Telcos Losing Money on Mobile Broadband

The success of mobile broadband is putting European operators in a sticky situation as retail prices are often well below the cost of providing the service.

According to analyst Strand Consults, many operators are selling mobile broadband for around 50 per cent less than it costs to produce such volumes of data.

Tough competition has driven prices down faster than booming subscriber growth can compensate for, the analyst said, and operators are having to rely on voice revenue to cover the capex and opex costs of their mobile broadband services.

To make the most of mobile broadband revenue opportunities—and limit potential cash drains—the analyst suggests operators reduce subscriber acquisition costs by, for instance, cutting subsidies or limiting dealer commissions.

Strand estimates around a quarter to a third of operators' costs go on sales acquisition and just 10 to 15 per cent on building and maintaining their networks.

Operators should also put caps on basic mobile broadband services—and block the likes of P2P traffic and VoIP—to ensure the minority of customers who can rack up a quarter of network traffic with their bandwidth-draining ways are made to behave. Or to pay: access to these services can then be offered as a premium rate add-on to generate new revenue streams.

Operators should also look to launch a combination of micro payments and premium value added services to enable third-party content producers to develop, market and sell services to users.

The analyst observed that mobile broadband does not take off until all operators in a market have launched HSDPA (aka 3.5G) networks—meaning all the players have a chance to grab a large slice of market share.

To stand out in this levelled playing field, the analyst suggests operators should launch bundled data services—such as hosted Exchange—to boost service functionality and create disincentives for customers to switch to other operators.

There are now close to 100 million mobile broadband connections worldwide, according to mobile operator industry body the GSMA—out of a total of four billion mobile connections. The industry is predicted to reach six billion mobile connections by 2013.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE