Prediction #3 - Shoemaker stick to your last
Currently, the mobile operator sector is the healthiest one in the mobile industry, at least for the #1 and #2 player in each market. In a way this is not strange given the oligopolistic nature of that business due spectrum licensing regimes and other high barriers to entry. From this perspective we predict the Operator sector, again for the #1 and #2 player in each market, to be the healthiest one for many years to come. The challenge is that it’s not so much a growth sector anymore. Take away emerging market assets from global operators and you will see that there have been revenue and margin pressure throughout this decade. In the same time frame there have been numerous product, application and service launches from Operators beyond building revenue streams voice and messaging. The result, in most cases, after all these years of trying is a revenue contribution in, to speak IR language, low single digit range.
From a Northstream perspective such weak outcome is not strange. Operators have a, sometimes neglected, scaling challenge. While everything that Google, Facebook, Skype and other Online Service Providers (OSP’s) do reaches all PC’s and Laptop’s in the world, the average Operator reaches 30% of the mobile users in one market with its services. Since Operators focus more on differentiation rather than seeking scale through cooperation with peer Operators the scaling challenge will prevail (international roaming being the most embarrassing example). With the fast growth in mobile broadband and Smartphones, OSPs start to reach a significant number of mobile users as well. In 2009 we have seen OSP’s services becoming more and more popular among mobile users, Facebook with its 80 million mobile users being a good example. Our prediction for 2010 is that OSPs will emerge as the leading service and application providers for mobile users. Beyond that, in 2010 they will start to compete in core revenue segments for Operators i.e. voice and messaging. Watch out for OSP talk and messaging clients! Operators that embrace this development and focus on coverage, quality and operational excellence are winners.
