According to a recent report published by Informa Telecoms & Media, European mobile operators are re-assessing their business models and considering alternative approaches to dealing with the current operating climate. The impact of the economic downturn, the subsequent shift in consumer behaviour and intense competition has forced mobile operators across Europe to change their strategies, with many reducing capital expenditure and others introducing discounted pricing models. However, operators need to be careful that these short-term solutions do not restrict growth in the long-term.
"We have seen a reduction in capex by many of the European carriers, with the total spend in Europe dropping to €6 billion in 2Q09 which is a y-o-y decrease of 8.6%. However, at a time when the operating climate is as competitive as it is, they should really be looking to increase their investment in high-speed network rollouts. The fall in prices and the commoditization of voice services has seen the need for operators to offer new data services, which means there is a very real opportunity to differentiate from their competition and invest in new technologies," explains Marisol Gomez, Research Analyst, Informa Telecoms & Media.
Although the overall trend has been to reduce capex, many operators are simply monitoring their costs and looking at alternative strategies to combat the overall decline in revenues and the rise in churn. Informa Telecoms & Media calculates that total revenues in Europe were €50billion in 2Q09 which represents a y-o-y decline of 4.7%.
"We have seen the emergence of a number of trends to tackle the decline in revenues, with pricing models very much at the centre of strategic thinking. Cut-price tariffs, SIM-only plans, promotions which benefit the unemployed and bundled offers have been implemented with varying degrees of success, in a bid to win new customers and keep existing ones."
"With unemployment levels soaring in Spain, operators have resorted to adapting plans aimed at retaining customers through difficult personal times. In highly penetrated markets in Western Europe, many operators have turned to SIM-only plans with impressive success, particularly in the UK, where in 2008 mobile operators sold over 1.2 million SIM-only subscriptions according to Ofcom," added Gomez.
"In the long-term, the challenging economic environment presents new opportunities to those able to adapt to the climate and those who understand customer needs and behaviour. But, at the same time, the difficult operating conditions can highlight bad management and past commercial flaws. Never before has there been a time when the delivery of relevant content and services at the right price has been such a priority for operators," Gomez concludes.