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Operators must go on the offensive to unlock growth

17 февраля 2012

A failure to change business models is the biggest risk facing operators this year, according to a new report.

Despite the difficult economic climate, operators must move away from defensive business strategies if they are to unlock growth, according to Ernst & Young’s annual Top 10 Risks in Telecommunications report.

E&Y’s global telecoms leader Jonathan Dharmapalan said shifting business models to cater for data services is now “mission critical”.

To see why, you need to look no further than full-year 2011 financial results. In the past few weeks, they have demonstrated how many operators are seeing revenues decline.

Swisscom, for example, yesterday blamed price erosion in part for a 4.3 percent decline in overall revenues. Specifically, it said bundling, flat-rate tariffs and a decline in mobile termination and data roaming rates had cost it €414 million.

The E&Y report highlighted new approaches to pricing – specifically ones that focus on bytes rather than minutes – as being crucial to driving future growth.

“Operators need to look at strategies such as tiered pricing,” E&Y senior analyst Adrian Baschnonga told European Communications.

Analyst firm Analysys Mason is in agreement. It launched a new paper on Wednesday that revealed how forward-looking mobile operators are launching new services such as temporary network speed boost and tiered bandwidth allocation.

“Operators are facing increasing pressure to deliver a high quality service despite growing data demands. The only realistic way to do that is to decouple ARPU from network costs and instead align it to the delivery of premium services,” said AM research director Patrick Kelly.

However, two recent high-profile launches show that, at the coal face, there is no immediate end to the all-you-can-eat data plans.

In January, France-based telco Groupe Illiad launched its Free Mobile service with the promise of unlimited calls, data and internet for under €20 a month.

Earlier this month, T-Mobile in the UK launched its “Full Monty” tariff – an all-you-can-eat package that starts at €43 per month, but crucially has no fair use restrictions, unlike the Free offer.

“If other operators follow T-Mobile’s lead and launch similar data plans the pressure that this could add to existing networks could be detrimental. Ultimately this would also undermine the one thing that they are trying most to achieve – a better, richer user experience for all,” commented Mobidia’s Chris Hill.

An inability to keep up with what customers want is the second biggest risk on E&Y’s list.

“Understanding the fast-changing customer mindset is more vital than ever if industry players are to add value in a rapidly evolving marketplace,” said Dharmapalan.

Crucially, E&Y believes that operators need to move away from the “old” view that they have exclusivity of customer ownership.

“Operators do recognize that have to share ownership with a number of players from device manufacturers to banks,” explained Dharmapalan.

But rather than viewing this as a competitive threat, Baschnonga said it was important to look at this within the framework of it being good for the telecoms ecosystem as a whole.

He cited operators looking at what they can do for partners, such as third party billing, as an example of how it can be a win-win for different industry groups.

Baschnonga admitted there was no quick fix; however, he said it was fundamental to the health of the sector that operators continued to evolve their business models if they were to be successful in the long term.

E&Y’s top business risks for the telecoms sector in 2012:

1. Failure to shift the business model from minutes to bytes

2. Disengagement from the changing customer mindset

3. Lack of confidence in return on investment

4. Insufficient information to turn demand into value

5. Lack of regulatory certainty on new market structures

6. Failure to capitalize on new types of connectivity

7. Poorly formulated M&A and partnership strategy

8. Failure to define new business metrics

9. Privacy, security and resilience

10. Lack of organizational flexibility

 

Источник: European Communications

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