New revenue opportunities for mobile operators

Updated: Aug 1 2005, 05:30am hrs
In the past few years, the increasing importance of mobility is radically changing the culture of voice communications. The possibility of using mobile phones as a substitute for fixed voice lines has been debated since the early days of mobile networks. Now, there is solid evidence in mature voice markets, such as Western Europe, that this fixed to mobile substitution is taking place. In growth markets, where fixed line telephone services have not been widely available, people adopt mobile telephony as their sole means for telecoms because it is quicker and increasingly becoming cheaper.

India is a classic example of that. Fixed to mobile substitution opens up new much needed revenue opportunities for mobile operators. The enterprise segment is particularly attractive because it already has a fixed to mobile substitution rate of 3%, which is expected to rise in the coming years. This is because enterprises recognise the benefits of mobility and are starting to replace their fixed voice communications infrastructure with mobile phones as their primary device for voice communication. The key benefit for enterprises is the cost reductions that can be achieved by conducting all voice communication over a single mobile infrastructure.

During the 1990s, the number of mobile phones exceeded the number of fixed phones in Western Europe, leading to a mobile penetration level of over 80% today. However, only 20% of all voice traffic is carried over mobile networks. Increasing the share of voice traffic in mobile networks through fixed to mobile substitution represents major growth potential for mobile operators. A 50% rise in voice calls originating from mobile networks would lead to network traffic growth of up to 150%.

In developing mobile markets such as India, the need and opportunity exists as well. Intense competition has seen tariffs and ARPUs (around $10) fall to amongst the lowest in the world, already. The market is expected to grow from the current 54 million to around 200 million by 2008, as per the government. This tremendous growth is seeing operators invest significantly in networks expansion especially in rural areas with low ARPU consumers and upgrading networks to EDGE/3G. This is putting further pressure on them to drive greater revenues from their existing networks.

Mobile voice will continue to be the dominant service and will account for up to about 63% of total mobile market revenue in 2007. Even greater mobile voice revenue will be achieved by transferring the revenue that is currently generated by fixed lines to mobile networks.

In Western Europe, 20% of mobile subscribers are business users, generating 50% of total mobile revenue with an ARPU up to three times higher than that of consumers. In India too, the business users comprise of the high ARPU generators. This calls for operators to have a solid enterprise segmentation strategy.

Acquiring customers through fixed to mobile substitution requires clear market segmentation strategies that will drive revenue and profit in the long run. Keeping that in mind, pricing strategies turn out to be a vital marketing instrument to attract new enterprise customers and drive up mobile voice usage. Mobile telephony costs need to be made transparent with clear and simple pricing such as flat rates.

Today, an enterprises mobile voice communication is built mainly on the existing infrastructure of mobile networks, enhanced by customised services for enterprise users. Established core network services such as GSM supplementary services, conference call, Multiple SIM card or Camel to enable the same services when roaming in other networks, all enhance enterprise communication.

All these mobile network-based services need no new infrastructure at the enterprise premises and can be used to enhance enterprise communication for both SMEs and large corporations. This results in virtually no start-up investment for mobile voice services and keeps operational and maintenance costs low in the long run for enterprises.

From an operators perspective, increasing the use of mobile voice brings economies of scale to existing investments and mobile network running costs, such as site rental, maintenance and operation and leased lines.

Enterprises place great emphasis on employee communication needs, such as reach and organisational factors, when deciding on the mix of fixed and mobile subscriptions that they use.

The author is country head, India & South Asia, Nokia Networks