Evaluation of Mobile Operators' Internet Related Business Opportunities


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This presentation contains the most important details and findings of my MBA dissertation work at the Durham University (UK) in 2009

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Evaluation of Mobile Operators' Internet Related Business Opportunities

  1. 1. Evaluation of Mobile Operators’ Mobile Internet Related Business Opportunities MBA Dissertation at the Durham Business School 2009 Author: Ottó WerschitzNote: this presentation includes only the most important details and findings ofthe otherwise in-depth study.
  2. 2. This work is licensed under the CreativeCommons Attribution-NonCommercial-NoDerivs3.0 Unported License. To view a copy of thislicense, visithttp://creativecommons.org/licenses/by-nc-nd/3.0/. 2
  3. 3. Why This Study?In developed economies, the market for traditional (voice-based)mobile telecommunications services is saturated - > new growthopportunities lie mainly in internet and fast mobile data servicesIn order to address mobile internet related businessopportunities, operators need to develop new business models.It is essential to explore• these business models• other market players involved in this business models• how these business models help operators exploit mobile internet related opportunities 3
  4. 4. The Research QuestionDo the business models chosen andimplemented by mobile operators enable themto position themselves successfully in theirrelevant market (as expanded by mobileinternet opportunities) or will the majority ofthe value created by mobile internet beexploited by other players? 4
  5. 5. Dissertation Structure1. Literature Review (highlights)2. Research Design3. Case Studies4. Discussion of Results5. Conclusions 5
  6. 6. Highlights of Literature Review Telecommunications have become a deconstructed industry with services provided by several inter-operating independent companies (Li and Whalley, 2002) Delivery of value to end-users evolved from integrated value chain to value networks of independent and inter-working players (Li and Whalley, 2002) Business model innovation is needed for mature industries [such as telecommunications] to avoid decline and / or to exploit technological advancement and / or to maintain competitive edge (Chesbrough and Rosenbloom, 2002; Dowdy and Nikolchev, 1986 ) Business Models: conflicting definitions. For this dissertation, the following was selected:  Osterwalder (2004) for a structured view of business model  Gordijn and Akkermans (2001) for modelling of value networks  Ballon et al (2008) for internet-enabled mobile operator specific business models on the basis of the value network concept 6
  7. 7. Research Design: Case Study ApproachThree value network based mobile operator related business models aredefined for mobile internet related business opportunities (Ballon et al, 2008)  Operator-centric: the mobile operator acts alone as Network Operator, Service Aggregator, Platform Operator and Portal Provider and contracts Service Providers.  Device-centric: 3rd-party device vendor (such as Apple) acts as Service Aggregator, Platform Operator and Portal Provider and contracts Service Providers. The mobile operator’s role is limited to providing mobile internet access and (not necessarily) selling the device bundled with subscription.  Aggregator-centric: an independent 3rd-party (such as Facebook or Google) takes the Service Aggregator, Platform Operator and Portal Provider Role. The mobile operator only provides mobile internet connectivity. A case study for each value network was prepared on the basis of desktop research 7
  8. 8. Research Design: Case Study Contents1. Selecting global operators and 3rd parties for analysing the given value network Types of business2. Understanding the type of business strategy strategy as defined by intended by the operator in the value network Porter: cost control,3. Determining the mobile operator’s position in differentiation or focus the value networkFocus of the analysis: understand whether the Analysis of marketoperator’s position enables the operator to forces: with Porter’simplement its intended business strategy in the five forces model (competitive rivalry,value network within the constraints of the market suppliers, customers,forces excercised by other participants of the value substitutes, newnetwork entrants) 8
  9. 9. Research Design: Limitations Information sources did not allow the examination of financial aspects, i.e. profits of players and distribution of profits between players in the value network Only public information was available Study results based on the selected market players are good indications, but cannot cover the entire industry New, still evolving business models were not consideredIn spite of these limitations, the three case studies andcomparing them with each other helped understand the valuecreation process related to mobile internet services and gaveindications on mobile operator performance. 9
  10. 10. Case Studies: 1. Vodafone – Operator-centric Business ModelArrows in the five-forces model represent Buyersthe market force of the actor. The strengthof force is indicated as low, medium orhigh. Media Agencies Vf subscribers Substitutes: medium medium independent mobile portals or device centric portals Competitors: other Vodafone with medium mobile operators with high Live! portal portal offering New Entrants: new mobile operators or low medium low to medium MVNOs with portal offering In-search Advertising Content / Apps Partner Providers Suppliers Compared with other mobile operator portals, Vodafone Live! can be competitive with extensive and distinctive content. On the other hand, substitutes are a strong threat to reduce Vodafone’s market share in the domain of mobile internet by taking away subscribers and advertisers or by reducing the mobile internet spending of Vodafone’s subscribers and advertising customers. 10
  11. 11. Case Studies: 2. T-Mobile – Device-centric Business ModelArrows in the five-forces model representthe market force of the actor. The strengthof force is indicated as low, medium or Buyers:high. T-Mobile subscribers Substitutes: mobile operators with medium medium mobile portals or independent mobile Competitors: other portals T-Mobile low to medium mobile operators offering iPhone with smart phone offering New Entrants: new mobile operators or MVNOs with low to medium medium to high portal offering Suppliers: Apple and other handset manufacturers T-Mobile’s mobile internet strategy is differentiation by distinctively offering mobile handsets that enable unique user experience. As long as T-Mobile is handled as a preferred partner by Apple and other internet enabling smart phone vendors offering valuable mobile internet end-user experience, the operator can implement its selected business strategy. 11
