Telcos risk losing ground in emerging markets mobile data battle

MELBOURNE, AUSTRALIA: Mobile operators in emerging Asian markets need to make urgent adjustments to content strategies if they are to adapt to rapid shifts in the market, according to Ovum.

In a new report, the independent telecoms analyst claims that while telcos are currently the dominant force in the emerging markets mobile content space, this is set to change with 3G due to strong competition from new distribution platforms led by device and platform vendors.

Angel Dobardziev, Ovum analyst and author of the report, said: “Unless telcos make rapid changes to their strategy and execution, their dominance is set to be challenged.

“We have found that once a consumer has bought a data access plan, they begin to move away from telco services. This is being heightened by the fact that many device and platform vendors are establishing alternative content distribution platforms that connect providers and end users easier, faster and cheaper than telcos. This will ultimately reduce the role of mobile operators to little more than providers of bandwidth.”

While 3G connections accounted for a tenth of all connections across the emerging markets in Asia-Pacific, we expect that in 2015, they will account for just over a third of connections.

Moreover, we estimate that 3G device shipments accounted for only about a quarter of all device shipments in Asian emerging markets in 2010. However, we forecast accelerated growth of 3G device shipments to four fifths of all device shipments in 2015.

The aggressive entry of local device manufacturers in China and India in particular has led to a rapid re-definition of entry-level, mid-tier, and smartphone segments. Previously unaffordable features such as color screen and camera are increasingly the norm in entry level devices, touch-screens which were the preserve of smartphones are increasingly common in feature phones.

Dobardziev added: “Android smartphone price points reached $100 toward the end of 2010 making them increasingly affordable in markets such as India and Indonesia.

“Telcos currently have mobile content strategies that are increasingly inadequate for addressing the new challenges and competition they now face. The key issue is one of strategic clarity on whether telcos plan to make money from bandwidth, mobile content or both. This issue goes to the core of the bit-pipe versus full service provider debate.”

The report states that focusing on mobile bandwidth and making a fair return on billing for content could be a profitable strategy for telcos, unattractive as the bit-pipe role may be. The other option is to develop a well-executed content strategy, which will require a significant change in mindset and considerable investment in IT, people and processes in order to facilitate such a strategy.

Dobardziev concluded, “What is not an option for telcos is to carry on pursuing both access and content strategies but failing to do either effectively.”