The focus of mobile operators – in terms of opportunities for growth – is shifting to the enterprise market
Two to three years ago telecom operators started to talk about opportunities to expand into adjacent markets and to develop digital services. At the time they were thinking about both the consumer and enterprise markets. In 2015, however, the focus is very much the enterprise market – more specifically, cloud services and M2M/IoT. Operator strategies in the consumer market are now evolving toward B2B2C and partnership models.
Consolidation in the telecom–technology sector is inevitable
Many of the technology vendors whose business has largely involved enabling mobile operators to develop services and capabilities such as messaging, VAS, and roaming are now desperately seeking new strategies and business models. Some are trying to develop new lines of business by selling directly to the enterprise rather than via the operator. Others are developing new service capabilities – around big data analytics, for example. However, these new markets are extremely competitive, and have traditionally offered lower margins than telecom.
Operators’ visions around virtualized networks are starting to crystallize
A number of large operator groups, including AT&T, Telefonica, and Deutsche Telekom, unveiled their technology and service visions for virtualizing their networks at MWC2015. For many years now, European operator groups in particular have struggled to leverage their multi-market footprints in terms of cost or revenue benefits. They are seizing on network virtualization as an opportunity to drive economies of scale and, wherever possible, to centralize platforms and technology. However, they remain vague about potential cost savings and how quickly they will be able to shut down existing legacy networks and functions.
5G is increasingly being seen as a network platform for IoT
Network vendors and operators are increasingly seeing 5G as a network for IoT. As such, the key requirements for 5G are starting to focus more on the ability to support (hundreds of millions of) connections and offer millisecond latency rather than pure speed.
The relationships between OTT players and operators are becoming stronger
Over-the-top (OTT) players have come to understand that by partnering with operators they can significantly increase usage of their services. Rather than waiting for operators to reach out to them, they are now themselves reaching out to those operators and trying to persuade them to strike deals around zero-rated content and bundling. The bulk of this activity is in emerging markets, where OTT services tend to have lower usage levels, and where operators have strong brands and are trying to build a demand for data services. The preferred model for OTT players is to strike deals where no money changes hands and where both sides see benefits, although there are examples of operators demanding (and receiving) payment.
Mark Newman is Chief Research Officer of Ovum's telecom research business. For more information, visit www.ovum.com/