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Operators dilemma the fourth wave chetan sharma consulting Document Transcript

  • 1. 2012OPERATOR’S DILEMMA (AND OPPORTUNITY): TH THE 4 WAVE CHETAN SHARMA A MOBILE FUTURE FORWARD RESEARCH PAPER
  • 2. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVETable of ContentsIntroduction ........................................................................................................................ 6Global Mobile Operator Growth – The Last 10 years ......................................................... 8 Revenue growth curves .................................................................................................... 8 First Revenue Curve – Voice ........................................................................................... 9 Second Revenue Curve – Messaging .............................................................................. 11 Third Revenue Curve – Access ...................................................................................... 14The Mobile 3.0 era ............................................................................................................ 18What is the 4th Curve? ....................................................................................................... 20Why the 4th Curve is different? ......................................................................................... 22Mobile Operator Strategy and implications for the ecosystem ........................................ 26 Delay the decline ............................................................................................................ 26 Extend the peak ............................................................................................................. 26 Invest in the 4th curve .................................................................................................... 26The Impact of 4th Curve on Operator Financials .............................................................. 27Investing in the 4th Curve .................................................................................................. 29 Utility players ................................................................................................................. 29 Enablers ......................................................................................................................... 30 Digital Lifestyle Solution Providers or Enabler+ .......................................................... 30How can Operators become Digital Lifestyle Solution Providers? .................................. 31 Customer vs. User .......................................................................................................... 31 Save the customer relationship ..................................................................................... 31 Use privacy/security as competitive advantage ............................................................ 31 Separate the 4th curve organization from the mothership ............................................ 32 Change the DNA............................................................................................................. 32 Portfolio management – fail often and cheap. Embrace Beta launch .......................... 32 Collaboration.................................................................................................................. 33 Standards vs. Proprietary .............................................................................................. 33 Build Advocates.............................................................................................................. 34How Operators See the 4th Curve? .................................................................................... 36 Tier-2 Operators on the 4th Curve ................................................................................. 38Case Studies of Transformed Operators ........................................................................... 40 AT&T .............................................................................................................................. 40 Telefonica ....................................................................................................................... 41Implications of the 4th wave .............................................................................................. 43 Who will capture the profits? ........................................................................................ 43 2 Introduction | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 3. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVE The Need for New operating models ............................................................................. 44 Implications on the Ecosystem ...................................................................................... 47 Competition and Operator Consolidation ..................................................................... 47 New Revenue Models ..................................................................................................... 48 New Joint Venture Models ............................................................................................ 48 New Business Models .................................................................................................... 48 Regulatory Rethink ........................................................................................................ 49Conclusions ....................................................................................................................... 50Acknowledgements ........................................................................................................... 51About Mobile Future Forward .......................................................................................... 52Mobile Future Forward Publishing ................................................................................... 53 Papers ............................................................................................................................. 53 Books .............................................................................................................................. 53About Chetan Sharma Consulting .................................................................................... 54About the Author ............................................................................................................... 54 3 Introduction | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 4. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEDisclaimerChetan Sharma Consulting is one of the most trusted advisory firms in the global mobileindustry. This research document presents some in-depth analysis about the future ofthe mobile industry. However, the author or the company assumes no liabilitywhatsoever.This paper is part of the Mobile Future Forward Research Paper Series. For past papersand books, please see http://www.mobilefutureforward.comAny use or reprint of the material discussed in the paper without prior permission isstrictly prohibited. 4 Introduction | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 5. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEWhen winds of change blows, some build walls while others build windmills – Old Chinese Proverb. 5 Introduction | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 6. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEIntroductionIn 2012, the global mobile industry revenue will hit $1.5 trillion.1 This revenue hastripled in the last 10 years. Mobile operator’s revenue reached a new milestone at theend of 2011. The total global mobile operator revenue exceeded $1 trillion for the firsttime. The operator profits have more than doubled in the last 10 years. The trifecta offast broadband networks, well-designed mobile computing devices, and the insatiablesupply of content, applications, and services has unleashed consumer demand for morelike never before. If we look at the history of the mobile industry, the first generationwas primarily focused on voice and this era persisted for a good 10-15 years before 2Gmessaging and very basic data services were introduced. A decade later, data servicesstarted to become more interesting as 3G networks enabled faster access speeds andnew applications. When Apple released iPhone in 2007, followed by Google’s Android in2008, the industry was turned on its head. While the implications were apparent at thetime, the far-reaching impact of these new devices on how people work and live is stillunraveling.The changing face of the industry also impacted the business models, the revenuestreams, and the value chain power structure. For much of the last three decades, voicehas dominated the revenue streams for almost all operators. However, in 2013, voicerevenues will fall below the 60% threshold globally. The drop in voice revenues has beencompensated by the rise of messaging revenues and the data revenues. However, somenations and operators have started to experience declines in messaging revenues. Theaccess revenue stream is still very much a growth story and is rising fast for almost allthe operators.We studied the revenue growth patterns for 65 leading operators in 30 major globalmarkets to understand when the revenue in certain segments rise, stagnate and fall. Theunderlying data yields some interesting and consistent patterns that are instructive onhow things might shape up over the course of the next decade.The sigmoid or the S-curve growth has been well understood and applied to variousdisciplines. To understand the various revenue growth curves, we segmented theoperator revenues by voice, messaging, and access and correlated them withsubscription growth. In a majority of the cases, as the subscriber penetrationapproaches 70-90% band in a given segment, the Net-Revenue starts to hit its peak,stagnates for a bit and declines. The amount of time the revenue curve stays in thestagnation phase depends on the market competitive dynamics and usage profile of thesubscribers in a given country.The first revenue curve of voice is already in decline for majority of the developedmarkets like the US, Japan, and Western Europe. The second revenue curve ofmessaging is on the decline in some nations like the Philippines, Netherlands, Taiwan,Spain, and Italy while approaching saturation in countries such as the UK, France, and1 State of the Global Mobile Industry, Chetan Sharma Consulting, 2012 6 Introduction | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 7. