European operators enter 'co-op or compete' era


Successful partnerships between competitors are an uphill struggle unless there are clear and identifiable benefits for the involved companies.

Given the sorry track record that European mobile operators have in forming alliances, the sudden flurry of co-operation announcements from across the continent provides insight into how these companies are now adapting their strategies to accommodate a changing business environment.

However, one could also view these new partnerships as a belated knee-jerk by the operator community in the panicky realisation that, unless they combine their resources, mobile operators will lose their prime status in the communication business.

Last week's announcement that TeliaSonera agreed to join the M2M alliance formed earlier this year by France Telecom (FT) Orange and Deutsche Telekom (DT) illustrates the issue.

Many M2M customers want a European-wide solution, without the hassles of striking deals with operators in several countries with the resulting billing and technical support issues. This sort of co-op agreement makes eminent sense and has a chance of success. Of note, the FT Orange executive involved with the alliance, Anne-Marie Thiollet, seemed to leave the door open for other operators to join, adding that only by working together could M2M become a reality.

At a more local level, the UK joint venture between Vodafone, Everything Everywhere and O2 to make m-commerce--including m-payments and mobile advertising--easier for all to use is noteworthy. But this alliance, while having grand ideals, seems to have been kicked into life by the major operators fearing that, unless they did something quick, others (namely Google and/or Apple) would rapidly move to snatch this revenue stream from the mobile operators.

FT and DT have already agreed to share networks and equipment procurement--which must considerably worry the infrastructure vendors--and it might be natural for TeliaSonera to want to join parts of this arrangement.

However, making an alliance of this size effective, in terms of meeting individual financial objectives and deployment timescales, is fraught with difficulties and could be its downfall.

But a new study from Pyramid Research believes that European telcos are moving into a phase of  "co-opetition" as they try to preserve their EBITDA margins by reducing capital expenditures and operating expenditures. According to Pyramid analyst Sylwia Boguszewska, operators are looking for greater co-operation with other players at every stage of the value chain, with a focus on those initiatives that will lead to new revenue streams.

Boguszewska maintains that, while these partnership might take operators away from their core competencies, the ability for them to innovate through these partnerships and have a say in the future developments of the telecoms, media and technology marketplace will be critical to their future successes.

Without doubt, the mobile telecoms landscape is changing as consumers look for innovative technology and services. For operators to believe they can be the single provider of these--the walled-garden approach--is turning back the clock to a failed business model. What is needed is for operators to promote the attributes of the network alongside that of content and services.--Paul

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