In the age of app stores and OTT services, mobile network operators have struggled to develop new revenue streams in the provision of content and services. Here, Mike Bradbury, CEO of billing and payments consultancy, T-Exec argues that MNOs need a cultural over-haul to compete in the mobile services economy.
It is accepted fact that mobile is the dominant technological force in 2014. Latest statistics show that smartphone penetration sits at 71%, 53% of internet access is from a mobile, m-commerce accounts for 27% of all online shopping, 71% of all social media access is via a mobile handset and the average person watches an hour and a half of television a month on a mobile. What’s more these figures are predicted to grow this year and beyond.
Sitting at the heart of this booming mobile industry are the mobile network operators (MNOs) that provide the connection between our smartphone and the Web, with the UK’s big four (Vodafone, EE, O2 and 3UK) owning 81% of the mobile network market. Yet, despite the insatiable public demand for mobile services and their huge controlling stake in the overall market, MNOs have not emerged as major players in the market for the applications and services that are delivered across their networks.
Whereas companies such as Apple, Sky and even BT, have become purveyors of digital content, the MNOs have been slow to react. As a result the MNOs are failing to capitalise on the countless opportunities to develop new revenue streams that have been presented to them.
So, what does the future hold? Are we going to see MNOs transform themselves into agile, service-driven businesses? Or will they simply consolidate their grip on the management of the networks and leave the higher growth and higher-risk business to more nimble competitors? Put another way, are they choosing to settle for cash cow status, milking the assets they already control, or aim to become stars in new, high-growth markets?
If the MNOs are to avoid becoming low-growth, low-margin utilities, they will need to confront 4 key issues.
“So, what does the future hold? Are we going to see MNOs transform themselves into agile, service-driven businesses? Or will they simply consolidate their grip on the management of the networks and leave the higher growth and higher-risk business to more nimble competitors?”
Culture and Mind-set
Since they came into being, mobile operators have focused on their networks. This is what they invested their money in, it is where their expertise lies and it is the source of their power. Visit a website of any major MNOs and you will see a clear focus on handsets, price plans, billing, payments and support. With the exception of the handsets, this is exactly what you are likely to see if you look at the home page of any of the major energy utilities. Notable by its absence is any reference to what you might want to do on the network other than make voice calls, send texts or ‘access the internet’.
If MNOs have any intention of transforming themselves into service businesses, their first challenge will be to change their corporate mind-set and move away from sweating their existing network assets towards a more adventurous, innovative approach that focuses on what their customers are actually doing over the network.
Leadership and Management
If MNOs have the ambition to enter new markets, they will need to find the leadership capability to back this up. There is a world of difference between the management skills required to keep a communications network running at peak efficiency and those required to design and launch innovative new products and services.
While we have seen some positive moves, such as partnerships for music streaming, subscription-based TV and film and concert offerings, these will need to be significantly expanded if they are to generate substantial additional revenues.
Although the MNOs compete with each other, this competition takes place within a controlled regulatory environment, where there are clear rules of engagement. The world outside is, in general, not regulated in this way and companies have greater freedom in how they choose to compete with each other. Do MNOs relish the challenge of going head to head with new competitors in a drive for growth? Or are they happier coping with the relatively predictable demands of their current environment?
Learn from Past Mistakes
Previous forays by MNOs into value added services have been far from successful. O2 Wallet failed to achieve a satisfactory level of consumer adoption and Vodafone Live has stuttered since its creation. It is tempting to suggest that MNOs envisaged that consumers would want these services, only to launch them and find out that no-one was really interested after all. If MNOs are serious about finding new revenue streams, then they will need to tune in to what consumers actually want to do on their phones – and gear their strategies towards this.
The opportunity certainly exists for MNOs to become even more central to our mobile lives, but the factors identified here continue to hold them back. Will MNOs address these issues, overcome them and become the brightest stars in the digital universe? Don’t bet on it – the evidence so far suggests that a utility future is far more likely.