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEthe US. Both these curves are on the rise in developing countries, which are still in thesubscriber growth phase. The third revenue curve of access is in the growth modearound the world for all nations; however, the margin pressure on this revenue base isthe strongest of the three as the operators rush to meet the growing data demand that isdoubling every year in most major markets. We are likely to see the growth continue forthe next 3-4 years before this curve also starts approaching its peak. At this stage, allthree revenue curves will be in decline. This means that the net revenue for some of theoperators and for some nations will start to go down, in some cases precipitously. Thiswill happen to operators around the world at different time intervals, unless the fourthrevenue curve2 starts to take shape in the near term to help cushion the decline.The growth of revenue in this fourth curve will be critical. For some operators, a weakfourth curve will be fatal. They won’t be able to arrest the fall in the overall net revenueand investor pressure will force them to consolidate or learn to live with lower marginsor go out of business.As such, it is important to understand the importance of the fourth curve and formulatestrategies that extend the lifetime of the previous three curves such that net revenuesand net profitability stay healthy over the course of this decade. The most interestingdynamics of this fourth curve is that other racers are not only the fellow operators butsome new well-funded service and application providers. They are using new gear, arenot constrained by the same rules, can change gears at will, and are ruthless in theirexecution. All this renders the traditional telecom organizational structure and the wayof life - obsolete.Based on the strategy chosen, the operators will likely fall into three major buckets:access only, enabler, and digital lifestyle solution providers. The operator might play allthree roles depending on the vertical in a given country. However, without playing asignificant role in the latter two categories, operator revenues over the long haul willstart to resemble those of utilities – billions of dollars in revenue but the margins mightshrink to 8-12% from the current 30-40%.The next 2-5 years will be critical for operators worldwide. The strategies they pursueand the investments they make will define their future existence for the coming decade.Operators who are investing heavily in the 4th curve have a good shot at seeing the endof the decade but a good many will succumb to the powers of the growth curves, leadingto consolidation in almost all markets or they will gradually morph from operators toutility providers. Many will be caught unawares by the shifting sands of revenue andtheir inability to mutate to compete effectively in the IP world.Operator’s dilemma – The 4th wave analyzes the four mobile revenue curves in detailand discusses the strategies needed to increase the net revenue and the investment areasthat can lead to new revenue and healthier margins for operators around the world.2 Curve and wave are used interchangeably throughout the paper but refer to the same concept 7 Introduction | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 8. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEGlobal Mobile Operator Growth – The Last 10 yearsRevenue growth curvesThe use of S-curve or the sigmoid curve to explain the growth patterns of markets is wellunderstood across markets. The simple observation is that after slow growth, as thetechnology or the market reaches a critical mass, the growth accelerates. After a certainhigh percentage of the consumers start using the service or the technology, growth startsto slow down, reaches saturation and then starts to decline depending on how fast thesubstitution effect takes place. This model can be used to explain the growth ofindividual products, companies, markets, and global industries. Revenue Growth Curves Net Revenue 0-25% 25-70% 70-90% 90%+ © Chetan Sharma Consulting, 2012 Subscriber PenetrationFigure 1. Revenue Growth Curve in MobileFor the purposes of this paper, we apply the S-curve model to the operator revenues invarious countries to understand the growth patterns of various revenue curves and whatthey tell us about what might be in store in the future.A typical revenue growth curve in the mobile industry is shown in figure 1. One of theobservations is that if we look at the individual growth curves of voice, messaging, andaccess – the three main categories of revenue generation for the operators worldwide,they seem to exhibit the same characteristics. The rise is slow when the subscriberpenetration is below 25% and then it picks up until the subscriber penetration reachesthe 70-90% penetration band. Then it starts to flatten and decline. As to which end ofthe 70-90% band the given revenue curve attains its peak and starts the decline reallydepends on the factors relevant to the individual country and individual operator. These 8 Global Mobile Operator Growth – The Last 10 years | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 9. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEare generally dependent on the maturity of the market, the economic and politicalconditions of the market, the regulatory regimes, the competitive forces that are at playin the market, and the availability of substitute solutions.In the subsequent sections, we will delve into each of the major revenue curves anddiscuss the nature of growth and decline in various countries.First Revenue Curve – VoiceThe first cellular market started in Japan in 1979 and gradually all markets launchedcellular services over the course of the next 25 years. For much of this time, the primaryrevenue growth driver was voice. As such, the markets that started early also reachedsaturation early. For example, while the cellular market in India was just coming out ofits cocoon in 2003, Japanese voice revenues already peaked and started declining. Next,many countries in Europe followed. Perhaps, as the precursor to the 2008 financialmeltdown, the voice revenues in many European nations peaked in 2007 and starteddeclining. Obviously, the micro-revenue environment was a bit different depending onhow each individual operator was doing but typically, the number 3 and 4 operator in agiven country peaked first in voice revenues and the decline began. In the US, the voicerevenues of Sprint and T-Mobile USA started declining in 2007, which led to the overallvoice revenues in the US market to retreat even though Verizon and AT&T – the top twooperators by overall revenues and total subscribers still had growing voice revenues. Infact, they haven’t peaked yet as of the writing of this paper. Voice Revenue Growth Curves Finland Italy Greece Sweden France Germany Netherlands US Spain UK Austria India Net Revenue Russia China Japan Indonesia Mexico 0-25% 25-70% 70-90% 90%+ © Chetan Sharma Consulting, 2012 Subscriber PenetrationFigure 2. Mobile Voice Revenue Growth Curves 9 Global Mobile Operator Growth – The Last 10 years | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 10. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEFigure 2 shows the position of various markets on the voice revenue growth curve.Figure 3 shows the trends in mobile voice revenues in some of the leading westernmobile markets.The voice revenues in emerging markets of Russia, China, India, Indonesia, Mexico, andmany others are still increasing as the subscriber penetration hasn’t hit the 70-90%band yet.Figure 3. Mobile Voice Revenue Growth Curves for Spain, Germany, Japan, US, France,UK 10 Global Mobile Operator Growth – The Last 10 years | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 11. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVESecond Revenue Curve – MessagingThe first SMS was sent in 1991 in Europe and even though SMS wasn’t intended to be aconsumer service, it ended up being the second big revenue generation category for theoperator for much of the 1990s and 2000s. In fact, in some of the emerging markets,messaging is still the second biggest revenue generation category after voice. SMS hasbeen a tremendous success story for the wireless industry. With trillions of messagesbeing sent every year, in 2011, the total messaging revenues exceeded $200 billiondollars. Both the number of messages and the total global messaging revenues areexpected to increase for the next 5 years. However, some subtle shifts started to appearin 2011. Just like VoIP had started to eat into the operator voice revenues, IP messagingstarted to make a noticeable impact on the operator revenues in some countries.Operators in Spain, Netherlands, Taiwan, and Philippines were among first to feel thebrunt of IP messaging (figures 4 and 5) and the impact on what had been cash cow forthe operators. The impact on the network was negligible, but the margins wereastronomical.The use of IP messaging was a function of slowing economy in Europe and the price-conscious markets of Asia. In 2011, KPN the biggest Dutch operator started to publiclymake noise about the impact of players like Whatsapp on their messaging revenue. Itforced them to acknowledge in their quarterly earnings call, the impact it was having ontheir overall financials. The Android and iPhone customers were using Whatsapp inlarge numbers. Over 90% of such subscribers preferred IP messaging. Hence, they werelooking for a cheaper alternative to operator messaging.Other operators are starting to see the same impact in 2011 and into 2012. Some of theseundercurrents were masked by the sizable messaging traffic and revenues but the shift isapparent. Figure 6 shows the status of various leading mobile markets on the messagingrevenue growth curve. 11 Global Mobile Operator Growth – The Last 10 years | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 12. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEFigure 4. Mobile Messaging Usage Growth Curves for Operators in SpainFigure 5. Mobile Messaging Revenue curve for operators in TaiwanThe shift and decline in messaging wasn’t really a surprise. The SMS platform hasn’treally evolved much in the last two decades. While the application of SMS to differentservices and verticals grew, the basic nature of messaging largely stayed the same. Once 12 Global Mobile Operator Growth – The Last 10 years | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 13. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEthe fast 3G/4G networks were in place complimented by industry changing devices, thestage was set for disruption in the messaging space. Even before Whatsapp, Voxer, andViber, the likes of Blackberry Messenger and Skype, had started the phenomenon in thedeveloping nations where consumers are price sensitive and creative in minimizing theirtariffs. That some of the operators were caught by surprise and didn’t anticipate the shiftpoints to the fundamental flaw in the DNA of some. Messaging Revenue Growth Curves Finland Italy Germany Sweden US France Austria UK Philippines Spain Canada Netherlands Net Revenue Taiwan India China Russia Mexico 0-25% 25-70% 70-90% 90%+ © Chetan Sharma Consulting, 2012 Subscriber PenetrationFigure 6. Mobile Messaging Revenue Growth CurvesIn the next 2-4 quarters, the markets of US, Finland, Sweden, France, and Italy will jointhe ranks of declining messaging revenues.Even in China, which is still considered a growth market, China Mobile, world’s biggestoperator by revenue and subscribers started to see its messaging revenue decline (figure7). In fact, mobile apps and VAS commanded the highest share in 2011 from the mobiledata revenues. 13 Global Mobile Operator Growth – The Last 10 years | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 14. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEFigure 7. China Mobile – Mobile data segment trendsThird Revenue Curve – AccessThe mobile data technologies have been around since the mid-nineties with CDPD,TACS, NMT, GPRS, EDGE and others, the market for mobile data didn’t really growuntil Apple showed up to the party with a device called the iPhone. The only exceptionswere the markets of Japan and Korea where consumers were using all sorts of dataservices but primarily on the enhanced feature phones which behaved like thesmartphones.The advent of the iPhone coincided with and to some extent accelerated the deploymentof the fast 3G networks. AT&T signed a bold deal with Apple to carry the deviceexclusively in the US market. Many other leading operators did the same in othermarkets. Most of the operators were not prepared for what was to come – a datatsunami. Many of the operators immediately realized that the unlimited plans are goingto crush their financials and they quickly retreated to the tiered plans.AT&T gave up on the unlimited plans 3 years after the launch. During this time period,the operator sustained the most incredible wave of data growth witnessed in humanhistory. From 1 PB/month traffic in 2007, the data traffic grew 25000% to 35 PB/month 14 Global Mobile Operator Growth – The Last 10 years | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 15. