Mobile Network Operators Face Cost Crunch

inShare1

Mobile network operators are facing a scenario where their capital (capex) and operating (opex) expenses will surpass their revenues by about 2014, according to a June 2010 white paper from Juniper Research. Estimates from “Crunch Time For Mobile Operators” indicate that typical 15-20% margins on operator-billed revenues, which are currently above capex/opex, will meet capex/opex in 2014, fall slightly below expenses in 2015, and begin substantially falling below them in 2016.

Juniper is actually predicting slight growth in revenues for the next several years, but the expected growth curve in expenses is substantially sharper.

Spectrum, Infrastructure, Network Costs Drive Crunch

Juniper identifies several specific cost factors driving the upcoming cost crunch for mobile network operators. To meet consumer demand, they must upgrade their networks to offer 3.5G and 4G services, thereby paying for new spectrum and infrastructure during the transition period and beyond, as well as cope with surging traffic resulting from increased smartphone use.
In addition, as managed network operators are forced to expand the breadth and depth of their networks, they may incur greater operating costs ranging from site leasing to electricity.

Mobile Ecosystem Changes Pose Threat

In addition to feeling the effect of rising costs, Juniper analysis indicates managed network operators are also being affected by changes in the mobile ecosystem. Large players such as Google and Apple bypass them entirely, while mobile penetration is reaching saturation and competitive pricing and regulation is limiting voice revenues.
The increased use of non-voice services and mobile broadband has not been enough to offset declines in average revenue per user for mobile network operators.

App Stores Change Mobile Game

In addition to the above changes in the mobile ecosystem, Juniper also cites the rise of app stores as a major threat to mobile network operator profitability. While mobile network operators were once the primary portal for most mobile entertainment and owned the billing procedures, now app stores enable non-mobile network operators to become a primary portal for mobile entertainment.
Juniper advises mobile network operators to seek non-traditional revenue streams to avoid having expenses exceed revenues within the next few years.

Nielsen: Apple iOS Users Average 48 Apps

Among Apple iOS users who download mobile apps, the average number of apps on their phone is 48, according to May 2011 data from The Nielsen Company. This gives Apple iOS users the highest average number of mobile apps by a wide margin; Android users follow with 35, a number which is 27% lower.
Users of no other mobile phone OS have an average number of apps anywhere close to either of these totals. Palm follows a distant third with an average of 21 mobile apps per user, well less than half the average number of apps held by the average iOS user.