Out with the old, in with the new... lessons from emerging markets

Having seen many of the world's more mature global operators invest heavily in emerging markets--albeit that France Telecom Orange is still trying--it might be time to challenge the long-held view that these established mobile service providers can teach new entrants what's best.

During the early days of mobile communications, when demand for voice services seemed insatiable, the business models were much simpler as consumers clamoured to acquire a handset and become "mobile."

Nowadays, saturated markets have forced operators to battle for subscribers while attempting to cut Capex and Opex budgets.

Operators in emerging markets have not been through this evolution, having been confronted with hugely different challenges from which operators within mature markets could benefit.

According to the market research firm Ovum, lessons from these newer operators could apply to every business facet of operators based in Western Europe and developed Asia.

Ovum's Steven Hartley believes that the lessons for established players range from the highest levels of corporate strategy, from marketing, distribution, and services, through to devices, operations, and network infrastructure. "Mobile operators in emerging markets already have ample experience of operating in extremely price- and margin-sensitive environments, and many mature-market operators now find themselves in exactly the same situation."

While there are many areas whereby valuable knowledge could be gained, Hartley claims that the most fundamental lesson to be learned was that profit and not ARPU must be the primary concern for today's mobile operators, regardless of location.

Intense competition and downward pressure on revenues means that operators in mature markets are facing the same focus on maximizing margins on low-ARPU subscribers as their emerging markets counterparts. Hartley maintains that this must lead to an even greater focus on rigorous cost-efficiency in mature markets than is seen today. "Network energy efficiency allied with outsourcing and a growing need to attract profit from even the lowest-spending customers are all symptomatic of this trend."

Other areas where these new entrants have led the way include mobile banking. Sophisticated services have been in operation, most notably in East Africa, for some years, whereas the financial services and mobile operator industries in Western Europe still fight over customer ownership with little if any progress in providing a service.

There is the certain danger that these mature operators enter "less advanced" markets with long-established business models that are built to better serve conventional operations in Western Europe.

Perhaps it's time to reverse the flow and revive these stodgy global giants with some fresh and innovative ideas.-Paul

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