How can mobile network operators increase revenues and reduce costs?

POSTED BY Global Administrator
I think it is fair to say that the outcome of latest round of operator results – which have typically combined flatlining or declining revenues with a rising costs base – was not entirely unexpected. To begin with, these flatlining revenues stem from the simple fact that pretty much every man, woman and child has a mobile phone these days and that, as a result, it is increasingly difficult to find cave-dwelling hermits who for the past decade have remained ignorant of the benefits that mobile can bring and who can be persuaded to fork out for a fifty dollar a month contract. When this (let’s call it Simple Fact A) is allied to Simple Fact B (the markets are increasingly competitive these days – in part as a result of Simple Fact A, in part due to the fact that there are a fair number of MNOs and MVNOs out there), the knock in effect is not good for revenues, because more competitive markets often results in average ARPU levels declining. When you then pull in Simple Fact C for good measure (the regulators have wised up to the fact that despite the wholesale cap on roaming, you’ve pushed up the margins and they’re not having that any more) the net result across the industry as a whole is that – at least as far as revenues from traditional voice and data services are concerned – you get the aforementioned straight line. Which, if you’re not careful, starts to dip downward. At the same time you have a situation where the MNOs are experiencing strong growth in data usage, thanks to those pesky smartphone users, which in turn is resulting in spiralling mobile backhaul costs. And if that wasn’t enough, the MNOs must also invest in new LTE/HSPA+ networks in a bid to cope with this data surge. Net result: capex and opex goes up. And up. And up. The nightmare scenario at the end of this – which we posited in our recent Mobile Operator Business Models report – is that within a few years, you arrive at a point whereby costs exceed revenues, a point at which the “misery” outcome from Micawber’s Theorem is arrived at. (For those unfamiliar with David Copperfield, the great Micawber opines thus:  “Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, andand, in short, you are for ever floored.”) Fortunately for those MNOs who are reluctant to reach a point where their blossom is blighted and their leaf withered, there are numerous preventative measures. As our report observes, these measures fall broadly into three main areas:

Maximise the opportunity from existing revenue streams – this can include measures ranging from simply introducing a wider range of prepaid and postpaid tariffs to offering integrated bundles of voice, messaging and data

Develop new revenue streams – MNOs can leverage their existing assets (including their network and customer billing relationship) to develop double-sided revenues across a host of areas, cloud being perhaps the best example

Reduce opex in the network – there are numerous alternative (or complimentary) strategies available to MNOs here, ranging from deploying networks of WiFI hotspots as a means of reducing strain on the cellular network to employing smart meters in the base station as a means of reducing energy costs.

Provided MNOs reduce their dependence upon traditional revenue streams – and are prepared to embrace new business models – then they have the opportunity to ensure an outcome in which they  are not for ever floored;  in which their circumstances are far more rosy than at the present juncture. In which, in short, result: happiness.