UNSUSTAINABLE HANDSET SUBSIDIES — JULY 2005
How much more money are mobile operators going to pour into subsidising handsets?
They are subsiding hundred of millions of mobile phones that nobody wants. And, in any case, all the money they poured into WAP, GPRS and MMS phones has not paid off, as very few people are using these handsets to download services over their networks.
In the meantime, the handset operators are laughing. They are happily subsiding these expensive handsets. At the same time they launched a range of portals on the Internet, offering customers with the fancy handsets a range of exciting new services. These are called off-net services – ringtones, wallpapers, music, games and electronic photo albums – and they are making the customers appreciate the handsets. There is no need to download over their very expensive mobile networks.
However, the reality is that over 95% of the revenues of these operators comes from voice and SMS services. As we can see in Africa and Latin America, Chinese operators are able to produce no-frills handsets for as little as $50. Philips recently announced one for $20! So if you want to support your mobile business through handsets, you basically only need these frills-free handsets.
In the meantime customers are paying through the nose for the handset subsidies, through high call charges. The operators further argue to the regulators that the termination rates need to be high in order to support their (handset subsidies) business – and, amazingly, they continue to get away with this.
How much longer will they be able to keep up the smoke screen? I believe that wireless broadband, and especially the new mobile developments in this market, are going to unsettle these unsustainable mobile business models. If they want to maintain successful businesses they will quickly have to make some serious changes to their business models.
Paul Budde
See also:
Global – Mobile – Equipment – Mobile Handsets
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Tagged in: Africa, Global, Latin America (Includes the Caribbean)
