Over-The-Top (OTT) Services a Potential Threat to Mobile Operators' Call Revenues

SmartphoneWireless services are a key area for telecommunications' industry growth in 2014, and industry players around the world are competing heavily for a lead position in these developments.  In fact, it is expected that subscriptions to wireless services will overtake the actual world population due to the number of multiple subscriptions owned.

A key development in this market is the rise of Over-The-Top (OTT) service providers.  For example, both mobile VoIP apps and mobile Instant Messaging (IM) are OTT services, representing a potential threat to mobile operators’ call revenues.  Growth is expected in these services due to improvements and a greater community acceptance.  Other forms of messaging, such as SMS, are increasing in use as well, particularly free messaging services offered by social networks and free apps such as Whatsapp.

Over the next few years, it is expected that the mobile operators will lose billions in revenue to these new cheaper or free messaging services. Mobile operators will need to consider revised pricing strategies to fight this threat and maintain their client base.

SMS, which traditionally accounted for around 80% of overall messaging revenue, is expected to decline and, by 2015, will account for only around 60%.

The ongoing improvements in infrastructure have driven the continuing uptake of mobility and broadband around the world, and, in 2014, mobile broadband is, in fact, the fastest growth area for the overall telecommunications sector. But, increased usage has caused data traffic jams on 3G networks as this infrastructure was not designed for the rapid increase in traffic its experienced over the last couple of years.

The release of 4G/LTE mobile broadband and growing uptake by consumers and businesses will certainly ease the issue in the short term; but, as user uptake increases so will the amount of bandwidth consumed. Anticipation of the growing demand has resulted in LTE becoming the fastest developing mobile technology to date.

Service differentiation between mobile operators competing for clients will become crucial with customer satisfaction being a key focus area.  Given that the cost of acquiring customers is expensive, reducing churn rates can offer significant savings to telcos.  In addition, lowering roaming charges also encourages goodwill at both a regulatory and consumer level and lessens the chance of bill-shock.

The enormous amounts of data being continually gathered on customers and their buying behaviours (Big Data) provides an unprecedented opportunity for mobile operators to develop new products and services to maintain their customer base and encourage new ones to join them.

While the phenomenal growth of the smartphone is expected to continue for a number of years, it is expected to eventually become a utility product.  This change is anticipated in the developed markets first, with the developing markets following as cheap models from China and India are adopted.

The BRIC markets of Brazil, Russia, India and China are key markets for opportunities for telecoms due partially to their large populations and increased globalization.

Since 2013, the international telecom community has also shown unprecedented interest in the emerging market of Myanmar (Burma) due to major changes in government legislation liberalising the telecoms industry.

For more information, take a look at Paul Budde Communication Pty Ltd's recent market research report on Global Mobile Communications Key Statistics, Trends and Regional Insights, or browse all their reports on OTT services.

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Editor's Notes:
This post was written by an compiled editorial team representing Paul Budde Communication Pty Ltd. All insights and original content provided by Kylie Wansink, Senior Analyst Global at BuddeComm.

About Paul Budde Communication Pty Ltd:

Paul Budde Communication Pty Ltd logo, featured on www.blog.marketresearch.comPaul Budde Communication is a telecommunications and information highway consultancy company specializing in market analysis. Paul Budde is a well-known industry consultant and market analyst with broad international experience. Research concentrates on the management and marketing issues of the telecommunications and information highways markets. Having been involved in the industry for over 20 years, Budde associates have become experts in analyzing the information. As we are an independent operation, we can assess the market objectively and provide accurate information about trends and developments, with realistic time-frame predictions. Paul Budde Communication publishes approximately 1,000 market research Web reports and 25 specialized Web news reports.

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Topics: Telecommunications & Wireless