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEby Q1 2012.3 AT&T rushed to beef up its network and the backhaul. The experience atAT&T helped other operators prepare their network when iPhone came to their network.Android started to show the same data consumption characteristics as the iPhone by2010.While the investments to keep up with the data demand increased the CAPEX andOPEX for the operators worldwide, they were able to sustain such an investment onlybecause the revenues from such traffic was delightfully growing at astronomical rate aswell. AT&T’s data revenue grew from $689M in 2004 to $22,000M in 2011, a 30xincrease. Other operators have seen similar hockey stick curves. Access Revenue Growth Curves Net Revenue UK Japan US Sweden Finland Germany 0-25% Netherlands 25-70% 70-90% 90%+ Spain Indonesia Greece France Mexico Austria China India Italy © Chetan Sharma Consulting, 2012 Russia Subscriber PenetrationFigure 8. Mobile Access Revenue Growth CurvesWe are very much in the growth cycle of the access curve. In most of the major markets,the smartphone penetration (which is a proxy for high-data usage) is still below 50%.Markets like Hong Kong, Singapore, and Australia have already exceeded the 50%threshold and big markets like the US are fast approaching it and will cross themilestone in 2012.The role of access revenues to the overall health of the mobile operators can’t beoverstated. The growth of the access curve helped compensate for the declines in voiceand messaging revenues. For example, in the US, the voice revenues declined $12B from2007 to 2011. During the same time, the data revenues increased by $41B, easilycompensating for the decline. In Japan, the voice revenues declined by $3B but the datarevenues increased by $25B from 2007 to 2011.3 Source: Chetan Sharma Consulting, 2012 15 Global Mobile Operator Growth – The Last 10 years | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 16. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEFigure 9. US Mobile Operators Revenue MicrotrendsAs a result of the data tsunami, there are two types of opportunities that are beingcreated, one that takes advantage of the data being generated in a way that enhances theuser experience and provides value and the other in technologies that helps manage thetraffic data that will continue to grow exponentially.To be able to stay ahead of the demand, significant planning needs to go into deal withthe bits and bytes that are already exploding. New technical and business solutions willbe needed to manage the growth and profit from the services. Relying on only onesolution won’t be an effective strategy to manage rising data demand. A holisticapproach to managing data traffic is needed.4 Our analysis shows that the coststructure can be reduced by more than half if a suite of solutions are deployed versus asingle dimensional approach. This bringing the hockey stick curves of data cost more inline with the revenues, thus preserving the margins.The decision making process within the operator organizations will need to bestreamlined as well. Operators should also consider creating a senior post which focuseson both the cost side and the solution side so they can devise and institute a sustainablelong-term policy and keep the margins healthy.4 For a detailed discussion of the topic, please read, Managing Growth and Profits in the Yottabyte Era, SecondEdition, Chetan Sharma Consulting, http://chetansharma.com/yottabyteera2.htm 16 Global Mobile Operator Growth – The Last 10 years | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 17. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEFigure 10. US Mobile Revenue Growth 1995-2011As the industry enjoys the ride on the access curve, there are two important questionsthat need to be answered: a) When will the access curve start hitting its peak; and b) What’s the 4th curve that will help compensate for the declines in the first three curves?How operators understand, react, and strategize on these questions will help definetheir fortunes for the next decade. The ones that are late at acknowledging the inevitabledecline of the access curve and delay the investment into the 4th curve might findthemselves consumed by the powerful forces of the competitive markets and somerelegated to the dustbin of mobile history. 17 Global Mobile Operator Growth – The Last 10 years | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 18. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEThe Mobile 3.0 eraClearly, we are living in a data-driven mobile era. Sooner or later, most operators’revenues will be derived from data services, whether it is age-old SMS, access, or nextgeneration communications or value added services. In Japan, in Q1 2012, Softbank’sdata services contributed to over 65% of the overall revenues. The other two operators –NTT DoCoMo and KDDI were at the 60% mark. It is safe to assume that all the threeoperators will have more than 80% of their revenues come from data services by 2013.Figure 11. Mobile Internet 3.0 – Leading global mobile operatorsThe Mobile Internet 3.05 is defined by the cloud-enabled, software driven, IP-centric,high-speed 4G+ networks; consumers using multiple connected devices; flattened value-chains; and operators relying on mobile data services for majority of their revenues.Mobile data growth in this stage is expounded by the ever growing ecosystem ofdevelopers, new data services, and the transition of the legacy network framework intothe network as a platform with monetizable open APIs that empower the ecosystem tobuild compelling experiences and applications. Mobile Internet 3.0 combines the5 For a full treatment of the subject, please read Mobile Internet 3.0, How operators can become serviceinnovators and drive profitability, Chetan Sharma Consulting, 2012 18 The Mobile 3.0 era | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 19. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEopenness of the core network with the ubiquity of the billions of IP nodes to createcompelling intelligent user experiences that delight consumers.The growth in mobile data services is more pronounced in the western markets with thedeveloping markets following their lead. In China, even though the mobile data marketis just evolving, data contributes to approximately 35% of the overall revenues. All thisgrowth has enabled the global mobile data revenues to grow 23% in 2011 to $320billion. Just to put this in perspective, this is more than the revenues generated bymusic, Hollywood movies, ISP services, and cable services combined.6The global mobile data revenues contributed over 30%7 to the service revenues.Messaging continues to be a big revenue generator but its share of the overall datarevenues is gradually declining. Access is becoming a dominant revenue categoryespecially for the western markets. This trend is even pronounced for the smartphoneusers. Consumers are paying $20-30/month for access but it is directly impacting themessaging revenues for some operators as consumers chose to use social networkingtools to do the bulk of their messaging. Additionally, the VAS8 revenue is also lost as thisrevenue moves to the over-the-top (OTT) application providers such as Google,Facebook and others.Given that there is constant pressure on the access profits, the issue of decliningmargins must be tackled head-on. Mobile operators must look at ways to move beyondjust providing access services and position themselves from being service providers tobecoming service innovators.6 Source: Chetan Sharma Consulting, 2011-12. Music, movies, ISP, and cable revenues from respective industryassociations.7 The distribution of mobile data usage and revenues varies depending on the region. For markets like India,Philippines, Indonesia, China, Russia, Brazil, messaging still accounts for 70-90% of the data revenues. In some ofthe western markets like the US, UK, France, Japan, Korea, data access and VAS account for roughly 60-70% of thedata revenues. The overall data revenue is also much higher in the latter markets.8 VAS stands for Value Added Services like navigation, advertising – services that go beyond access. 19 The Mobile 3.0 era | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 20. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEWhat is the 4th Curve?The 4th curve is not a single entity or a functional block like voice, messaging or accessbut is made up dozens of new application areas. Some are not even dreamt up yet. Assuch, this portfolio of services requires a different skill-set for both development andmonetization. Some of the services that are already in the market are listed below inTable 1. Another key difference in the competitive landscape for these services is that thebiggest competitors for these services (depending on the region) might not be anotheroperator but the Internet players.Table 1. 4th curve application areasApplication Areas CompetitorsIdentity, Risk Management Facebook, Google, Twitter, Microsoft, BanksCommerce Amazon, Ebay, Google, GrouponPayments Paypal, Startups, Google, Facebook, VisaUser Profile Google, Microsoft, Apple, Twitter, FacebookAdvertising Google, Facebook, Startups, AppleCloud Services Amazon, Cisco, Apple, Microsoft, SalesforceEnterprise SIs, Vertical playersConnected Home Cable Companies, HP, Microsoft, Sony, Apple, ADTHealth Microsoft, Health Care providersAnalytics Google, Microsoft, Facebook, AmazonFor some of these services, the operator might just focus on enabling the ecosystemwhile for others they might actively participate in bringing the service to the market. Forexample, AT&T is deeply entrenched in the Health space with several key initiatives inmHealth, TeleHealth, Cloud-based Healthcare, etc. while some of its Europeancounterparts are more focused on enablement of the health ecosystem. DeutscheTelekom works closely with BMW for auto services while its US counterpart is lessinvolved with companies directly but is more focused on getting the developerecosystem to take advantage of its network platform. 20 What is the 4th Curve? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 21. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEThe opening up of the network for innovation necessitates re-architecting the networkelements that can scale with demand and meet the specific requirements of the verticaland the application. Table 1. lists several growth areas, the likely competitors (beyondtheir fellow operators), the market opportunity, the ARPU potential and how the moneywill flow into the value-chain. The market penetration indicates the potential for howmuch a given solution can be adopted in the next 3-5 years. ARPU refers to the potentialmonthly revenue from the customers adopting these solutions. So, for an operator with10 million subscribers, the risk management solution has the potential to reach 5million subscribers who pay $1-2 each thus increasing the overall monthly ARPU by$0.5-1.Figure 12. The 4th curve opportunitiesIn some areas, operators will compete head-on with the OTT players such as Google andMicrosoft but in the new complex mobile ecosystem, operators should learn tocollaborate and compete at the same time. In certain areas, like mobile advertising,financial services, identity management, they should collaborate with their fellowoperators to provide a better front-end to the customer and the vertical industry. WhenGoogle and Facebook can offer 250 million+ customer profiles in the US to theadvertisers, Verizon and AT&T are better off together than working alone.99 For a more detailed treatment of this subject, please see, “Mobile Internet 3.0: How Operators Can BecomeService Innovators and Drive Profitability,” Chetan Sharma Consulting, 2012 21 What is the 4th Curve? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 22. