We wrote OpenGardens based on primary research i.e. actual interviews with mobile network operators, mobile startups etc.
In OpenGardens, we speak of Inside the mind of the mobile operator or walking in the operator’s shoes
Many companies creating emerging mobile applications do not see it from the ‘other side’ so to speak. This blog is an outline of some of my thoughts in this space. Another way to look at this is to consider – what would be the priorities/mindset/issues of a typical manager in the mobile data industry?
Almost by definition, a mobile network operator is a ‘big’ organisation. People complain about how hard it is to work with an operator… but still expect operators to fund developments in this area… while lowering prices.
All big organisations are difficult to deal with but in case of the mobile network operator, some unique factors come into play
a) These are ‘big’ organisations – but in most cases – have only really been around for about 10 years. That’s not very long for such a large business!(I am talking of the ‘mobile’ side of the business as opposed to voice)
b) Most managers have come from a typical telecoms background. The data side of mobile applications is actually more akin to the typical Internet based applications than to telecoms applications. Thus, it is not familiar to many – and is often perceived as a threat
c) Operators have experienced rapid growth with voice – but that revenue is under threat through technologies like VOIP
d) Most people now have mobile phones and are becoming much more price sensitive. Overall, Many operators we spoke to, believe the growth period is over (believe it or not)! – and they are behaving as such i.e. operating in a mature market as opposed to an emerging market.
e) See the market consolidation taking place in Europe as an indicator of the above and also the growth of low cost MVNOs and the need to reduce churn(all are indicators of grabbing marketshare, growth from other players when the companies feel that bottom line growth has peaked)
The operator has to spend billions up front and then sell as much as possible to recoup the investment in a technologically disruptive business environment.
Coverage costs dominates i.e. rolling out the network, etc. Operators need 40% EBITDA to cover capital and loan costs because of high level of up-front investment. (for most businesses – 25% EBITDA would be great!). Meanwhile, UMTS (3G) is still running on very low capacity – estimated at 10% estimated
Thus, we see a price war – the basis of the price war is “more usage for the same price” rather than “same usage for less price” in order to maintain ARPU and capital repayments. Expect to see enormous minute/text bundles. This is very different from the heady days of 2000, when we all thought content could grow ARPU!
Finally, after the cost of the network itself, Quality of service and support costs are the next highest. With time to market at 13 months for new product introductions and the high cost of support – introduction of new services is very slow. As developers of emerging mobile applications, this is painfully familiar to many of us!!
I seek your thoughts and experiences on the above. You can email me at ajit.jaokar at futuretext.com