Margin squeeze could see costs exceed revenues for some mobile operators

Mobile operator costs pass $800bn annually as margins become squeezed, so network optimisation is critical to redress the balance, Juniper Research report finds

Margin squeeze could see costs exceed revenues for some mobile operators

A new report from Juniper Research has found that with annual mobile operator expenditures now in excess of $800 billion (£510bn), several leading players face the possibility of costs exceeding revenues by the end of the decade without remedial action.

According to the report – Mobile Operator Business Models: Challenges, Opportunities & Strategies 2014-2019 – a combination of flatlining revenues allied to surging data traffic costs could ultimately threaten the viability of network operations.

In an analysis of 12 international operators, the report found that margins had fallen by an average of 6.4% over a three year period, with 5 of those surveyed experiencing decreasing margins in every year throughout the period.

Furthermore, a number of major operators now have single figure margins: with costs currently increasing at 1.5%-2% per annum, the situation is unsustainable in the longer term.

Meanwhile, the report found that without more widespread network optimisation, the situation could become critical in a number of developing markets. It argued that with surging mobile Internet adoption in the Indian Subcontinent, regional operators could see data costs outstrip data revenues by $45 billion (£28.7bn) within three years unless networks are optimised.

Shared data plans key
However, the report pointed to a number of success stories, particularly in the US, where players such as Verizon and AT&T have bucked the trend in falling margins by introducing shared data plans. It observed that Verizon had seen wireless revenues increasing by more than 7% despite operating in a saturated market, while AT&T now had more than 14 million households on shared plans.

According to report author Dr Windsor Holden: “Given the threat from OTT (Over The Top) VoIP and messaging services to core service revenue, the US emphasis on focusing the value on the data element is absolutely the right way to go. This is particularly true within an increasingly 4G environment.”

The whitepaper, Mobile Operators ~ Strategies for Growth, is available to download from the Juniper Research website together with further details of the full report and the attendant Mobile Operator Business Models Excel.

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