Mobile operators are starting to uncover new business models that help to address the problems posed by saturated mobile markets and high handset subsidies. European mobile operator Telefonica O2 announced last week that its SIM-only service, Simplicity, now has almost half a million customers and accounts for one third of its online sales. The SIM-only concept was pioneered by discount MVNOs in northern Europe and is now being embraced enthusiastically by mobile operators. It holds two key attractions for mobile operators, according to research from Informa Telecoms & Media. First, it allows them to accelerate the migration from prepaid to postpaid price plans. And secondly, it significantly reduces subscriber acquisition (SAC) and retention costs. SIM-only customers keep their existing phones so operators do not need to resort to costly device subsidies.

'With the impending credit crunch in many developed markets we believe that SIM-only services are extremely attractive to consumers who are prepared to keep their old phone in return for lower subscription and usage fees’, comments Mark Newman, Chief Research Officer at Informa Telecoms & Media.

The SIM-only business model is just one of the strategies analyzed in new research from Informa Telecoms & Media.  Future Mobile Operator Business Models: Broadband, Partnerships, Wholesale and Mobile 2.0, a report published this month, argues that operators in developed markets need to undertake a thorough review of their businesses and strategies if they are to retain their levels of profitability amidst the onslaught from lean, fast-moving Internet companies and business cultures.

While SIM-only services are an effective tool to win market share, reduce SACS and spend on customer retention, mobile broadband is a brand new revenue stream for mobile operators. HSDPA dongles are among the top-selling devices for mobile operators in a number of European markets and made up more than 50% of the global total of 30 million HSDPA subscriptions at the end of 2007, according to Informa Telecoms & Media research. The number of 3.5G-connected laptops will rise to 184 million by 2012, according to ITM.

At the heart of the debate about future mobile operator business models is the extent to which mobile operators risk being relegated to the role of dumb pipes. ‘Mobile operators have spent the last ten years trying to develop services that reduce their dependency on voice’ notes Newman. ‘But, beyond SMS, they have had limited success. With the arrival of Internet services on the mobile screen, this is set to change. But will it be them, or the mobile operators that end up reaping the rewards?’. To benefit from the fusion of mobility and the Internet, mobile operators need to start thinking about what services, functionalities and capabilities they can offer third parties offering services over their networks.‘Mobile operators need to think of Internet companies as their partners, or even as their customers, if they are to share in the success of Internet-on-your-mobile services,’ Newman argues. In many cases this goes against their natural instinct of competing with such service providers.
www.informa.com