In the last decade, mobile phones have become powerful entertainment hubs as well intimate and inseparable companions.
Our everyday life has been ineluctably transformed.
In the same period however, European mobile operators seems to have gone through little transformation, as if the advent of new players – such as Apple or Google – the pace of technological innovation and the tangibility of convergence had not affect them.
In this context, is it fair to bet that, in 2015, the mobile telephony market in Europe will look the same? Not so sure…
Below are some plausible scenarios.
[Note: The aim of this exercise is not to predict the future, but to generate a healthy debate about the mobile industry; I don’t necessarily agree with each of these scenarios which are in no particular orders and may or may not be related; last, each of these scenarios have different probabilities that have not been disclosed in this document].
Scenario One: a ferocious price war on voice tariffs
The mobile operator industry is oligopolistic for obvious reasons, let alone regulatory and infrastructure-related ones. Consequently, price war is unlikely to happen.
Still, voice tariffs are bound to decrease dramatically.
First, users are keen to ditch landline telephones, and keep a lifelong mobile telephone number.
Second, many Europeans travel within the Continent or know – and thus call – people who live abroad. In Europe, the proximity of so many countries, which in turn have a variety of mobile operators, makes the region an inefficient if not dysfunctional place in the eye of consumers.
Last, inexpensive voice over IP is bound to take off. To compete with Skype tariffs, operators will have to substantially modify their prices.
If voice tariffs fall radically, economies of scale and geographical penetration will be key, thus favouring mergers between mobile operators.
Scenario Two: a new approach to infrastructure management
Is the management of cellular infrastructures the core competence of mobile operators? Or should they focus on customer services and innovation?
When operators’ geographical coverages are identical, they do not bring added value or differentiation in consumers’ mind. In this case, could cellular masts be built, maintained and operated by an independent body, like a rail track network is separated from the business of running railway companies?
In the future, a single cellular network with multiple frequency bands would be built by an operating company that could be state-owned, a joint venture between mobile operators or owned by a third party such as an infrastructure private equity fund, the likes of Ericsson or Alcatel-Lucent, mobile handset manufacturers… or even Google.
Scenario Three: supermarket chains become WiFi operators
Grocery retailers run numerous outlets, including in city centres, that could all offer wifi access on a nationwide basis. Those with tariff plans that limit access to the mobile Internet, such as students, would wait to be close to a local Tesco or Carrefour in order to download an online magazine or email documents.
Mobile operators would see data consumption declining on their 3G/4G networks, whilst retail groups would be able to generate ancillary revenue and provide added-value services to customers.
Scenario Four: Mobile operators become marketing platforms
With mobile phones becoming the core of anyone’s digital activities – from buying goods to interacting with friend, watching television or reading the news – mobile operators have access to invaluable data around usage and location.
If they manage to be perceived as a trusted and lifelong partner by customers, they could become hugely efficient marketing and loyalty platforms by operating for example well-refined addressable advertising systems. They could for example sell advertising spaces to brands by providing precise demographics. Apple had already launched the iAd platform (see first results analysed by Nielsen)… but think of the sophisticated level of data a Vodafone or Orange can have with their millions of customers in Europe.
One could even think that a mobile operator could end up acquiring Groupon.
Scenario Five: Mobile operators become banks
The same goes with money transfer: mobile operators could apply for a banking license, or partner with the likes of VISA or Mastercard, in order to provide payment system from and to mobile phones. These transactions could happen between customers or between customers and corporations; in the mobile ecosystem, or between mobile phone and payment terminals in the “physical world” – think of paying a parking ticket at the till. Starbucks has recently launched such a mobile payment system in some of their outlets.
Again, think of all the transactions that could be run on millions of mobile handsets. Even a minuscule transaction fee as a percentage could generate substantial revenue. Facebook knows this very well, hence its plans for a proprietary money transfer system.
Scenario Six: Apple licenses its mobile operating system and iTunes platform
With unfounded – but still plausible – rumours around the respective rapprochement of RIM with Google’s operating system and Nokia with Microsoft’s Windows Phone 7 (since this post was published, a deal was cut by Microsoft and Nokia), Apple might be tempted one day to authorise third parties to use it OS and its iTunes payment system.
By doing so, they would increase the numbers of transactions on iTunes, which could, in turn, become the industry standard for online payment.
Licenses would be granted to a couple of mobile manufacturers, but also to other hardware producers, such as Hi-Fi equipments or car manufacturers.
Scenario Seven: Google charges handset manufacturers for the use of Android
Google essentially makes money out of search-related advertisement. By conceiving and developing Android, and then licensing it for free, Google’s aim is to have millions of handsets that use Google’s search engine by default. However, Google has a dominant share of market in search, regardless of the mobile operating system (with the notable exception of Windows Mobile and its link to Bing). In the long term, why would Google continue to provide for free a top operating system?
Scenario Eight: Nokia abandons Symbian or makes it a joint venture
Developing a best-of-class mobile operating system must be a Sisyphean endeavour. Nokia, mostly a hardware manufacturer, could decide to sell a portion of Symbian to a consortium of software companies such as IBM, HP or Accenture. However, would a joint venture the best way to take swift strategic and investment decisions in such a competitive and fast-moving landscape? What seems clear is, in case Nokia does not decide to join a competing operating system, they need to find partners for upgrading Symbian.
Your reactions are welcome.
PS : There are three key topics that I have not specifically addressed in this article:
– 4G: because all operators will launch it
– NFC: because all handset manufacturers will launch it
– The complex issue of who will pay for the huge growth of Internet traffic and the related debate around the Net neutrality: AT Kearney brilliantly covered this matter in a report that they recently published (“A Viable Future Model for the Internet”).