The Sum May Be Greater Than the Parts - by Tom Dibble

The future of the burgeoning wireless industry is far from clear. A crystal ball is about as close as you'll come right now. The mobile community struggles alongside other consumer industries in these conservative times. Short-term, the lack of new investment may be the biggest challenge for operators facing uncertain seas ahead.

MNOs who are usually viewed as highly successful executors of new service launches are currently suffering from funding shortages, which curtail new services. In Q3 2002, NTT DoCoMo reported a 95% profit reduction due to losses on overseas investments: namely AT&T Wireless, KPN Mobile in the Netherlands, and Hutchinson 3G in the UK.

 

"We will continue to increase our international partners to achieve the smooth delivery of 3G around the world...our focus is on Asia now," says Keiji Tachikawa, DoCoMo's CEO. Similarily, in Western Europe, it seems as if many related industries in the food chain are still cautiously and quietly downsizing. Although economic times force officers to take a second look at operations, mobile use is growing and some analysts are predicting that it will overtake PC penetration rates.

 

The International Telecommunications Union (ITU) report "Internet for a Mobile Generation," considers the analysis that mobile communications has a surprisingly similar growth pattern to the Internet, but with a delay of approximately two years. The ITU says, "It requires no great leap of the imagination to believe that the convergence of mobile communications and the Internet will produce something big, perhaps even the mythical sum that is bigger than its parts."

 

Industry growth will be driven by new and innovative mobile data services. This growth will be encouraged by the increased availability of mobile content, SMS, picture messaging, and other MMS services according to analyst forecasts. The amalgamation of mobile communications and the Internet is going to be the major demand driver of telecommunications of the first decade of the 21st century according to the ITU. Nonetheless, this growth, which is predicted to be around 30% of total service revenue by 2007, may not be as fast as the industry may want, given its $100 billion investment.

 

Organizations not directly linked with the mobile landscape generally expect new mobile data services to impact positively on their business; 45% see opportunities for increasing business and enhancing customer relationships. Marisa Drew, managing director of investment banking at Merrill Lynch International, envisions that the impact of changes in the mobile industry on her company over the next five years will be, "to increase our efficiency. We will be able to spend more time out of the office with clients and do more with less administrative resources."

It is common analytical belief that enhanced messaging services will uplift revenues during 2003. Consumer usage research and analyst forecasts within the mobile ecosystem sustain this theory. For instance, Yankee Group envisages messaging to contribute more than 23% to service revenue by 2006. Recent figures for 2002 show that SMS contributed approximately 91% of data revenue in advanced SMS markets such as Western Europe.

 

According to recent market research conducted by various established sources, sentiment seems to be that the integration of the personal digital assistant, mobile phone, and the laptop is, without question, a technology driver for new devices. Messaging combined with personal information management applications will drive new mobile data revenue in the short term. It is also expected that mobile content sales will gather critical momentum over the next two years.

 

The industry does not expect m-commerce and location-based services to be substantial generators until late 2004. Packaging and bundling of these services is still widely recognized as a prerequisite to consumer acceptance and ultimate penetration. Emphasis on variety, personal benefit, and simplicity rather than technology-led marketing is a key message MNOs must get across. Gone are the experimental marketing days of WAP in Europe. Consumers are ever more savvy, especially as younger generations age into prime consumer demographic areas.

 

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