Research Notes

The third and fourth largest mobile operator on a mobile market will experience increasing pressure over the coming years – unless they start thinking in new creative ways.

There is no doubt that being a mobile operator is tough and that increasing competition, decreasing prices and never ending infrastructure investments are resulting in an increasing number of mobile operators finding themselves under increasing pressure.

When analysing the telco markets we are increasingly seeing that economies of scale are becoming increasingly important. Basically many of the costs of running a mobile operator are the same whether that operator has one or one million customers.

Strand Consult has been researching and analysing these challenges for many years and can now see that the challenges facing the third and fourth largest operator on a market are not decreasing, but rather increasing over time. Our data shows that these challenges are increasing far more quickly for small operators than for the bigger operators that are often the largest or second-largest on a mobile market.

But it is not all bad news. We are not talking about a set of “Mission Impossible” challenges. There are many different ways that smaller mobile operators can handle these challenges and there are already a number of operators around the world that have launched various business models and strategies that are now helping them create value for their shareholders quarter after quarter. Strand Consult has identified five paths that smaller operators on a market can choose between:

1. Cost control – Use tight cost control and a close focus on all costs to ensure that your company is being run more cost efficiently than your competitors. This is a tough business strategy and is being used to a lesser or greater extent by all mobile operators every day.

2. Infrastructure sharing – An increasing number of operators are not only outsourcing smaller or larger parts of their business, they are also now signing network sharing agreements with their competitors, allowing them to create companies that deliver mobile traffic to multiple competing mobile operators.

3. An aggressive MVNO strategy – Using an aggressive MVNO strategy makes it possible to significantly reduce your sales and marketing costs. In practice mobile operators using this strategy will move away from purchasing expensive customers with a high margin, that will not be profitable for 12 – 24 months, to purchasing customers with a lower margin, but that are generating a positive cash flow from the first month.

4. A focused strategy – An operator can also have a focused strategy, where they avoid customer segments and products that they either do not have the resources to handle, or the ability to service. One way of doing business using this strategy would be to solely focus on SIM-only products and not subsidise any type of hardware. By using this strategy, an operator can profile themselves on the market with simple and clear messages and at the same time significantly reduce their distribution costs.

5. The capitulation strategy – Operators thinking about this type of strategy have most probably already tried one or more of the above strategies without much success and have therefore concluded that their business may have a larger value if they try selling it to a competitor, that will gain the advantage of being able to benefit from the synergies of merging two mobile operators. There have been numerous examples where we have seen very high “scrap” values for mobile operator. For many mobile operators that are number three or four on a mobile market, this model is probably the most profitable for their shareholders.

Discussing which strategy is best suited for any individual operator can be a lot of work. Strand Consult knows that there are many different factors that need to be considered and that these factors do not just include the current market situation, but also whether the company’s management and employees have the necessary qualifications and are willing to execute a new and sometimes radically different business strategy.

For example, many mobile operator employees will probably find a “focused strategy” somewhat boring, as they will no longer be focusing on marketing and selling smart mobile phones with large subsidies. Many employees consider a SIM-only strategy rather unsexy and a sure way of commoditising your product.

During recent years Strand Consult has held many executive level workshops for top-level management and members of boards of directors of national and international mobile operators. At the workshops we have discussed and analysed the above issues in relation to the mobile operator’s current situation. We believe that the correct knowledge and a 360 degree evaluation of all the possible strategies and paths an individual operator can take, will enable an operator to decide which strategy and direction is best for them, their customers and their shareholders.

If you would like to learn more about Strand Consult’s Executive Workshop concept and the many possible strategies currently available to a mobile operator that is the third or fourth largest on a market, as competition continues to intensify over the coming years, please do not hesitate to contact us: Contact Us
More information:
Executive workshop for Top Management and Board Members in the mobile industry

Strand Consults Strategic Workshops

Successful Strategies for the Mobile Broadband Market

OneAPI – Next Generation Value Added Services in the Mobile industry

Show me the money – The future Business models for mobile Broadband Services

How MVNO´s can get success in the Mobile Broadband market

How media companies can get success on the mobile broadband market

How to get success with Value added services on the Mobile Broadband market

How can a Wimax operator survive in a world full of WCDMA

Contact us to get a copy of the report

Request the report