The first signs of increased competition in the mobile market are starting to emerge. They revolve around three key trends:
– Increase in pre-paid promotions
– Roaming arrangements
– Drop in call charges through new packaged deals
In trying to control the erosion of the ARPU (Average Revenue Per Users), the three incumbent operators have only reluctantly introduced pre-paid services. In countries with more competition pre-paid is now delivering 50% to 80% of all new customers to the network operators.
We predicted in 1997 that the ARPU would have dropped to around $650 by now. However, we had not foreseen that it would take so long for the new competitors to establish themselves in the market. The triopoly was therefore able to maintain an ARPU of around $800 for the 1998/1999 period. It is only in the last few months that we see the ARPU dropping to $700-$750. The reason for this is not only pre-paid. The carriers are increasingly introducing new pricing packages, varying from per-second charging to free calls within the same network during particular periods. All of this is resulting in a discount of around 20%-30%.
As a result we see a significant increase in the number of calls and the minutes spent on the network. This has given a revenue increase of between 15%-20%. This is in line with our predictions that over the next few years it will become more and more difficult for the mobile operators to maintain their current revenue levels. We haven’t even seen competition from companies such as Hutchison and One.Tel – and this is where the roaming arrangements will come in.
In an unprecedented way, especially in the case of Telstra, (without court cases and/or regulatory intervention) we are seeing companies establishing roaming agreements. What this will do to competition is to basically turn mobile into a commodity, since there will be few differences to promote – by the time the newcomers have arrived it won’t matter any more which company you select for your mobile operator as they all will, in one way or another, be able to offer services from the various players. The focus will then clearly turn to customer service, value-added services, data communications and so on.
So far the big roaming winner has been One.Tel. They have arrangements in place with Telstra and Optus, as well as having their own network. Add to this the company’s marketing focus and it will become a formidable force in the market.
I still have reservations about Hutchison. For one thing, they will only have a CDMA network and it will be damn difficult to move customers to this new technology; furthermore they will only be able to roam with Telstra, who at the same time is their biggest competitor and who has, unlike themselves, a nationwide network.
While I agree that their future is in wireless local loop (WLL), they will have to come up with more appealing pricing and service offerings. While both One.Tel and Hutchison will start offering services in early to mid-2000, they won’t have their full networks in place till well into 2002. The big question by that time will be the return on investment (ROI), as prices will by then have dropped by 50%-80%.
I hope that all newcomers, including AAPT, will have built new data technologies into their networks (WAP, EDGE, GPRS) as by that time e-mobile will have been well and truly introduced by the three incumbents. This would provide them with the much-needed platforms to generate new revenues.
By that time 3G will either have started to become available or will shortly become available. The question then will be if the newcomers will have enough oomph to participate in this next round.
With e-mobile becoming a more prominent feature of wireless communication we will see, as we have seen with current Internet developments, that e-mobile services will be developed by content providers (publishers, financial institutions, travel, tourism, retail, etc). This further underlines my previously expressed views that all mobile operators, like fixed voice operators will be forced back into wholesale positions, rather than retail.
This trend will of course favour the incumbent national operators and Telstra and Optus will, by dint of their early moves into the roaming market, reap the benefits of this.
Vodafone is a big unknown here. So far they have not signed any roaming arrangement and on a previous occasion its CEO has even argued for regulatory intervention to prevent the establishment of virtual mobile operators. Such a restrictive vision doesn’t, of course, assist in the progress of this fast-moving and rapidly changing market.
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