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Mobile Operators: From Dumb Pipe to Nightmare Scenario

Posted in Industry updates by Manas Ganguly on August 8, 2011

A new Juniper report estimates that while global operator-billed revenues will exceed $1 trillion annually by 2016. This would be something to celebrate were it not the case that costs are forecasted to rise in accordance with revenues — and exceed them. Mobile network operators (Telcos) face the prospect of a “nightmare” scenario under which operator costs will exceed revenues within four years unless remedial action is taken.

Smartphones contribute to 25% of the global mobbile phone sales. Smartphones are to become the highest-selling consumer electronic device category in 2011.Cellular data traffic doubled in 2010.The Coda Research Consultancy predict global smartphone sales of some 2.5 billion over the 2010-2015 period, and also suggesta that mobile Internet use via smartphones will increase 50 fold by the end of that period.Gartner expects over 500 million smartphones to sell in 2012.

As revenues begin to flatline – the result of market saturation allied to declining ARPUs – and the surge in data usage pushes backhaul costs ever higher,operators margins and profits will increasingly get squeezed. This is called the Nightmare scenario.

There is no one-size-fits-all solution for Telcos, simply because the circumstances of individual operators differ widely, even within the same market. To survive this nightmare scenario, Telcos will need to offer integrated rate plans, while also providing a wide range of segmented postpaid and postpaid tariffs.The potential for double-sided revenue streams in areas such as cloud, M2M and mobile financial services where Telcos can leverage their existing assets.

Second tier networks (those with lower traffic) could be poised to gain significant advantage by retaining flat rates for data bundles. Likewise, Integrated Mobile Broadcast represents a new 3G standard that has the potential to add infinite capacity to 3G for popular content, offering a solution to the impending capacity crunch. \

Lastly, as the cost of fossil fuels continues to increase, transition to green networks and base stations is beginning to “represent both an environmental and economic imperative”.

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