Informa: 2006 A "Watershed" Year For Mobile Phone Industry"

LONDON -(Dow Jones)- Research company Informa Telecoms & Media, part of Informa PLC, Wednesday said 2006 will be a "watershed" year as mobile phone operators change their strategies in response to a number of major threats. These include high subscriber acquisition costs, a higher churn - the rate at which customers change networks- and falling prices.

Informa said growing optimism within the sector is tinged with caution about structural change within the industry.

Informa's annual report is based on a survey of over 1,000 senior industry professionals. For 2006, the report highlighted a growing sense of optimism with 68% of those surveyed more confident about the industry's prospects in 2006 than they were a year earlier.

Informa said the unsustainability of the traditional operator business model will become more apparent in 2006 as operators come under more pressure as a results of higher churn rates, price erosion and high subscriber acquisition costs. Of those surveyed, 60% expected subsidies to decrease or stay flat on 2005 levels over 2006, while 84% expected the price of voice services to decline by up to 25%. Meanwhile, 49% said churn will rise in 2006.

Informa also expects a rapid evolution of the mobile virtual network operator concept and see network operators becoming more amenable to the concept. MVNOs, like the U.K.'s Virgin Mobile, don't own network infrastructure and instead lease capacity from network owners. Some network operators in Europe - T-Mobile International in the U.K. and KPN NV's E-Plus unit in Germany - have focused on signing up, or establishing their own, MVNOs to boost capacity on their networks.

Informa also expects convergent services - which utilize both mobile and fixed-line networks - to become more widespread as operators like France Telecom, BT Group and Telecom Italia deploy Internet Protocol-based networks to reduce costs and rollout new services such as IPTV.

Another issue for mobile companies to grapple with is the rise of Voice over IP, or VoIP, services which are rapidly driving down the price of voice services, Informa said. It expects VoIP to take its first major bite out the "mobile cash cow" next year. However, only 30% of those surveyed saw VoIP as a threat.

Finally, Informa said it expects mobile operators to adopt off-portal strategies - where revenue is principally derived from traffic and billing services - with regard to mobile content. This prediction follows a frustrating year for mobile companies, which have struggled to derive meaningful revenue-streams from mobile content services over the past year.

The survey found mobile music and e-mail as the applications expected to generate the most interest in 2006.

Informa Telecoms & Media's Chief Research Officer Mark Newman said in the statement: "The arrival of IP and services based on unlicensed wireless networks will fundamentally change the mobile landscape over the next five years ... With the breaking down of the barriers to entry, price competition will inevitably follow. And if operators are to preserve profitability they will have to either cut costs, develop new revenue streams, or both."

Company Web site: http://www.informa.com

-By Nic Fildes, Dow Jones Newswires; +44-20-7842-9264; nicolas.fildes@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 23rd November 2005