Mobile operators profitability challenged within three years, says study

Date: Sun, 07/31/2011 - 22:06 Source: Tellabs press department

Operators must rethink their networks before they run out of cash
Mobile operators profitability challenged within three years, says study Image credited to Tellabs

A study undertaken by Tellabs, based on independent analyst data, has found that profitability could become extremely challenging for some mobile operators within three years. The mobile Internet is forcing operators to transform their networks and business models. Without rethinking the design and capabilities of their networks, costs will surpass revenues for many operators in:

• North America by Q4 2013. In some cases this could happen as early as Q1 2013.
• Developed Asia Pacific by Q3 2014. In some cases this could happen as early as Q3 2013.
• Western Europe by Q1 2015. In some cases this could happen as early as Q1 2014.

The study puts timescales on an issue that has concerned operators since users began embracing the mobile Internet. Traditional ways of handling dramatic traffic growth are expensive. Meanwhile competition has increased pressure on revenues.
“Mobile operators can spend themselves into a hole well before users run out of hunger for capacity,” said Rob Pullen, chief executive officer and president of Tellabs. “Our study shows that simply adding capacity or ‘dumb pipes’ is an unsustainable business. To avoid the ‘end of profit,’ operators must bring intelligence to their networks – it’s critical to carrier survival.”
Dr. Vikram Saksena, Tellabs chief technology officer, added, “It’s challenging for mobile operators to sustain a business model based on bandwidth alone. Adding intelligence to the network adds revenue, improves business fundamentals and enables a more profitable business.
“To provide critical intelligence for operators to survive and prosper, we’re introducing a new smart mobile backhaul solution and an improved smart mobile packet core platform” Dr. Saksena said.
Network intelligence encompasses many variables in operator networks. Powerful analytics enable smart networks to deliver the right bandwidth to the right users at the right time. Intelligence brings new traffic management efficiencies, new business models and new revenue streams. Intelligence will reverse the trend of declining operator profits.

Regional Differences
North America – Higher network access costs make North American operators most susceptible to the changes wrought by the mobile Internet. This is despite earlier adoption and roll-out of more cost-effective network technologies.
Developed Asia Pacific – Rapid revenue decline is the primary challenge faced by operators in developed Asia Pacific markets. Analysys Mason predicts a revenue per gigabyte decline of 88.2% between 2010 and 2015.
Western Europe – Lower network access costs and a more gradual revenue decline lessens the impact on Western European operators.

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