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The sales of smartphones is currently exploding
but are mobile operators experiencing similar growth on their bottom line?

There is currently a great deal of media attention on the smartphone market and how it is developing, but for some reason a great deal of what the media is writing is not the reality that many mobile operators are currently grappling with.
Many smartphone articles often give the impression that the increasing sales of smartphones is simply the single best thing to ever happen to mobile operators since Graham Bell said “hello”! But is the smartphone really that good news for mobile operators as the media claims?

In many countries, Strand Consult is seeing that the increasing interest in smartphones is resulting in many operators naturally increasing their focus within this area. Operators are amongst other things increasing their smartphones subsidies, resulting in their smartphone sales and acquisition costs exploding at the same rate as their actual sales of smartphones.

As operators increase their focus on smartphones, customers will naturally also be influenced into accepting these new types of multifunctional mobile handsets, which again will stimulate the growth of the smartphone market. This self-perpetuating effect is currently happening on most smartphone markets around the world.

The iPhone is good business for operators - isn't it?

Strand Consult has been following the mobile industry for 16 years. We were the first in the world to voice criticism about the iPhone and how the iPhone was having a negative influence on many operators’ business cases. Our iPhone market report from 2009 - http://www.strandreports.com/sw3896.asp - reached a distribution of over 10,000 copies and is probably the single most read and quoted report in the history of the mobile industry.

In that iPhone report we documented how a number of mobile operators experienced significant increases in their SAC after launching the iPhone and furthermore how a number of those operators subsequently experienced low cost MVNOs offering the operators’ customers inexpensive mobile traffic on their heavily subsidised smartphones, as soon as their minimum subscription period expired.

In countries like Denmark, Norway and Germany, a number of mobile operators experienced that their high-end smartphone customers quickly disappeared once their subscription expired, resulting in a far from optimal financial result from many smartphone customers.
 
Japan is leading the way - how are they doing that?

A great deal has been said and written about Japan through the years. This is a country with a population of 122 million people and is the world leader regarding the size of revenue that mobile operators are receiving from non-voice traffic. But very few have actually taken the time to research what the Japanese are doing to generate this extra revenue.

Let's take a look at some of the facts about the Japanese mobile market. At the end of 2010 there were only around 2.5 million smartphones in Japan. In other words the Japanese mobile market is probably the single most developed mobile country in the world with the lowest smartphone penetration. But despite this, the Japanese consumers are literally crazy about many of the different types of mobile services that they use daily on their “non-smartphone” mobile phones.

Japan has a long tradition of mobile operators and content providers working together to create innovative mobile services - a tradition that has resulted in customers not focusing on which particular OS their mobile phone uses, but rather on which services and service platforms it supports. In Japan people do not discuss whether their phone is a smartphone or not, they talk about which services they are using and can recommend to others.

Why are the western developed mobile markets so far behind - or are they?

Many articles in the media give the impression that the world is full of journalists that have some sort of naive belief that only smartphones can be used for mobile services that are not voice or SMS.

Many journalists have either overlooked or forgotten to examine what people are also using mobile phones for and have therefore little idea about the actual size of the mobile services market for "traditional" mobile phones and the many types of services that people are already purchasing, downloading and using on completely ordinary mobile phones

Take for example the mobile Java game market. The value of mobile Java games sales is in itself four or five times larger than the value of all the games sold to all iPhones in the whole world. But considering that the number of people that purchase mobile services for traditional feature mobile phones outnumber the total number of smartphones, it does seem very odd how little attention this area receives from the media, resulting in many people – even in the business - making decisions based on what they believe is true, rather than facts and results from the market.

If operators want positive financial results from their smartphone sales, they need to start by realising that it is not the smartphone market that is driving the services market - and thereby their services revenue, but rather the service platforms that each individual mobile phone supports. A mobile phone that supports the correct service platforms will generate far more revenue from mobile services than a mobile phone with poor service platforms support.
Just the fact that over 100 million mobile customers use Opera mini every month on ordinary mobile phones gives a much clearer view of the real mobile market. In fact there are currently more people using Opera Mini to surf the net, than the total number of people who own an iPhone!  The next question would then be; which customer group do you think has the possibility of generating the largest mobile services income in the short, medium and long-term?


If you would like to learn more about the smartphone market, how it is developing and how a market player can achieve success in this area, please do not hesitate to contact us here at Strand Consult.

We have developed a customised workshop concept that can help you develop, optimise and launch your business strategy for this area.  Contact Us


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