Operators fight for life after voice

26 May 2006

The unstoppable rise of the mobile phone was always going to hit a ceiling when everybody had one but mobile operators are the kind of people that think nothing of raising the roof.

The issue is no longer about the numbers of handsets (the Commission for Communications Regulation has reported 102pc penetration in Ireland), it’s about grabbing a bigger slice of total voice minutes and data services.

It’s no coincidence that fixed-line penetration has continued to decline among residential users and that business customers are putting a greater onus on mobile solutions in their communications infrastructure.

“The mobile phone has become business people’s primary phone. If they have the choice they will grab it before the fixed phone every time,” claims Colm McVeigh, Vodafone’s head of corporate and business. “Our propositions are about data but they are also about gaining an increasing share of the total telecom minutes available.”

This had led to increased competition around voice tariffs, something that operators have grown accustomed to, according to Paul Farrell, marketing director at O2. “The frequency of price reviews is increasing,” he says, “and by the nature of the market and increased competition it will probably become more intense, but it’s always been there.

“In the past it was the bigger accounts that tried to make sure they got the best deal; now smaller businesses carefully monitor costs and make sure they are getting their needs met. Traditional services are the bread and butter but in the future we have to find something that keeps us relevant beyond voice. That has to be in the business solution space.”

Like O2, Vodafone has long grown used to the idea of diminishing returns around voice and is looking towards data for new revenues. Recent deals with notebook manufacturers Dell, HP and Lenovo to embed a 3G service at the point of purchase is a strategy that Vodafone expects to pay dividends. “That decision point will impact strongly on market share,” says McVeigh, “and it opens up new areas of business for us. IDC has predicted a 30pc growth in notebook sales so it’s important for us to gain a strong market share in what will be a new revenue stream.”

Email on the move remains the killer data application, according to McVeigh. “People want the office experience on the move; push email is the key element and it’s now permeating into other technologies.”

“The tipping point was BlackBerry,” says Farrell. “It delivers a seamless and reliable service without having to log on and sync up. There is no doubt that it has grown the credibility of the concept of mobile data and there is still growth to be had around delivering it alongside a value voice offering.”

Delving deeper into the concept of the mobile enterprise, Vodafone has partnered with Microsoft to develop a push email service in a deal that McVeigh describes as “exclusive for the moment”. The launch date is still to be confirmed.

O2 has pursued a more “customised approach” to mobile enterprise, according to Farrell. “We have made a huge investment into how we manage our accounts ands we provide a more complex suite of offerings that need more backup and support.” Padraig Coakley of Mason Communications confirms the operator view that the mobile application market is starting to take off in Ireland. However, he says it has its limitations. “It is still aimed at the mobile user rather than remote users who still prefer to use fixed connections,” he says.

Arguably the most ambitious strategy from any mobile operator is Wireless Office, an assault by Vodafone on the fixed-line corporate market. It is a product that provides free internal calls to its business customers and Coakley thinks it’s an impressive offering.

“You can see where they are going with that. They have been using the Republic as a testing ground where I know companies that have taken it on and are very happy with it,” he says. “More and more voice traffic is migrating to mobile networks and I’m sure the operators will continue to make sure that happens to the detriment of old fixed-line operators. Traditional voice traffic is definitely disappearing.”

To find new sources of revenue in the business space, operators are taking more time to tailor their solutions to target different segments, loosely defined as corporate and government, SME (small and medium-sized enterprise) and SoHo (small office home office). The SME and SoHo space has seen intense competition, eroding the dominance of Vodafone which had inherited a big market share from Eircell.

Last year Meteor entered the business market and has successfully captured a slice of SME customers. “We said from day one we’re a value proposition and that’s why we’ve been successful,” says Stuart Kelly, Meteor’s national business manager. “Since we launched at the SME customer we’ve seen Vodafone cut its prices dramatically to compete.”

Farrell says O2 has also enjoyed considerable growth among SMEs. “From three years ago when it was dominated by Vodafone we have managed to triple our share of the market.”

The impact of fixed-mobile convergence, and the prospect of single billing where fixed and mobile services are delivered by the same service provider, became a possibility in Ireland through Eircom’s acquisition of Meteor. Are the other operators worried?
“If somebody can deliver a good, seamless service it would have appeal,” admits Farrell, “but the key driver for customers has to be a value proposition for taking the two services.”

“The original idea was to aim at the corporate market to provide a complete solution but the possible takeover of Eircom by Babcock & Brown Capital has put such plans on hold,” reckons Coakley.

He is also sceptical of another much-hyped development, the operators’ plans to launch an HSDPA (high-speed downlink packet access) service later in the year. Capable of quadrupling existing 3G data speeds, there has been much talk of it taking mobile operators into direct competition with traditional broadband providers. “They will go that way eventually but not yet,” says Coakley. “We’re 18 months off it happening.”

By Ian Campbell