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEWhy the 4th Curve is different?The investment in the 2nd curve of SMS started in the mid-nineties, almost 10-15 yearsbefore the 1st curve started to peak and decline. Similarly, the investment in the 3rd curvestarted to occur in the late nineties, almost 10-12 years before the messaging curves areapproaching saturation and declining. It is safe to assume that the decline in the 3rdcurve will start to happen sometime this decade. The approach to peak and thesubsequent decline will depend on individual operator and the country circumstances,but it will happen. So, when should the investment in the 4th curve start to occur? Theanswer is now and at a much faster pace than the last 3 curves.The reason is twofold: a) With each cycle, the length of the curve shrinks, so the access revenue curve will peak earlier than the previous two curves; and b) The competitive landscape is quite different for the 4th curve (figure 13) than was the case for the previous three. One could argue that voice-over-IP (VoIP) players compete with the voice curve and the IP messaging players compete with the operator messaging curve but for most of the growth for these two curves, operators were primarily competing with each other. However, as operators embark on the 4th curve, the competitive landscape is different from the start. In addition to worrying about their fellow compatriots, they have to worry about multiple competitors who can emerge from anywhere. Also, there is no one single curve but rather a collection of dozens of curves that in aggregate make the 4th revenue curve. It will require more prudence, more patience, and more strategic execution to survive and ride the 4th curve.The 4th curve has different characteristics than the previous three: a) It is not one single curve but a combination of dozens of smaller curves. The previous three curves were quite distinct in their offerings. The investment required, the type of people that needed to get hired, the product roadmap, the vendors, and the value chains etc. were well defined over the course of time. The purpose, the functionality, and expected returns were well understood. For example, for the voice curve, the goal of the telecom operator was to connect to end points and provide the best quality possible at the minimum cost. The business models were driven by economics of the given operator in a given country. Similarly, the messaging curve was driven by the capability of delivering messages from one node to another and the entire industry got built around that. For cellular access and connectivity, again, the functionality over the various 22 Why the 4th Curve is different? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 23. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVE product roadmaps has been to connect the device to the network and provide the fastest speed at the lowest cost to the operator. Infrastructure vendor roadmaps are driven by this basic dictum. The cost to provide higher throughput must go down in proportion. As such, the migrations from 2G to 3G to 4G have been step functions to deliver more capacity at a lower cost/bit. The 4th curve has different characteristics for there is no singular function of the curve but rather it is made up of multiple mini-curves which vary in the potential, the lifetime of the growth curve, the type of partners needed to deliver on the promise of each mini-curve, and operators ability to execute on the promise. On top of that, ecosystem conditions can be drastically different. For example, mobile payments, commerce, and remittance are worth hundreds of billions of dollars but have formidable entrenched incumbents who will fight tooth-and-nail to protect their turf. Other nascent areas like mobile health face less of a threat from the incumbents but more from the regulators who are stuck in the primordial era. Some like advertising involve the Internet heavyweights while others like Security have only the new entrants and startups to contend with. Alone, any given mini-curve might not represent as big of an opportunity as the previous three curves individually, however, collectively; the 4th curve has the potential of surpassing the previous ones.b) The barriers of entry are low on the fourth curve. The past three curves followed a simple formula. Invest heavily in the infrastructure which included buying spectrum and laying down the infrastructure. The enormous capital requirements meant that only a few could play the game. The incumbents had a built-in advantage. New entrants were rare. The industry grew through consolidation. You want more revenue, then, buy more subscribers. Over the course of the last 25-30 years, almost all major markets have whittled down to three main competitors. Yes, there are a number of MVNOs and smaller regional players. However, in the overall scheme of things, they don’t really matter. The smaller players provide choice but can hardly compete with the big boys on the national scale. Regulators have largely been asleep or incapable of changing this dynamics in most jurisdictions.c) The Competitive landscape of each of these curves is different requiring a more agile organization. In general, operators are large organizations. And large organizations in any industry fall victim to complacency, politics, in-fighting, analysis-paralysis, risk- aversion, and bureaucracy. Even tech giants like Microsoft, Cisco, HP, and Yahoo have fallen victim to the law of large corporations. Given that the operators will have to invest and fight for their share on multiple fronts on multiple curves, they need to be nimble. The process of decision making and making bold bets needs to23 Why the 4th Curve is different? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 24. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVE be efficient and decentralized. They should aim to fail often and fail cheap. That’s the only way they will be able to compete on the 4th curve. d) Competition from new entrants starts very early. It is true that the voice business has been under threat from the VoIP players and the messaging business is being impacted by the messaging OTT players. However, the competition from these players started much later in the life of the curve. It was based on how technology evolved. By the time most of the OTT players came into the market, voice revenues had already peaked in the western markets and had started their descent. Messaging revenue only started to get impacted as the curves were approaching the top plateau. The advent of the OTT players was primarily possible because of two factors – IP broadband wireless networks and Apple. Broadband networks allowed for new types of services to be built and serviced that didn’t require the traditional circuit-switched network. Apple busted through the operator closed-garden model and the wireless industry changed forever. The 4th curve is different. Here the competition starts early and the competitive forces are furious. In many of the markets like advertising and security services, the operator will be a new entrant. But, the operator is also in a unique position where they can provide an end-to-end solution to the customers where they already have a billing and service relationship. e) Business models that extend beyond metering are required. All the first three curves followed the same business models - $X for Y units of use. $20 for 600 minutes, $10 for 1000 messages, $30 for 3GB, and so on. Of course, the unlimited model came into being for voice and messaging. But, for data, the reverse was true. Many operators started from unlimited to boost demand but soon realized the folly of their judgment and moved back to the metering model. While unlimited voice and messaging can be sustained, unlimited data cannot - at least not without a fundamental change in the laws of physics or economics.The fourth curve constitutes of multiple curves and product areas that require differentskill set both for management and leaders of the organization as well as developers anddomain experts for various verticals. The incentive structure for the organization andthe people working in that organization should also be different. In fact, changing theDNA of the company is more important than picking the areas of investment on the 4thcurve.We will discuss this 4th curve in more detail later in the paper but first, let’s discuss theimplications of the 4th curve on operator strategy. 24 Why the 4th Curve is different? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 25. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVENet Revenue Revenue Growth Curves Voice Access Messaging VAS/OTT © Chetan Sharma Consulting, 2012 Subscriber PenetrationFigure 13. The four revenue growth curves Extend the Peak Revenue Growth Curves Delay the Decline Move up the value chain in VAS © Chetan Sharma Consulting, 2012Net Revenue Voice Digital Lifestyle Solution Provider Access Messaging Enabler VAS/OTT Utility Subscriber PenetrationFigure 14. Mobile Operator Strategies: The rise and fall of the 4 Revenue Curves 25 Why the 4th Curve is different? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 26. Mobile Operator Strategy and implications for the ecosystemAlmost all major mobile operators are public companies who have to answer to theshareholders every quarter. They are measured by the revenue they generate eachquarter and the potential to generate more revenues in the future with existing and newcustomers, and existing and new services. Thus, like other publicly-traded companies,they have to do a delicate dance of managing a declining business while investing infuture growth. We believe that the operator strategies worldwide will be drivenprimarily by the key constructs illustrated in figure 14 and described below:Delay the declineBoth operators who are experiencing declines today and those who are approaching thegrowth curve peaks have to figure out strategies to delay the decline of their voice andmessaging curves. This can be achieved by a number of key initiatives that involve a mixof business models, consumer loyalty, integration of new technologies to reduce churn,and embracing OTT/VAS services.Extend the peakFor operators in India and China, who have yet to hit the peaks of their voice andmessaging curves, the strategy is going to be driven by strategies similar to the onesdiscussed in the section above. For the access curve, where most operators are still goingto be riding the growth for the next several years, strategies will be driven bytechnologies and business models that help manage the cost per bit to enhance themargins per bit. Operators who are able to manage their margins better will havesignificant competitive advantage. The reason Sprint is still able to offer unlimited dataon iPhone and Android devices is because their margins/bit are better than theircompetitors.10 A number of operators like Rogers, Vodafone and Verizon have launcheddata share plans that allow consumers to bundle multiple device per plan. This willencourage users to become data users across multiple devices. This form of data pricingand bundling will help extend the access curve peak in all markets.Invest in the 4th curveAs we mentioned earlier in the paper, how operators react to the opportunity of the 4thcurve and how they decide to ride this next wave will write their destiny. Depending onhow they choose or are able to invest and compete will define what they will become in5-10 years. Given that the 4th curve is not a singular curve but a combination of severalmini-curves that have their own profile, growth characteristics, competitive dynamics,and opportunity landscape, operators will have to manage the 4th curve like aninvestment professional would manage an investment portfolio or fund – diversify toreduce risk and extend growth.10 Part of the appeal is also in the simplicity of the message which helps in managing the churn.
