Research Notes

ARPU – Korea is achieving the impossible!

what can Europe, the USA and Japan learn from this?
In Korea, the ARPU (average revenue pr. user) is on the rise and there are some very good reasons for the astounding results that the Koreans have had over the past year on their ARPU.

ARPU is probably the single most important figure that the mobile operators are looking at today – how much money is each mobile subscriber using on average every month on their mobile phone. In the early mobile days, the ARPU was just the cost of the amount of time customers spent talking on their mobile phones, simply because that was all one could do on the early models – talk.

Today, trying to get mobile customers to talk more on their mobile phones is difficult. Penetration of mobile phones is very high in most countries, so trying to get new customers, means stealing them from other operators, which is expensive. Almost the only thing left for mobile operators to increase their revenue, is by getting the ARPU up on their customers. And the only way they can do that is by offering non-voice services and making these services attractive to use for their customers.

The biggest hit for non-voice services in Europe has been SMS, while WAP had no impact at all. Now the European operators need to expand the non-voice market with new mobile services on the new technological platforms like MMS and Java, but have little idea on how to go about it. Until they do – their ARPU will not grow and they will find it difficult to finance the enormous investments in the 3G rollout, just around the corner.

In Korea however, ARPU is on the rise – big time. Korea has already moved on to a full 2.5G mobile platform, that is actually very close to what we will see from the first European 3G platforms.

During the past year, the Korean mobile operators have seen a huge increase in ARPU, from those mobile users who have bought a new 2.5G mobile phone and started using the many new mobile services available. Those users in Korea who still have a 2G mobile phone – similar to most GSM phones in Europe – spend only 1.9 Euro a month on wireless Internet services. But as soon as the mobile operators get them to buy a new 2.5G phone, that figure explodes. Then a 2.5G customer with a monochrome screen in their mobile suddenly spends 4.6 Euro a month and a 2.5G customer with a colour screen in their mobile 7.6 Euro a month on wireless Internet services!

A year ago, those figures were even higher, as the early adopters discovered the new capabilities in the 2.5G mobile phones. Today, Korea has 9 million 2.5G mobile subscribers – 25% of the total number of subscribers – of which 5 million have bought phones with colour screens.

The single main reason for the customers uptake of the new generation of mobile phones in Korea in such a short space of time, has been the amount of content and services available on the new phones. This has not just created a demand for the actual phones, which incidentally are not subsidised in Korea, but a huge demand for the actual services available on the new phones.

The only reason that there is so much content available to the 2.5G users, is that the operators have had their business and reveue sharing models ready from day one, making it attractive for content owners and creators, to migrate their content on to the mobile platforms.

Will the European mobile operators learn from what has – and still is happening in Korea? There were no revenue sharing models for WAP and so far, we have seen little signs of revenue sharing models for e.g. MMS or GPRS based services. The CEO of one of the largest mobile operators in Scandinavia said in public only weeks ago that whether or not the new 2.5G MMS/GPRS mobile phones in Europe would be a success was entirely up to the mobile phone manufactures – not the operators!

Before publishing our first report about the Korean mobile market – “The Korean Mobile market, a window to 3G” – Strand Consult spent almost 9 months analysing the worlds most advanced mobile market. We met with all the players in the mobile value chain and been honoured to have access to information not previously disclosed. We describe what the operators, the content owners and the technology companies business case actually looks like for real. With key figures and information we give a detailed description of a mobile market with over 30 million mobile customers – of which 9 million are “3G” users.

This report is the closest thing to a manual on how to achieve success on the 3G market, that the mobile operators and anyone else in – or thinking of entering – the mobile marketplace is going to get.
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