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Mobile phone operators unsure that data will drive growth

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The rising use of data services is unlikely to sustain mobile operators' revenue growth. Yet service providers are falling back on cost reductions and are not doing enough to find new ways to expand. These are the main findings of a new study by the Economist Intelligence Unit and sponsored by InnoPath.

The report is based on a December 2009 survey of 197 senior executives in the mobile telecommunications industry worldwide. Only a minority (44%) says growth in revenues from mobile data services will make up for a decline in voice revenues over the next five years. This reinforces sceptics' doubts about data's role in sustaining mobile operator's profitability.

"Operators recognise the challenge posed by non-traditional service providers such as Skype and Google, but they have not yet clearly defined their strategies for making their mobile data businesses more competitive," says Katherine Dorr Abreu, senior editor at the Economist Intelligence Unit.

Survey results show that:

Mobile operators plan to focus on developing content and applications for phone users, but their strategies for doing so are still unclear. Almost half of respondents say that in the next five years their company will develop revenue-generating content and applications to reduce its reliance on traffic revenues. Yet more than two-thirds prefer to partner with third-parties in offering applications through online shops - and this means sharing revenue.

Open networks are the wave of the future. Operators now believe that open networks, which allow their customers to visit third-party sites, will help them to make profits. A large majority of respondents say that operators adopting an open-network policy will be more successful than those that do not. And less than a third say that legislation supporting the principle of "net neutrality" (which would lead to open networks) would hamper their ability to invest in advanced networks. Openness poses a risk, however: a mobile operator's presence in the content and application market is likely to be even smaller than it is now.

Operators may be over-reliant on next-generation networks to ensure profitability. Companies will focus on boosting efficiency over the next five years, and are counting on next-generation networks to help them achieve this, the survey shows. These will provide new capacity for the high-bandwidth services operators plan to develop. And although the networks will help alleviate the burden of high traffic volumes engendered by flat-rate pricing, operators may also revisit the issue of pricing in their search for profits. Fully 58% of survey respondents think usage schemes are more likely to ensure profitability.

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