  • 27. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEThe Impact of 4th Curve on Operator FinancialsIn the last 10 years, operator profits have more than doubled. Granular analysis revealsthat European profit growth has been pretty stagnant while growth in North Americanand Asian markets fueled much of the profit growth over the last decade (figure 15).Operators in South America and Africa are starting to make meaningful contribution tothe global profit pool as well.Figure 15. Mobile Operator profit growth in Europe, North America, China and IndiaThe review of the Debt and EBITDA numbers yield another interesting insight. Thegrowth in revenue has been fueled by the investments that operators have to make tokeep up with the network demand. As such, many have had to raise significant amountsof debt. In fact, on average, the debt load has increased approximately 50% over the lastfive years. For some like Bharti Airtel, China Mobile, NTT DoCoMo, Telefonica, it hasincreased significantly.If the EBITDA for the company doesn’t grow in proportion to the rising debt, thecompany comes under scrutiny and financial pressure. Typically, the averageDebt/EBITDA ratio for global operators stays around 1.4 with Asian operators 27 The Impact of 4th Curve on Operator Financials | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 28. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEmaintaining a lower ratio compared to their North American and Europeancounterparts (figure 16).Over the past few years, weak economic conditions in various geographies and pressureson the first three curves have increased the Debt to EBITDA ratios for some of theoperators. For Deutsche Telekom, the ratio has risen by 22%, for France Telecom 23%,for Sprint 24%, and for Telefonica 50%.Figure 16. Debt/EBITDA ratios for global mobile operatorsOthers like SK Telecom, China Telecom, Softbank, Telenor, and Telstra have been ableto lower their Debt/EBITDA ratios over the same time period.Operators’ ability to raise debt and invest in new ideas and growth curves rests on theboth the will to invest as well as their current financial condition. When the revenuesstop growing but the debt demands stay high, the ratios start to climb, puttingsignificant stress on the financial health of the operator. The access curve will inevitablystart to decline at some point in the future for all operators. For some it might be acouple of years, for others it might take another 5-6 years. To even start to see thegrowth on the 4th curve, one has to start investing many years prior. The competitivelandscape on the 4th curve is much more complex so it requires a different kind oforganization to play the game else the rookies will be ousted in no time. 28 The Impact of 4th Curve on Operator Financials | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 29. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEInvesting in the 4th CurveBased on the strategy and performance of a given operator on the 4th curve, operatorsworldwide will typically fall into three major categories:Utility playersThe Darwinian law will be in full display as operators who are unwilling or unable tocompete on the 4th curve see their margins plummet from the declines of the first threecurves and negligible growth on the 4th curve. These will typically be the operators whoare the tier 2/3 operators in a given market. Their revenue profile will very muchresemble that of utility players who generate billions of dollars in revenue but theirmargins are in the range of 8-12%. Some of the tier 1 operators might fall in thiscategory as well.Figure 17. Revenue and margins of US Electric UtilitiesTo get a sense of how the financials of companies in this category might look like, onecan study the financials of the utility sector. Figure 17 shows the revenue and margintrends for US Electric Utilities which show that while the revenues have almost tripledover the last 30 years, margins have been cut in half. We can expect similar trends forthe utility mobile operators or utility mobile businesses. 29 Investing in the 4th Curve | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 30. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEEnablersThe next category of operators will invest in technologies that help them becomeeffective enablers of the larger ecosystem. They provide a robust network, an extensiveset of APIs, and the consumer/network data that powers the most popular consumerapplications and services.Digital Lifestyle Solution Providers or Enabler+Mobile operators who are able to transform themselves into digital lifestyle solutionsproviders (DLSPs) who go beyond just providing access and devices to their customersto empower consumers and enterprises with solutions, end-to-end solutions, will reapgreater benefits from the 4th curve. Such operators go beyond just being an enabler ofthe ecosystem; they actually launch complete end-to-end solutions in given verticals likeAT&T’s digital life in home automation.Obviously, any given operator could play a different role on the various mini-curves thatmake up the 4th curve. For example, they could be a DLSP when it comes to securityservices, and an enabler for the advertising services, and a utility player for the cloudservices. The net performance of any given operator will be measured by how theyperform in aggregate on the 4th curve. 30 | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 31. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEHow can Operators become Digital Lifestyle Solution Providers?To be an effective and a long-term competitor on the 4th curve, operators have tobecome the OTT players themselves. 11 Operators have to become one of them. Thisrequires innovation, financial muscles, and a ruthless mindset to capture its share fromthe value chain.Customer vs. UserThe first step in the journey to becoming a DLSP operator is appreciating thatconsumers of the 4th curve are not only going to be the operator’s customers today butalso users across all operators and in all countries. The moment this realization seeps in,the strategy and business models for the 4th curve change and become much moreinteresting. Instead of offering a messaging service to an enterprise customer, theoperator can offer a cross-carrier service and compete at the OTT scale. Instead of just afew million consumers, they could potentially reach hundreds of millions of consumers.This realization is absolutely essential for smaller operators who don’t have a 100M+subscriber base to market their services.Save the customer relationshipSome operators have resigned to the fact that they can’t really compete with the OTTplayers or don’t seem interested in OTT services. After all, the customer is paying a tarifffor the bandwidth they use. However, the key loss in such a scenario is the customerrelationships. Once that’s lost, it is very hard to get it back. If all the customer caresabout is the access, they are unlikely to look to their operator for VAS and other OTTservices in the future. Hence, it is important for the operator to preserve their customerrelationship. If they can’t or don’t want to develop their OTT solutions, they shouldpartner with the players to offer branded solutions or have joint offerings that makes thecustomer develop and maintain brand loyalty with the operator.Use privacy/security as competitive advantageOver the past couple of years, the debate over privacy and its role in the continuedevolution of information technology has been reinvigorated. To some extent, thecontroversy isn’t new, nor is it surprising. Whenever there’s disruption in the marketand the boundary conditions are tested, there’s going to be consternation.It’s also clear that if the mobile industry isn’t proactive in addressing consumer privacyhead-on from a technical, business, education and compliance perspective, there will bea strong push to pressure the government to regulate an opportunity that hasn’t fullyblossomed yet — and in the process, hamper its evolution. Mobile operators are placedvery well in the ecosystem to broker privacy and security between the user and the app11 Or figure out an effective revenue share model with the OTT players by adding value. 31 How can Operators become Digital Lifestyle Solution Providers? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 32. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEecosystem. If they play their cards right, they can turn consumer’s trust on privacy andsecurity as a distinct competitive advantage.Separate the 4th curve organization from the mothershipIt is not like smart people don’t work at the operators or they don’t feel the ecosystemearthquakes, it is just that the change is difficult, esp. when the company is beingmeasured on preserving the legacy revenue rather than generating new revenue curves.Operators are typically large organizations employing thousands of employees whichleads to fiefdoms, tension, and friction. Smart organizations separate 4th curveorganization from the mothership and hire as many Internet employees as possible –the ones that will go work for Google or Facebook. The umbilical cord can stay butefforts should be made to shield this unit from the rigors of an organization that has toreport quarterly. However, the group should be held accountable to results perhaps toeven a higher standard and providing business metrics focused on service innovation,new customer acquisition and growth. A safe operating and testing environment is a fairexchange for tougher standards.Change the DNASteve Jobs was fond of saying that ―if you don’t cannibalize yourself, someone else will.‖Operators by nature are risk averse. Talk of cannibalization is not encouraged. Theywould rather have competitors eat their lunch than go on a diet to come out fitter andstronger on the other end. Obviously, not all operators are created equal. Some likeTelefonica, Deutsche Telekom, Orange, and AT&T are creating new divisions and groupsto address the OTT threat and opportunity. But there is significant resistance from thelegacy organizations.One of the reasons is that the CEOs have to answer to the street quarter after quarterand the street wants consistency in revenue increases. A good example is messaging,most of the western operators are seeing decline in messaging volumes/subscribers ifnot the net messaging revenues. A good strategy would be to integrate SMS and IPmessaging into a single client on every single device that operators have control over.They should work with the OEMs to implement and execute on the strategy. Apple withiMessage is already doing it without the user even realizing it so why not the operatorswho are in the best position to do it in the first place? Yet, the legacy organizationsappear frozen to that possibility. Perhaps the integration will come soon but it should behere and now.Portfolio management – fail often and cheap. Embrace Beta launchOperators are used to launching perfect services. They want to dot all the i’s and crossall the t’s. They want to ensure that services are tested perfectly, the business modelironed out; the marketing machine is in place before any offering hits the market. 32 How can Operators become Digital Lifestyle Solution Providers? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 33. