The Year Ahead: The Birth Of Operator-As-A-Service
BMI View: Over the last five years, mobile network operators have turned to infrastructure sharing or joint equipment procurement relationships in order to secure cost efficiencies in network rollout, to improve coverage in sparsely-populated and economically unviable areas and to ensure that next-generation services can be delivered affordably. However, the high cost of spectrum acquisition, of customer acquisition and retention and of next-generation access equipment is proving increasingly difficult to recoup in light of falling voice usage, greatly reduced mobile termination rates (MTRs) and consumers' substitution of operator-billed voice and messaging services with 'free' IP-based alternatives. For the near to medium term, we expect to see more infrastructure sharing agreements being struck around the world, along with mergers and acquisitions where sharing still proves to be insufficient. Meanwhile, a number of recent developments suggest that operators' long-term futures may depend on a radical overhaul of the traditional business models and in repositioning themselves as service, rather than infrastructure, businesses.
BMI forecasts global mobile subscriptions to rise from 6.845bn in 2013 to 7.982bn by 2017, of which the vast majority will come from Asia's most mature and several key emerging markets. New operators are entering these markets all the time, keen to bring their innovative services to increasingly affluent and content-hungry consumers and to usurp the existing players. Governments are also increasingly aware of the importance of telecommunications to economic growth - particularly where the sale of highly appealing digital dividend spectrum can raise billions of dollars for state coffers - and we therefore expect no let-up in growth, either in the number of subscriptions or in the creation of operators and service providers.
New entrants typically use low-cost pricing and/or multi-service packages as a means of disrupting the status quo and ensuring they can attract many customers to their networks as quickly as possible. Existing players tend to respond with price reductions and promotions that, in some cases, can kick-start a downward destructive cycle in market value. Such a scenario has already played out in a number of African states, where new entrant Bharti Airtel significantly undercut existing players' offers and consistently used that same tactic when its rivals responded in kind. The African market is only slowly recovering from this ordeal and customers' by-now ingrained expectations for low-cost services and handsets are near impossible to break. Thus, despite Africa's huge potential in terms of unaddressed market, investment in a new mobile business represents a massive risk to prospective players.
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