Feature Article

December 27, 2012

Global Mobile Service Providers Will Lose $1B a Month on Voice, Messaging in 2013: Yankee Group

Globally, mobile service providers will lose about $1 billion a month in voice and messaging revenue in 2013, Yankee Group analysts predict.

But mobile service provider data revenue will increase from $319 billion in 2011 to $550 billion by 2016, so total mobile service revenue will increase from $1 trillion in 2011 to $1.15 trillion by 2016, according to the Yankee Group’s estimates.

But service providers in 2013 still will lose billions in voice and messaging revenue, based on the firm’s projections. The global mobile voice and messaging market will decline from $758 billion in 2012 to $746 billion in 2013, representing a reduction of almost $1 billion per month throughout the year.

That means service providers will be making hard decisions about their business models, infrastructure plans and customer experience investments. Optimistically, many observers suspect a fundamental choice has to be made between “value add” and “value” approaches to the business, broadly stated.

Some call this the choice between becoming an “experience provider,” or becoming a “value provider.” Others might say that choice is between the “full service” approach and the “bitpipe” approach.

By any name, the problem is that service providers have to make rather clear choices about their future positions in their markets. Where it is possible, it will make sense to try the “add value” or “premium features and services” approach.

In other cases, it will make more sense to attack the market with a “value for money” approach. Telefonica and Verizon Wireless are clearly taking the “add value, premium provider” strategy.

Free Mobile and T-Mobile USA are attacking the “value” part of the market.

A shift of end-user demand to over-the-top (OTT) services is a key reason for the voice and messaging weakness. Yankee Group’s 2012 European Mobile User Study finds 44 percent of respondents are already using an app such as Facebook Messenger, WhatsApp, Viber or Skype as a low-cost alternative to traditional mobile voice and SMS.

On the other hand, overall demand for voice and messaging seems to be peaking, as well.

Ofcom’s July 2012 Communications Market Report shows that the total volume of mobile calls made in the U.K. declined for the first time ever.

“Best-in-class” IP communications providers such as Facebook Messenger, Skype and WhatsApp, as well as operators that launch their own OTT apps, will be “winners,” Yankee Group expects.

Telefónica O2, T-Mobile USA and Orange are also in that category.

Operators that are late to market or fail completely to launch their own communications apps, and IP communications app providers that cannot demonstrate a unique selling point, will be among the losers.

That might be true in some markets, but might not be true in all markets. If mobile service providers can provide a reasonably-priced messaging and voice alternative, and serve a large internal market, the economic incentive to use OTT apps will be reduced.

The greatest danger will face mobile service providers with a high percentage of international calling and small internal markets.

Edited by Braden Becker

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