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEHowever, the 4th curve requires different operating principles. Though the quality ofproducts and services still needs to be paramount, they must embrace the concept of the―beta launch‖ - something that the Internet world lives by. The 4th curve business modeldoesn’t require everything to be perfected at launch but rather its functionality androadmap iterated based on user feedback.Traditionally, operators have missed out on lucrative opportunities because they werelate to the party. Location, search, consumer cloud services, advertising, and others areclassic examples where operators had the expertise and the technology much before theInternet players came to the scene, yet, never paid much attention. Now there are multi-billion dollar opportunities being harnessed by the Internet players.Moreover, the multitude of the curves that constitutes the 4th curve demands that theinvestments be managed like a professional portfolio. Operators mustn’t act like asubprime mortgage bond trader who had no clue of what he was doing, but rather anexperienced portfolio manager who can weigh the risks and have the perseverance to seethe vision through fruition.CollaborationAs we have alluded to earlier, the competitive landscape is quite different on the 4thcurve. Instead of just 3-5 operators, the new landscape has dozens if not scores offormidable opponents. The operator community collaborated well to bring GSM andSMS to the market but the track record on collaboration on applications and serviceshas been abysmal in most countries. There are some good case studies in Portugal whereoperators are collaborating on an advertising platform or in Czech Republic whereoperators are working towards a common payments platform; however, operators havelargely competed with each other.Success on the 4th curve requires much tighter collaboration between them than everbefore. The reason is simple - scale. For example, for advertising, Verizon and AT&T aremainly competing with Google and not so much with each other. Google has 250M+users in the US. The top four operators in the US have 280+. Individually, they are aweaker opponent. Together, they can be formidable. But, they haven’t been able to workon common initiatives that provide a unified front to the rest of the ecosystem. Formany of the verticals on the 4th curve, the only way operators can make a meaningfuldent would be to go past their legacy competitive concerns.Standards vs. ProprietaryStandards are good. They have served our industry well. Without standards for thenetwork technologies, the world will be a hodge-podge of incompatible networks anddevices. However, in the apps world, standards can slow you down. A perfect example isRich Communications Suite (RCS) which was introduced in 2006/7 and has been only a 33 How can Operators become Digital Lifestyle Solution Providers? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 34. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEfew months away from launch. It did finally launch as Joyn in 2012 with worldwideoperator support but by then OTT players had created similar apps that already hadscale. There will be a continued tension in the desire to standardize and the will to win.Software solutions by nature are proprietary. There is a reason Skype doesn’tinteroperate with Facetime and Google Search and Bing don’t talk to each other. Biggeroperators have the scale to launch proprietary solutions while smaller ones rely onstandardized approaches for their customers to benefit from the same advances.Build AdvocatesStephen David, former CIO of Procter and Gamble while speaking at the inauguralMobile Future Forward Executive Summit12 explained that the new measure ofMarketing is ―Advocacy.‖ Advocacy drives output that is measured in sales. WithoutAdvocacy, the output suffers. Advocacy helps decrease acquisition cost and increases lifetime value of the customer.Apple products have created fierce loyalists and rabid fans who will sport Apple logotattoos and be fierce advocates for the Apple brand. That advocacy directly andindirectly translates into billions of dollars of profits. Similarly, Google has its loyalistsalbeit it is a smaller pool. Facebook has its fan, and so on and so forth. Operators haveworked hard and succeeded in creating customers. But not advocates.Given that we are a few quarters away from the embedded SIM phenomenon which isbound to shake up the entire industry, building loyalty is critical to the overall health offuture revenues. Operators should understand advocacy dynamics and launch newprograms that instill brand loyalty. While we are unlikely to see an operator logo on ashaved head anytime soon, by embarking on the advocacy building program, operatorscan preserve their future revenues.12 www.mobilefutureforward.com, 2010 34 How can Operators become Digital Lifestyle Solution Providers? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 35. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEFigure 18. Mobile customer loyalty indexAs is evident from figure 18, loyalty is poor in prepaid markets where consumers switchbetween operators ad-nauseum based on the deal of the month. Even the postpaidmarkets will start feeling the tension when embedded SIM comes into play. 35 | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 36. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEHow Operators See the 4th Curve?In late 2011, conveying its five year strategic plan13 to the investors, NTT DoCoMo, thelargest Japanese operator noted, ―To become an Integrated Service Company placing mobile at the core, the aim is to expand the revenue size of New Businesses for FY2015 to approximately ¥ 1 trillion, approximately 2.5 times the level of FY2011.‖Figure 19. NTT DoCoMo Revenues from new businessesThe focus is on creating new markets that leverage mobile. The company will try to dothat through alliance partners and joint ventures. The principal areas of its focus are:media/content, commerce, finance/payments, medical/healthcare,environment/ecology, M2M, aggregation/platform, and safety/security. Figure 19 showshow DoCoMo is planning to grow these market segments. Some of the new segmentslike health, M2M, platform, and environment; it expects its revenue to grow 10-20 timesthe 2011 levels within four years.13 Medium-Term Vision 2015, NTT DoCoMo, Nov 2011 36 How Operators See the 4th Curve? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 37. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVESimilarly, Telefonica Digital has outlined its 4th Curve strategy to focus on a number ofsegments (figure 20) with the goal of doubling the 2011 revenue of 2.4 billion € to over 5billion € by 2015.Figure 20. Telefonica Digital Revenue Targets14Necessity is the mother of all inventions. In developing markets, shaped by marketneeds, certain segments like mobile finance and mobile health are taking shape. Forexample, in Kenya, Safaricom has been able to create a fairly healthy mobile revenuestream with its popular service M-Pesa. In 2011, M-Pesa’s contribution was more than2x that of mobile access and accounted for almost 14% of the overall operator revenue(figure 21).14 Source: Telefonica Digital Investor Conference, July 2012 37 How Operators See the 4th Curve? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 38. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEFigure 21. Safaricom mobile data revenue segmentation15Similarly, in Philippines, Smart Mobile saw a 52% increase in VAS revenue in Q1 2012.16For China Mobile, Mobile VAS revenue is now greater than both messaging and accessrevenues.17Tier-2 Operators on the 4th CurveFrom the initiatives thus far (as of mid-2012), it is apparent that the large operators whohave the resources and the desire to invest on the 4th curve in a substantial manner.Operators like Verizon are spending billions of dollars on acquisitions and on beefing uptheir offerings on the 4th curve. But how will the tier-2 operators respond to theopportunity and the threats? Clearly, they won’t have the resources of doing $500-600M+ acquisitions. Will they be more tactical and opportunistic or will they find theirniche in certain verticals? Will they collaborate with the ecosystem more to have jointofferings? Will they work better with other tier-2 operators within their national15 Source: Operator financials 2009-201116 PLDT Q1 2012 financial statement, April 201217 China Mobile 2011 financial statement, March 2012 38 How Operators See the 4th Curve? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 39. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEboundaries or even abroad to compete effectively? Will such efforts prove viable? Orshould they focus on strengthening their revenue streams on the first three curves?There are no easy answers. A lot will depend on the competitive dynamics in a givencountry and the types of opportunities these operators pursue. Tier-2 operators willhave to tread more carefully than their beefier rivals as they don’t have the option formaking mistakes or costly bets. Depending on how they choose to react will determinewhether they get acquired or they can continue to operate independently. 39 How Operators See the 4th Curve? | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 40. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVECase Studies of Transformed OperatorsWhile it is very early to write the history of the 4th revenue curve, we will discuss twooperators who are serving as role models for the entire ecosystem. There are manyoperators around the world who are doing some really innovative work like Turkcell inTurkey, Softbank in Japan, Bharti in India, SMART in Philippines, Sprint in US, Rogersin Canada, Orange in UK, etc., however, AT&T and Telefonica stand out for the urgencythey have shown in transforming themselves and how early on the growth curve havethey undertaken this transformative process. For the sake of brevity, we will cover somesalient points of their program to date.AT&TIn the US, AT&T stands behind Verizon as the number two mobile operator. However,in two growth areas of connected devices and enterprise mobility it is generating morethan twice the traction. In fact, while it has roughly 31% of the subscriber market share,its share of the revenue in the connected devices and the enterprise mobility segments ismore than the rest of the operators combined. How was it able to get such a good lead?It started early, the organization has been nimble, and it transformed itself to do thebusiness differently than has been done in the past. In Q3 2008, AT&T announced theEmerging Devices Organization (EDO) much before the first iPad was launched, the firstconnected car (broadband), the first connected pill bottle came to the market.Essentially, it anticipated the trend and took advantage of it.The EDO18 organization also structured itself differently. The process to deal withpartners was simplified and time-to-market was accelerated and led to many industryfirsts.Similarly, the enterprise mobility organization is more mature at AT&T compared to itspeers not only in the US but around the world. It has become the leading mobile appsdevelopment organizations in the ecosystem; they have built out a services delivery armthat is focused by industry verticals and solutions. This holistic approach to enterprisemobility – looking at mobile device management, mobile security, mobile applicationdevelopment and the ability to provide complete end-to-end solutions has helped themwin more enterprise deals than their competitors. Similarly, an early focus on machine-to-machine (M2M) opportunity has positioned AT&T as a leader in this fast growingcategory.As a result both the Emerging Devices Organization and the Enterprise Mobility Groupare performing better than its peers. This attracted partners and more importantlycustomers.18 The scope of the organization has since been broadened to include vertically focused solutions such as DigitalLife, Connected Auto, etc. 40 Case Studies of Transformed Operators | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 41. