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Signal Strength: Assessing Value Shifts in the Mobile Telecommunications Industry
Feb 01, 2012
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Executive Summary
While the mobile industry has been a persistent economic bright spot over the last decade, industry leaders are concerned about the sources of continued growth. With mobile penetration exceeding 100% in most developed markets, and revenue growth slowing, the mobile industry exhibits many of the characteristics of a mature market. Traditionally, mobile service providers, telecommunications equipment vendors and device manufacturers have captured most of the revenue, and value, from this market. However, rapid technological change, open mobile networks and new business models have made the market unpredictable, allowing new entrants to shift value away from established industry participants.
In the course of our consulting work, we have heard a number of repeated concerns about changes in the marketplace that could undermine existing business models. Some of these changes entail hypothetical disruptive entrants and offerings. Other changes have already begun. Looking at four key sectors in the mobile telecommunications industry – mobile service providers, device-makers, telecom equipment vendors and content/application providers – we have identified seven trends that may shift value among players, or erode the value of existing players.
In this study, we have analyzed these trends and determined their scope and potential impact. Given our analysis of the dimensions, timing and magnitude of the impacts, we have developed recommended strategies to mitigate risks and preserve and capture value. The seven areas addressed are:
| Potential Value Shifts | |
| 1 | Over-the-Top Threat: Mobile service providers face potential value erosion from over-the-top voice and messaging substitution. |
| 2 | New Entrant Threat: Disruptive new mobile service providers may capture share from incumbents. |
| 3 | Mobile Data Traffic: Mobile data traffic growth will challenge service providers' network capacity and data profitability. |
| 4 | Smartphone Profitability: Late adopters of smartphones will be less profitable to mobile service providers than earlier adopters. |
| 5 | Network Equipment Vendors: “Incumbent” network equipment vendors face carrier consolidation, competitive pressures from Chinese manufacturers and commoditization. |
| 6 | Tablet Market: Tablets may become a low-margin mass market device, benefiting a few device-makers and large ecosystem / content rights owners. |
| 7 | Mobile Content Proliferation: Mobile service providers are being disintermediated from mobile content as third parties capture a disproportionate share of value. |
While near term value shifts among players will be limited, without action, long term challenges will increase. Established players can no longer rely on a rising tide of demand to guarantee growth and profitability. The existing business models are not broken, but they require some tweaking. The most successful players will be the ones that proactively respond to looming threats, and innovate in areas like pricing, marketing, network optimization and ecosystem partnerships. Additionally, open networks mean that a host of new players (including publishers, automotive manufacturers and financial institutions) will be able to utilize mobility to drive additional value in their core business.
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Watch the Pulse Network interview with Sean McDevitt (CSMG VP) and Todd Bricker (CSMG Principal) discussing Signal Strength and the future of mobile data use. |
