Research Notes

Where are the GPRS revenue models?

Many European mobile operators have been offering GPRS throughout most of 2002, some even earlier. GPRS is the key to a successful 2.5G and 3G rollout, because mobile users will only have to pay for actual data, rather than the time they are on air
Add to this the advantages of higher download speed and “always on” and there is no doubt that once mobile users are running time saving and entertaining mobile services on GPRS they will never look back – and be willing to pay for those services!

GPRS is the technology that will educate mobile users to understand how mobile phones will be able to assist them in the future – giving even more freedom and saving time than the 2.0 mobile phones of today can offer. For the operators GPRS is undoubtedly the first most important strategic step towards ensuring a profitable return on the huge UMTS investments looming ahead.

Although the content owners can do more to ready themselves for a growing mobile services market, amongst other things, by approaching the mobile operators with a strong strategy for how their content can help the mobile operator win customers and increase average revenue pr. user. But the operators must get their own GPRS strategy finished, so they know what kind of revenue sharing business models they can offer content owners and services creators.

Even if GPRS terminals start selling well because of other features like colour screens or built in camera, the average revenue pr. user will not increase by much – if at all – until the user understands and is using GPRS. A mass market for GPRS based services will not exist before there are entertaining, timesaving and innovative new services available and those services will not be created before the content owners know what sort of revenue deals they can expect from the operators.

Do the operators have an excuse for why they are not moving on GPRS? Yes they do – one year ago the excuse was that there were no GPRS terminals. Their excuse today? They are still focusing on Premium SMS. They have realised its revenue potential and want to cash in on it’s potential for as long as possible. “Why kill the cash cow”? was what one mobile operator said to us at a recent workshop.

But the mobile operators are completely missing the point. The latest report from Strand Consult “How to make money on mobile services” a picture of the current & future Market for Mobile Services in Europe shows that in 2005, non-voice ARPU (average revenue pr. user) will account for 32% of the mobile operators earnings and have a total value of Euro 23 billion. Part of that is of course still SMS based.

In other words, they will not be killing the cash cow – they will be opening up a new market for services based on new technologies that already in 2003 has the possibility of a market value of Euro 3 billion – making them as much money as SMS based services next year and doubling the size of the market and their revenue! All they are doing now is stalling the start of a new market with huge potential for themselves and letting high quality content owners miss out on an opportunity to open up this new market.

The figures in our report are based on the mobile operators being slow on the uptake to offer revenue sharing models on GPRS for the content providers and service creators – but if the operators get any slower (if that is physically possible) – we can already start cutting a billion or two off the value of the market in 2003. On the other hand, if they work solid through the summer holidays, the total value of the market for mobile services in Europe in 2005 could well be even bigger!

For now, we can only hope it rains!
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