The erosion of MNO margins

 

November 2017

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Challenges

The revenues growth of wireless operators has stalled and their margins are eroding, as they are facing the following challenges:

  • Mobile phone market saturation

  • Suppressed voice and messaging revenues due to VoIP and IM services

  • Value disruption by the OTT players in the consumer market

  • Aggressive competition from technology companies in the enterprise market

  • Pressure on prices due to regulation changes (e.g. end of roaming charges in the EU)

  • Uncertainties in the definition of 5G and the development of its ecosystem

  • Corporate take-overs

 

Solutions

Offering

In order to grow their revenues and contain their capex and opex, Mobile Network Operators (MNOs) need to :

  • Monetise new services in the consumer market

  • Offer new services in the enterprise market, and expand their client base in both the SME and large-enterprise segments

  • Go beyond connectivity, and consider opportunities in cloud, IoT, big data, and digital services

  • Explore applications such as robotics, drones, VR/AR, gaming, and autonomous vehicles

Business model

In addition, MNOs should:

  • Create innovative business models and new channels

  • Determine how to partner or compete with digital services companies, IoT specialists, cloud hosting services providers, IT vendors, and telecom equipment providers

Operations

They also need to:

  • Source talent, acquire startups, and incubate

  • Restructure, and foster a customer-centered, agile and entrepreneurial culture

  • Make their network flexible and increase its capacity to meet market demand

  • Accelerate time-to-market, and improve quality of service (= customer experience)

Technologies 

Wireless operators also need to validate and deploy technologies such as:

  • Rich Communication Services

  • Artificial intelligence

  • Real time data analytics, automation

  • Internet of Things

  • Edge computing, private networks

  • Network mobility: network virtualisation, Network Function Virtualization (NFV), Software-Defined Network capabilities (SDN), Network Slicing

  • HetNets, small cells

 

In particular, mobile operators need to define and substantiate their 5G proposition, business case, go-to-market strategy, and roadmap. In the meantime, they should pursue immediate LTE opportunities.

 

Regional opportunities

Whilst the above holds especially true in mature markets, the following characteristics embody the emerging and developing markets:

  • Increasingly competitive field

  • Declining new subscriber connections

  • Decreasing ARPU due to price wars and revenue cannibalisation

  • Decline in traditional voice and messaging usage due to VoIP and IM

 

Thus, mobile operators cannot attract and retain subscribers trough price reductions.

Operators must instead improve quality of service, exploit customer needs left unaddressed so far, and develop new services. For example, mobile banking and m-health have great potential.

 
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