Research Notes

The question is not how large mobile broadband penetration will become – but how to create a healthy business case

Predicting that the mobile broadband market will be huge is not rocket science – it is something you can already see for yourself in a great number of countries including Sweden, Finland and especially Austria. At Strand Consult we have been following this market for a long time and the research we just published in our new report “Successful Strategies for the Mobile Broadband Market” shows that the operators’ largest challenge is not related to market penetration, but about getting their mobile broadband business case to work.
If we take a look at what is happening on a number of markets, there is no doubt that mobile broadband is probably the factor that will trigger the next wave of consolidations in the mobile industry. In countries like Sweden, Finland and Austria, prices are dropping faster than penetration is growing and with the infrastructure investments that operators are facing, there is no doubt that a number of operators and ADSL providers will start admitting that prices are close to – or already under – the price it costs them to offer their broadband products.
In a country like Austria, a HSDPA 7,2 Mbit/s mobile broadband connection including 15 GB monthly traffic only costs 15 euro and in Sweden you can get 1 GB for just under 9.5 Euro and 5 GB for just under 16 Euro – with the additional gift that data traffic is free for the rest of 2008!
In Sweden, Tele2 and TeliaSonera are operating a joint 3G network via the company Svenska UMTS Nät AB and likewise the mobile company 3 and Telenor are operating a joint network via the company 3G Infrastructure Services AB. One of the differences between the two ventures is that Tele2 and Telia together have 76% of the subscribers and 65% of the Swedish revenue. With that size traffic and number of customers, Telia and Tele2 will always be able to produce cheaper traffic than their competitors.
If you compare Norway to Denmark, Sweden and Finland, there is no doubt that the size of the countries, the local competitive situation and the network cooperations in each country will have a large influence on both prices and competition – and thereby at the end of the day the size of mobile broadband market penetration. But even though our analyses in our new report “Successful Strategies for the Mobile Broadband Market” show that a high penetration is almost as certain as snowfall in the mountains during winter, it is by no means certain that all operators on all markets will get a return on the investments they are facing, both regarding the roll-out of mobile broadband and ensuring the necessary network capacity that customers are demanding.
The size of an operator’s customer’s ARPU, compared to the distribution and acquisition costs of those customers, are extremely important parameters when evaluating the investments operators are facing. During the last six months Strand Consult has held over 14 workshops at CxO level for various mobile operators around the world regarding the mobile broadband market. Our conclusion based on our research and these workshops show that operators are not particularly focused on penetration, but rather on how to create a healthy business case in the medium and long term.
The mobile broadband market is far more complex than most think – just the cannibalisation that the ADSL and fixed line providers will experience ought to give food for thought for a serious market player. In a country like Austria, 84% of the mobile broadband customers are today using their mobile broadband connection at home, while only 14% are using their mobile broadband connection on public transport. The conclusion must therefore be that in Austria – and other places – mobile broadband is becoming a serious alternative to the traditional broadband products.
In our report we have examined what is happening around the world and we believe that those companies that have too great a focus on penetration, instead of focusing on the business models that are the foundation of the mobile broadband market, will be those companies that are sacrificed when the next wave of consolidations hit the mobile industry.
One thing is certain, and that is that the number of operators around the world will decrease as mobile broadband penetration increases.
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.

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