort to desperate measures to rescue their ailing PSTN businesses. This involves the deployment of IP-based networks to slash operating expenses and roll out of converged fixed-mobile-TV-broadband services that will allow the end-user to make 'mobile' calls at home or in the office at PSTN rates. The survey found that 56% of all respondents anticipate that integrated fixed and mobile operators will benefit most substantially from convergence-IP-broadband.

3. Rise of the MVNO

2006 will see the rapid evolution of the mobile virtual network operator concept and operators' realization that a wholesale strategy can, in some cases, be more profitable than a retail business. The report predicts that in 2006 there will be more operators adopting a wholesale/MVNO model to find away around the handset subsidy dilemma.

4. VOIP driving down price of voice

The impact of IP and, in particular, VOIP which is rapidly driving down the price of voice telephony will become a major concern for mobile operators in 2006. The report predicts that VOIP will take its first major bite out of the mobile voice cash cow next year. Despite this, the survey found that only 30% of mobile operator respondents saw VOIP as a threat.

5. Growth of off-portal (direct to consumer) mobile entertainment

Mobile operators have experienced mounting frustration with their inability to derive meaningful revenue streams from mobile content services in 2005. Many are now starting to come to the view that off-portal strategies, where revenues are derived principally from traffic and billing services, may be a more lucrative approach. The survey found that mobile music and e-mail are the services which mobile operators expected to generate most interest in 2006. This was followed by games and TV (2006 is too early for mobile TV technology and business models to take shape). Among handset manufacturers mobile music was, by a long stretch, the most popular choice with 56% of the vote followed by mobile TV (19%), e-mail (14%) and games (11%).

So where is the industry headed?

More: see Annual Mobile Industry Outlook 2006 report Publ. 20051123