The fight over which device end users will use for mobile broadband will be tough
|There is no doubt that it will be a tough battle between the mobile handset manufacturers on the one side and the PC manufacturers on the other side to gain the favour of the mobile broadband providers. On the one side we have the traditional mobile handset manufacturers like Nokia, Samsung, Sony Ericsson, Motorola and LG etc that are fighting for their market of around one billion mobile telephones and on the other side we have the PC manufacturers like HP, Dell, Lenovo, Fujitsu Siemens, Acer etc, fighting over a market of around 430 million PCs.
The mobile handset manufacturers want the market to develop in a direction where customers have more than one mobile handset and where customers increasingly purchase smart phones that cost more than the traditional mobile telephones.
The PC manufacturers have a strong wish to gain access to some of the enormous funding being used on mobile handset subsidies. One could say that the PC manufacturers have a strong desire for mobile operators to use mobile broadband and subsidies to increase the demand for their products, at the same time as their hardware prices decrease.
But basically, a mobile telephone and a PC are sold through two different value chains – in the PC world the product becomes more expensive each time it passes through a new link in the value chain, while in the mobile world the product – due to the enormous subsidies – becomes cheaper on its way through the value chain.
The most important difference between the mobile handset value chain compared to the computer industry’s value chain, is that mobile operators are subsidising mobile handsets.
At the same time, mobile dealers are receiving a significantly lower commission on mobile handsets, because the dealers commission is calculated as a contribution margin of the sales generated when dealers acquire new customers for a mobile operator.
It is currently difficult to assess which and how many operators will subsidise portable PCs and it is also difficult to assess the size of subsidy they will be willing to give this type of product.
We know that subsidising is an expensive business for operators and the fact that many operators use 20-25% of their total costs on SAC will result in many operators carefully considering and reconsidering PC subsidies a number of times, before giving it a go.
PC subsidies can increase mobile broadband penetration, increase mobile network traffic, increase traffic in the operators’ distribution channels, give the opportunity to make contact with new types of distribution channels and give the possibility for selling new types of services. It could be very good business on markets that allow the possibility of longer minimum subscription periods and can help maintain the level of end user prices for mobile broadband.
But PC subsidies will also result in increasing SAC costs, increased competition, increased marketing costs, subsidising products that customers are already purchasing at full price and the risk of competitors focusing on cheap traffic rather than cheap hardware.
There are very many different factors to take into account, including local conditions, the local competitive situation and an assessment of which customer segments one wants to target.
One thing is certain – we will to a smaller or larger extent experience that most operators will move focus away from selling telephones to selling mobile broadband – with or without PCs – and that this development will influence companies like Nokia, Samsung, Sony Ericsson, Motorola and LG’s sales on markets that have a large focus on mobile broadband.
We have thoroughly examined and analysed these – and many other issues – in our new report “Successful Strategies on the Mobile Broadband Market”. The report is therefore an efficient tool for mobile broadband providers in their efforts to create and implement an optimal strategy.
We have thoroughly examined and analysed these – and many other issues – in our new report “Successful Strategies in the Mobile Broadband Market“. The report is therefore an efficient tool for mobile broadband providers in their efforts to create and implement an optimal strategy.