  12. 12. Case Studies: 3. „3” – Aggregator-centric BMArrows in the five-forces model representthe market force of the actor. The strengthof force is indicated as low, medium or Buyers:high. “3” subscribers Substitutes: mobile operators medium medium to high with mobile portals and device centric “3” offering pure Competitors: portals mobile internet other mobile medium access on operators offering handsets mobile internet New Entrants: access on handsets new mobile operators or low low to medium MVNOs with portal offering Suppliers: Yahoo and other independent mobile portals „3” strategy for mobile internet is cost leadership by focusing on internet access only at reasonable costs. Since “3” in this scenario does not differentiate itself by offering any mobile internet related value added, there is a threat that its market share and revenues are limited by other mobile operators with similar offers for mobile internet. The threat of operators offering other value added, such as attractive smart phones to customers (i.e. substitutes), further limits the room of “3” for implementing its strategy. 12
  13. 13. Discussion of Results1. SWOT-analysis of Operator-centric ModelStrengths Weaknesses- Strong offering on the basis of agreements with - Live! only focuses on Vodafone’s own subscribers, content publishers and application developers. i.e. the possible reach of customers limited, whereas independent portals target all mobile- One stop shopping offered to customers internet users. (access, content & applications, services). - Vodafone may not be seen as an authentic brand- Multiple revenue sources. for value added mobile internet services.- Customer ownership including valuable profile information to be used for e.g. targeted advertisements.Opportunities Threats- Increasing number of mobile internet users of - Independent aggregators of mobile internet Vodafone’s subscriber base. services and device centric portals (substitutes).- Service bundling to stimulate Live! usage (e.g. - Instead of using Live! subscribers only use mobile with mobile internet access). internet access offered by Vodafone and consume value objects from substitutes.- Advertisement funded content and application offers to subscribers. - Advertisers rather go to substitutes. 13
  14. 14. Discussion of Results2. SWOT-analysis of Device-centric ModelStrengths Weaknesses- Strong offering on the basis of agreement with - Value added by T-Mobile is limited to mobile Apple (and possibly with other smart phone internet access in this value network. vendors).- iPhone users stimulate mobile internet traffic from which the operator is benefited by access fees.Opportunities Threats- Increasing demand for value objects on device - Customer ownership being taken over by device centric portals drives T-Mobile’s mobile internet vendors. access revenues. - End of exclusivity with Apple and / or other- Increasing value added and generating more operators increasingly become re-sellers of smart revenues by being involved in device centric phone brands. value networks more actively by “selling” user profile information as newly created value - Decreasing profits on mobile internet access objects to device vendors with portal offering. provision. 14
  15. 15. Discussion of Results3. SWOT-analysis of Aggregator-centric ModelStrengths Weaknesses- “3” focus on operator core competence by - Value added by “3” is limited to mobile internet offering mobile internet access. access in this value network.- Strong internet brands, such as Yahoo generate - Overall value delivered to end-users may be lower demand for mobile internet usage from which because of weak user profile management. “3” is benefited by collecting access revenues.Opportunities Threats- Increasing value added and generating more - Customer ownership being taken over by revenues by handing over subscriber profile data aggregators. as newly created value objects to aggregators and receiving a share of related aggregator - Increase of price competition with other mobile revenues. operators. - Decreasing profits on mobile internet access provision. - Value added offering by other mobile operators. 15
  16. 16. Conclusion:Answering the Research QuestionDo the business models chosen and implemented by mobile operators enablethem to position themselves successfully in their relevant market (as expandedby mobile internet opportunities) or will the majority of the value created bymobile internet be exploited by other players? 3rd party actors in mobile internet value networks are better positioned to capture the majority of economic value related to mobile internet service provisioning, since operators can have profitability issues with their most natural offering, i.e. mobile internet access, and face a strong competition of and at the same time are dependent on global media and other internet brands when offering value added services, i.e. mobile internet content, applications and advertising as well as mobile internet enabling handsets. 16
  17. 17. Conclusion:Opportunities for Operators1. Valuable subscriber related assets, such as user profile and location information can be turned into „value objects” and „sold” to co-operating 3rd parties  to increase the operator’s share in the (economic) value creation, and  also to increase the overall value of mobile internet offering.2. Operators may also work on managing their roles in all three business models to “internalize” substitutes and by this improving competitive position. 17
  18. 18. Appendix:Quoted Literature SourcesBallon P et al, 2008, “An Advertisement-based Platform Business Model forMobile Operators”, IBBT SMIT, Vrije Universiteit Brussel, Belgium.Chesbrough H and Rosenbloom RS, 2002, “The Role of the Business Model inCapturing Value from Innovation: Evidence from Xerox Corporation’s TechnologySpinoff Companies," Industrial and Corporate Change, vol. 11 (3), pp. 529-555.Gordijn J and Akkermans H, 2001, “Designing and Evaluating E-Business Models”,IEEE Intelligent Systems, July/August, pp. 11-17Li F and Whalley J, (2002), “Deconstruction of the telecommunications industry:from value chains to value networks”, Telecommunications Policy no. 26 pp 451-472Osterwalder A, 2004, “The Business Model Ontology. A Proposition in a DesignScience Approach”, PhD Thesis, HEC Lausanne, Lausanne 18