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEAnother key element of AT&T’s strategy is AT&T Foundries which are essentiallyhoneypots for startup innovation. These centers of excellence setup in US and Israel area critical link between the entrepreneurs and AT&T. The fast-paced environment, thequick prototyping approach, and focus on speed and efficiency is winning over manystartup executives who would have stayed away from AT&T in the past. Telcos in generalmove slow not because they want to but because of the weight of a huge organizationwhere even a simple request needs to go through a myriad of hierarchal decisionprocesses that pretty much kills any interest from the startup. Startups don’t have thetime nor the resources to get tied up into the moribund process. The foundries serve asan early opportunity radar for AT&T and have helped improve its overall approach tobecoming a DLSP.Verizon has also been active in addressing the mobile enterprise and connected deviceopportunity with the acquisitions of nPhase, Terremark, and Hughes Telematics.Similarly, Sprint has organized itself to take advantage of the new opportunities in thissegment. T-Mobile USA has focused its energies on communications (Bobsled) and theM2M segment.TelefonicaTelefonica Digital was formed in 2011. The economic conditions in Europe have beenhaving a negative effect on the operator financials. The OTT threat loomed large. Assuch, Telefonica had to respond and respond urgently. It put together a group primarilycomprised of software and Internet folks who understood that speed matters a greatdeal for innovation and that the time is limited. Since its creation, their developmentprogram Bluevia has gained strength and has been lauded by the developer community.In early 2012, the group launched TU Me – the messaging and communication app thatwas built in just 100 days (conception to release). With its global scale, they can reachconsumers in multiple regions.And like AT&T, Telefonica Digital is focused on opportunities beyond communicationsinto M2M, Advertising, Financial Services, Cloud, Security, mHealth, and Distribution.With the scale of 300M+ subscriber base, it can make an impact with solutions andservices it introduces into the market.Like AT&T, Telefonica launched a startup incubation program Wayra19 across 10countries. The program takes advantage of local talent, local resources targeted at localconsumers with the opportunity to make a global impact. Additionally, the programprovides funding for the startups and provides Telefonica with early indications of newtechnologies and directions of the market that can be harnessed effectively for the bettergood of the company and its ecosystem.It remains to be seen how much is Telefonica Digital able to improve Telefonica’sfinancials in the long run but it’s the right step for the company to address the market19 http://www.wayra.org 41 Case Studies of Transformed Operators | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 42. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEpressure and declining revenues. It has organized itself better than some of its peers totake advantage of the 4th Curve.There are other good examples like NTT DoCoMo and Omron Healthcare forming jointventure called ―docomo Healthcare, Inc.‖ to capitalize on the mHealth opportunity.20Many other operators are doing some good work on their path to becoming a DLSP. Weare just starting on the 4th curve journey. It will morph several times over the course ofthis decade and new leaders and role models will emerge over time.20 http://www.nttdocomo.com/pr/2012/001599.html 42 Implications of the 4th wave | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 43. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEImplications of the 4th waveIt is inevitable that the 4th growth curve for the wireless industry is going to bring indisruption in the industry structure, technologies used, revenue models, and at somepoint the regulatory framework itself.Who will capture the profits?The most important question for the financial community will be as to who dominatesthe profit pool. Historically, operators captured most of the value from the first twocurves. As figure 22 illustrates, over 82% of the mobile industry profits belonged to themobile operators in 2011.21Figure 22. Global Mobile Industry Profit ShareIf we look at the profit share by segments, operators still dominate and captureapproximately 82% of the profits from the aggregate curves in 2011. However, Apple21 Obviously, the profit pool was divided amongst hundreds of mobile operators around the globe. 43 Implications of the 4th wave | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 44. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEstarts to show up amongst top two (figure 23) now. In 2011, Apple’s share of the globalmobile industry was higher than that of Verizon and AT&T and just behind ChinaMobile which benefits from the biggest subscriber base on the planet and low operatingcosts.Figure 23. Global Mobile Industry Profit Share of Top 5 playersThe fourth curve will present interesting competitive dynamics. The landscape is muchmore distributed. Operators will have to figure out which areas and how they want tocompete and against whom. Each of the mini-curves will have their value-chains,business models, and technology providers. They will get disrupted more frequently andwill require much tenacity and agility to survive. The long tail of revenue share will geteven longer and the industry might eventually consolidate further but it is going to be anenormously interesting time period in the wireless industry.The Need for New operating modelsIt is no secret that building and operating a network requires high CAPEX investment.The high cost of the network is both strength and the weakness of the business. Strength- because it builds the natural barrier to entry and that’s why we don’t seen newoperators coming into the market every day. Weakness – because operators are forcedto raise a lot of debt to fund their network deployment and if the revenue starts to take ahit due to economic or competitive climate there is not much room to maneuver. 44 Implications of the 4th wave | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 45. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEFigure 24. Operational efficiency of leading fortune 100 companies22This means that the operators will have to segment the cost of doing business and therevenue streams and optimize for higher margins. For segments that are commoditizedand provide no inherent competitive advantage, it is in the interest of operators tocollaborate rather than compete so network sharing becomes a much more practicalstrategy for preserving cash flows. Similarly, outsourcing of some key IT and networkoperations that don’t provide any discernible advantage by operating internally canprovide better yield for investment dollars.Many operators in Asia and Europe are already pursuing some of the above strategies.We envision that these will become more common place even amongst the topoperators.The reason is simple. If we look at the operating efficiency of some of the Internetplayers, their profits and revenues per employee is much higher than the operators.Given that the competition on the fourth curve is primarily going to be from the Internet22 Some of the firms like Facebook are not amongst the Fortune 100 but we included them in the chart to showtheir relative performance in 2011. While other companies have been around for many many years, Facebook is anewly minted public company so their depiction in the chart is more for illustrative purposes. 45 Implications of the 4th wave | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 46. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEplayers, their operational metrics should start to mirror the likes of Apple and Google.This can only happen if the operating model of the operators changes over time.At some of the operators like AT&T and Verizon, the wireless groups are performingmuch better than the overall company. For example, if we just take a look at the wirelessbusiness, AT&T Mobility’s Revenue/Employee/Year is much more than for the wholecompany and is better than even Microsoft’s numbers.23 Similarly, Telefonica Digital’sperformance is more than 2x that of its parent Telefonica. Overall, the Japanese mobileoperators are more operationally efficient (in terms of generating profits/employee)than the leading Internet players of this era.Figure 25. Operational efficiency of leading Telecom operators24,2523 Based on author’s assumptions about AT&T Mobility’s number of employees. AT&T doesn’t break down theiremployee numbers by units.24 NTT DoCoMo and China Mobile are mobile only operators. Rest of the operators include their landline and otherbusinesses in the mix and as such their performance numbers are down. In general, mobile operations performbetter than landline operations. That’s why when measured separately, US mobile operators score much higherthan when the telco businesses are measured independently.25 There are other operators like KDDI and Softbank who have higher performance numbers than the operatorsshown in the figure but their subscriber and revenue base is relatively smaller. 46 Implications of the 4th wave | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 47. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEMany operators might need to trim their workforce, in some cases, drastically. Or shedmoney-losing businesses to optimize for overall margins. At a minimum, the operator’sdigital organizations will need to perform at the level of their Internet peers.If we take a look at the operational efficiency (as measured by the profit being generatedby the company for every employee and every customer in a given year) in figures 24and 25, in general, mobile operators don’t score that high because the number ofemployees needed to run the business. While businesses in various verticals aredifferent, the value of the enterprise is ascertained by the growth potential andconsistent profits. That’s why we see anomalies like Amazon in spite of slim profitsbeing valued high because of growth potential while operators, retailers, and fast-foodchains valued as utility businesses because the growth potential is not on the hockeycurve.The digital business offers operator an opportunity to change the perception about theirbusiness. In some instances, this might be only possible through a spin-off where theparent company is a major stake-holder.So, for strategic and financial reasons, operators need to realign the core competencesand offerings and size up their operational structure accordingly.Implications on the EcosystemThere are two obvious implications to the ecosystem. Players who completely rely onoperator channel for their services are likely to see a decline in their revenue pipeline.Secondly, the number of players they can sell to will expand dramatically which meansthey will also have to adjust how they design products, establish relationships, andconform to revenue goals. Also, for the first time, software more than hardware willdrive the revenue growth curve for the vendors.Greater competition on the 4th curve works in the best interests of the consumer. Giventhat the service layer is detached from the access layer, the choice of solutions across anygiven vertical will be good for the consumer. The startup ecosystem will also benefitfrom a more diverse telecom services landscape as the number of potential customersand acquirers will increase. Regulators will have their work cut out for them to keep themarket fair and competitive.Competition and Operator ConsolidationCompetition is the central tenant of economics and in turn fairness to everydayconsumers. Competition also drives innovation and accelerates the advent of new andnimble players to disrupt the waters and moves the ecosystem forward. The rise of thedependence on the 4th curve will force consolidation. Essentially, the pool of competitorsis increasing, the nature of competition is changing, and the customer relationship for 47 Implications of the 4th wave | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 48. