Research Notes

Good Morning, this is your wake-up call:

“It’s time to get up – the discount mobile service providers are coming to town”. The Discount Mobile Service Providers will spread throughout Western Europe and have a huge impact on all the players in the mobile industry – and for some players that impact could be devastating!
“Money makes the world go round” – but will the Discount Mobile Service Providers grab the money from the mobile world? In this business it is the mobile operators money that is making the wheels turn around. For example it is the mobile operators that are paying for the often very expensive mobile licenses that give access to develop and use new mobile infrastructure and technology. It is the mobile operators that are paying the manufactures for all the new expensive equipment they need to build the infrastructure. It is the mobile operators that are the mobile handset manufacturers largest customers. And last but not least the mobile operators are buying all sorts of mobile services from many smaller suppliers and developers.

Nokia, Sony Ericsson, Siemens, Samsung, Motorola, Ericsson, Lucent, Alcatel and many more Infrastructure and handset manufacturers and a huge number of suppliers and developers of mobile services are in other words dependant on the mobile operators placing orders with them. How much the mobile operators invest depends on their financial status at that time and whether they believe that they can make an attractive return on their investments.

During the past few years however, mobile operators in Western Europe have had difficulty in making money, with the many new providers offering mobile telephony giving them more and more competition. As if that wasn’t enough the mobile operators now face a scary new wake-up call:
“The Discount Mobile Service Providers are coming to town”!

Discount mobile telephony’s main features are that the customers registers and pay for their mobile accounts online. Add to this that the pricing tariffs are extremely simple and do not contain any subscription, but only very low prices on “voice” minutes and SMS messages.

The Discount Mobile Service Providers are letting customers service themselves online and thereby able to run very small, tight, cost-efficient organisations that let them make a profit even with their ultra-low mobile telephony prices!

This new business area of discount mobile telephony has just been thoroughly analysed in Strand Consults latest comprehensive report “The Moment Of Truth – A Portrait Of The Discount Mobile Service Providers Success”. This report has examined the Danish mobile market, where discount mobile telephony has in a very short period of time, managed to turn the whole mobile market upside down, completely changing the competitive parameters that were until recently governing the market.

The report focuses on how the two Discount Mobile Service Providers (Telmore and CBB Mobil) have managed to acquire no less than 43.7% of all new mobile customers from 2H 2000 to 1H 2003! This is an outstanding achievement considering these two companies were both launched at the end of 2000. Add to this that around 20% of the total Danish mobile customer base is using a Discount Mobile Service Provider today and you just have to be pretty impressed. The report also analyses the development of the end-user prices for voice and SMS messages. In the past 10 months alone the price has dropped by around 50% so a discount mobile customer can today talk on his mobile phone for just 0.091 Euro and send SMS messages galore at only 0.026 Euro pr. message. It is only a question of time before we see a similar trend on all the other Western European mobile markets.

When these new discount providers suddenly open up for such immensely cheap mobile prices both for “voice” and “non-voice” (SMS, MMS, GPRS) telephony – and without having to pay any form of monthly subscription like the operators still are demanding from their customers – the operators can feel the pressure. And when the prices on “voice” mobile telephony then fall by over 50% in under one year, the mobile operators are suddenly under extreme pressure.

An operator under that kind of pressure will for a time – for obvious reasons – loose interest in new investments. We have already seen that happen e.g. in connection with the expensive 3G licenses, which had a negative effect on the operators desire to invest in infrastructure and new handsets. Likewise the introduction of discount mobile telephony can easily influence the operators’ revenue so much that it simply puts a huge restraint on any urge to invest.

The launch of discount mobile telephony on a mobile market will in other words not just put worrying frowns on the faces of the mobile operators, but can easily result in radical consequences for all the players in the mobile value chain.

More information “”The Moment Of Truth” – A Portrait Of The Discount Mobile Service Providers Success”

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