Investment is key to mobile margins

Operators in mature markets will be able to sustain profit margins even with a twentyfold increase in mobile data consumption, according to ReWheel.
But to do so will require significant network investment and cost efficiency measures, and an expansion into new areas of connected devices, the Helsinki-based consultancy said
ReWheel has performed a case study of a European operator in a mature market, using business modeling to project growth through to 2014. The operator's financial results through to 2009 and the projected impact of external market factors were used for the model.
The results show that the operator can maintain topline revenue growth of 3% per year even while ARPU shrinks and mobile data usage explodes, as long as it is willing to invest enough capex to more than double its 3G/HSPA network coverage by 2014.
The operator would have to simultaneously reduce non-network opex by 10%, while still spending enough to maintain quality of service for its customers.
More operational expenses can be saved by upgrading standalone 2G and 3G network sites into single multi-mode boxes, and by using the 900MHz instead of the 2.1GHz band in rural areas, ReWheel said.
Operators will also likely have to look beyond the handset to add-on devices such as tablets and connected multimedia devices to sustain the required 5% annual growth rate in active SIM connections.
While LTE is not expected to provide much of a boost to margins in the short-term, sensibly staged LTE rollouts may be conducted without increasing network opex, ReWheel added.
“Mobile broadband/data is neither panacea nor a telecom plague,” the report states. “The industry winners of tomorrow will be smart operators that seize the opportunity and transform themselves into very efficient data production factories with a sole purpose to serve their customers’ needs.”