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEproviders is being altered. All this will force weaker and smaller players to disappear orget consolidation with the bigger ones.26Consolidation landscape will be different in different geographies. Europe – which islikely to be the most impacted by this will probably congregate around few multi-national operators. Given the importance of telecom infrastructure to nation’s strategicgrowth plans, regulators will fiercely resist non-European acquisition threats. In NorthAmerica, while FCC (US Federal Communications Commission) and DOJ (USDepartment of Justice) have shown aversion to big M&As, market forces might worktheir way through to further consolidation in the next 2-3 years. In Asia, markets thatare open like India will see considerable turmoil as the market learns to adjust andsettles down in a competitive equilibrium. Markets like China, Japan, and Korea whichare closed in nature, the government will largely control how the market competitivelandscape shapes up. Successful and cash-rich mobile operators from the developingmarkets will try to flex their muscles outside their national boundaries to gain moreclout and customers. The moves by the Mexican operator TelCel in Europe to acquireshare in Austria and Netherlands are an early indicator of such a strategy.New Revenue ModelsWe will also see a significant shift in classic metering telecom models to experimentwith value based pricing and solutions based pricing. While the focus for most operatorsis still around measuring and billing of basic units. It is essentially a race to the bottom.Operators need to become ―service providers‖ again rather than just the ―networkoperators.‖ By providing end-to-end solutions they can capture better value from theecosystem.New Joint Venture ModelsGiven that the 4th curve requires a different approach, we might see operators pursueinitiatives by vertical industries or different horizontal segments. Verizon’s acquisitionof Hughes Telematics for $632 million in Q2 2012 was an early indicator of such astrategy. Given how much money operators spend on handsets (especially in postpaidmarkets); it is possible that some JV initiative also pursues an operator led deviceinitiative. Similarly, there might be some more partnerships with the infrastructureproviders. China Mobile and Alcatel-Lucent’s joint development work is a goodexample.New Business ModelsNetwork sharing started to emerge as a key technology initiative for the operators inAsia and then spread through major markets in Europe. We can easily envision that26 For an in-depth analysis of Mobile Competition and Consolidation trends, please see, “Competition andEvolution of Mobile Markets. A Study of Competition in Global Markets,” Chetan Sharma Consulting, 2012 48 Implications of the 4th wave | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 49. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEmost of the operators will have some form of network sharing and spectrum sharingagreements in place. This will allow them to better segregate their operations. They canhave a common technology infrastructure and can compete based on brand, marketing,and pricing.Regulatory RethinkFairly or unfairly, operators often get labeled as dinosaurs for their seeming inability tomove against gravity. However, compared to many of the regulators, operators are fastmoving gazelles. Regulators in the majority of the countries are behind the curve inunderstanding the tectonic shifts. While there is a desire to help the industry and theconsumers at large, their inability to comprehend the shifts in the technology andcompetitive landscape is often to the detriment of the overall ecosystem. Additionally,the regulatory framework is too much intertwined with the political system for it tomake any discernible progress at a rapid pace. Everything seems to take years anddecades instead of days and weeks. Even some of the western regulators who are held asexamples of forward thinking lack the imagination and courage to move with the marketlet alone ahead of the market.As we discussed in the paper, we are truly witnessing the massive disruptive forces atwork and yet regulators seem oblivious to the change. The 4th curve will have differentcompetitive characteristics, in fact each of the smaller curves will have their owncharacteristics and yet the telecom players are regulated and bound by the differentrules than the new and nimble players. For example, the rules that apply to Google,Amazon, and Facebook with respect to the collection, management, and monetization ofthe consumer data are quite different than the rules that bind the operators. If operatorsare to provide competitive advertising or cloud services, the underlying regulatoryframework should be identical for all. Otherwise, the market will suffer from the lack ofmore diverse competition and the progress in technology and business models might bestunted. 49 Implications of the 4th wave | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 50. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEConclusionsMobile is becoming the critical tool to drive human ingenuity and technological growth.Mobile operators have played a dominant role since the inception of the industry.Fueled by the revenue growth curves of voice, messaging, and access, the industry hasflourished beyond anyone’s imagination. As each of the previous generation of thegrowth curves hit maturity and start declining, the growth of the net-revenue is at risk.It is time for the operators to configure and execute on their 4th wave strategy. Unlikethe previous generation of curves, this one is different. They need to not only worryabout technology; they need to reinvent themselves to have a shot at success.Organization density and capability to execute on the run is as if not more importantthan the bets in various segments of the 4th curve.An operator’s ability to recognize the importance of the 4th curve in its long-termsurvival plans will define their role in the ecosystem. Many will fail and get assimilatedby the tides of consolidation. But, some will move and adapt, either forced by thefinancial climate or the desire to innovate, and launch new services that fuels theirgrowth for the next decade. Indeed their future will be defined by how they react to the4th wave of mobile. 50 Conclusions | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 51. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEAcknowledgementsAuthor thanks and acknowledges the assistance of Sid Parikh, Danny Bowman, RussMcGuire, Steve Elfman, James Finn, Abhi Ingle, Sarla Sharma, Joanne Steinberg, CarlosDomingo, and Jeff Giard. 51 Acknowledgements | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 52. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEAbout Mobile Future ForwardMobile Future Forward is mobile industry’s premier thought-leadership summitthat attracts some of the most influential minds in the mobile industry who are veryinstrumental in shaping the industry, in innovation adoption, and in managing thegrowth of revenues and profits. For the 2012 summit, the experts and visionaries fromaround the globe will gather in Seattle on Sept 10th to explore the mobile industry 2-5years forward, envision what the user experiences and use cases look like, discuss anddebate the challenges and opportunities in the journey to that vision. The Theme for2012 is ―Connected Universe. Monetizing Opportunities.‖ The focus will be onunderstanding the monetization opportunity and value-chains across the spectrum.More information at www.mobilefutureforward.com 52 About Mobile Future Forward | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 53. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEMobile Future Forward PublishingMobile Future Forward Community produces some of the most thought-provokingmobile industry papers and books.PapersEach year, Chetan Sharma Consulting researches and produces industry-defining papers that look at newopportunities, industry challenges, and the shifts in consumer behavior.BooksMobile Future Forward publishes the book series that consists of essays from speakers and thought-leaders in the mobile industry. The Mobile Future Forward Summit is all about creating new ideas,discussion and debate of opportunities and challenges. The essays from CEOs and senior industryexecutives are focused on new technologies, trends, and business twists and turns of the industry. 53 Mobile Future Forward Publishing | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.
  • 54. OPERATOR’S DILEMMA (AND OPPORTUNITY): THE 4TH WAVEAbout Chetan Sharma ConsultingChetan Sharma Consulting is one of the most respected management consulting andstrategic advisory firms in the mobile industry. We are focused on evolving trends,emerging challenges and opportunities, new business models and technology advancesthat will take our mobile communications industry to the next level. Our expertise is indeveloping innovation-driven product and IP strategy. Our clients range from smallstartups with disruptive ideas to multinational conglomerates looking for an edge. Wehelp major brands formulate winning, profitable, and sustainable strategies.Please visit us at www.chetansharma.com.About the AuthorChetan Sharma is President of Chetan Sharma Consulting and is one of the leading strategists inthe mobile industry. Executives from wireless companies around the world seek his accuratepredictions, independent insights, and actionable recommendations. He has served as anadvisor to senior executive management of several Fortune 100 companies in the wireless spaceand is probably the only industry strategist who has advised each of the top 6 global mobile dataoperators. He is considered a leading authority on the mobile data technologies and consumertrends. Some of his clients include NTT DoCoMo, Disney, KTF, China Mobile, Toyota, Comcast,Motorola, FedEx, Sony, Samsung, Alcatel Lucent, KDDI, Virgin Mobile, Sprint Nextel, Skype,AT&T Wireless, Reuters, Juniper, Qualcomm, Microsoft, Reliance Infocomm, SAP, MerrillLynch, American Express, and Hewlett-Packard.Chetan is the author or co-author of five best-selling books on wireless including MobileAdvertising: Supercharge your brand in the exploding wireless market and WirelessBroadband: Conflict and Convergence. He is also the editor of the Mobile Future ForwardBook Series. His books have been adopted in several corporate training programs and universitycourses at NYU, Stanford, and Tokyo University. His research work is widely quoted in theindustry. Chetan is interviewed frequently by leading international media publications such asTime magazine, New York Times, Wall Street Journal, Business Week, Japan Media Review,Mobile Communications International, and GigaOM, and has appeared on NPR, WBBN, andCNBC as a wireless data technology expert. He is also the chief curator of the mobile thoughtleadership executive forums – Mobile Future Forward and Mobile Breakfast Series.Chetan is an advisor to CEOs and CTOs of some of the leading wireless technology companies onproduct strategy and Intellectual Property (IP) development, and serves on the advisory boardsof several companies. He is also a sought after IP strategist and expert witness in the wirelessindustry and has worked on and testified in some of the most important cases in the industrysuch as Qualcomm vs. Broadcom, Samsung vs. Ericsson, Sprint vs. Verizon, Openwave vs. 724Solutions, and Upaid vs. Satyam. Chetan is a senior member of IEEE, IEEE CommunicationsSociety, and IEEE Computers Society. He has Master of Science degree in Electrical Engineeringfrom Kansas State University and Bachelor of Science degree from the Indian Institute ofTechnology, Roorkee. 54 About Chetan Sharma Consulting | www.mobilefutureforward.com © Copyright 2012, All Rights Reserved. Use without permission is strictly prohibited.