Mobile phone operators unsure that data will drive growth, new research finds

The rising use of data services is unlikely to sustain mobile operators’ revenue growth. Yet service providers are falling back on cost reductions and are not doing enough to find new ways to expand. These are the main findings of a new study by the Economist Intelligence Unit and sponsored by InnoPath, The mobile data challenge.

The report is based on a December 2009 survey of 197 senior executives in the mobile telecommunications industry worldwide. Only a minority (44%) says growth in revenues from mobile data services will make up for a decline in voice revenues over the next five years. This reinforces sceptics’ doubts about data’s role in sustaining mobile operator’s profitability.

“Operators recognise the challenge posed by non-traditional service providers such as Skype and Google, but they have not yet clearly defined their strategies for making their mobile data businesses more competitive,” says Katherine Dorr Abreu, senior editor at the Economist Intelligence Unit.

Survey results show that:

• Mobile operators plan to focus on developing content and applications for phone users, but their strategies for doing so are still unclear. Almost half of respondents say that in the next five years their company will develop revenue-generating content and applications to reduce its reliance on traffic revenues. Yet more than two-thirds prefer to partner with third-parties in offering applications through online shops – and this means sharing revenue.
• Open networks are the wave of the future. Operators now believe that open networks, which allow their customers to visit third-party sites, will help them to make profits. A large majority of respondents say that operators adopting an open-network policy will be more successful than those that do not. And less than a third say that legislation supporting the principle of “net neutrality” (which would lead to open networks) would hamper their ability to invest in advanced networks. Openness poses a risk, however: a mobile operator’s presence in the content and application market is likely to be even smaller than it is now.
• Operators may be over-reliant on next-generation networks to ensure profitability. Companies will focus on boosting efficiency over the next five years, and are counting on next-generation networks to help them achieve this, the survey shows. These will provide new capacity for the high-bandwidth services operators plan to develop. And although the networks will help alleviate the burden of high traffic volumes engendered by flat-rate pricing, operators may also revisit the issue of pricing in their search for profits. Fully 58% of survey respondents think usage schemes are more likely to ensure profitability.

The mobile data challenge
is available free of charge at
www.eiu.com/sponsor/innopath/mobiledatachallenge

Press enquiries:

Joanne McKenna, press liaison, +44 (0) 20 7576 8188, joannemckenna@eiu.com
Katherine Dorr Abreu, Senior Editor, +1 212 554 0637, katherineabreu@eiu.com

Notes for editors

The mobile data challenge is an Economist Intelligence Unit report, sponsored by InnoPath. The research is based on an online survey of 197 senior executives worldwide in the mobile communications industry. The survey was conducted by the Economist Intelligence Unit in December 2009 and examined the challenges faced by mobile operators. Although all respondents represent companies in the mobile segment, their companies also offer a range of other communications services, both wireline and wireless, and for consumers and businesses.

Respondents are based worldwide: 30% in the Asia-Pacific region, 28% in North America, 26% in Western Europe and the remaining 16% from the rest of the world. The level of seniority of respondents is high: 43% are C-level executives or board members and another 24% are VPs, directors or heads of business units. Company size ranges from less than $500m in annual revenue (30% of the total) to $5bn or more (37%). Eighteen percent have revenue of $500m to $1bn, and 37% range from $1bn to $5bn. Respondents carry out a variety of roles, including marketing and sales (41%), strategy and development (37%) and general management (27%).

About the Economist Intelligence Unit

The Economist Intelligence Unit is the world leader in global business intelligence. It is the business–to–business arm of The Economist Group, which publishes The Economist newspaper. As the world's leading provider of country intelligence, the Economist Intelligence Unit helps executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies. More information about the Economist Intelligence Unit can be found at www.eiu.com or follow us on www.twitter.com/theeiu.

About InnoPath

InnoPath, the global leader in Over-the-Air delivery of customer care, helps operators and mobile device makers reduce support costs while providing a better end-user experience by diagnosing, updating and fixing mobile phones and other devices Over-the-Air. InnoPath products help shorten or prevent support calls and drive first call resolutions. The company's extensive experience in production Tier-1 networks helps ensure rapid and successful deployments in large, complex environments. With a proven value proposition, the payback time for an operator deploying Innopath ActiveCare is usually less than one year. Our customers include AT&T, Verizon, Sprint, Samsung, LG, KDDI, Tata DoCoMo and China Telecom. Discover more at our website, www.innopath.com, and our blog, The CSR, at http://thecsr.blogspot.com/.