Data Dollars

Communications providers continue to search for new revenue streams as voice revenues flatten or fall. Ronan Shields looks to the region to see whether any successful data alternatives have been discovered.

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By  Ronan Shields Published  May 9, 2007

Alternatives to voice-driven ARPUs|~|Data.200.jpg|~|Services such as mobile TV are expected to rejuvenate non-voice data revenunes for network operators in the MEA. |~|Communications providers continue to search for new revenue streams as voice revenues flatten or fall. Ronan Shields looks to the region to see whether any successful data alternatives have been discovered. Voice-driven ARPUs are flattening or decreasing across the globe; and network operators in mature markets such as Europe, Japan and North America have been quick to develop new revenue streams in order to compensate for the revenues generated by the provision of voice services. Telenity, a US-based provider of next generation converged services platforms and applications; argues that network operators should look to the realms of ICT convergence in order to provide differentiated services to shore up their revenues streams. “Mobile data applications should follow the Web2.0 success in the internet domain; service providers must deploy the right service delivery infrastructure from the ground-up that will enable both new service creation and rapid time to market,” says Didem Karabatur, Telenity’s director of marketing communications. The company also claims that the role of governmental bodies is crucial to the development of this market segment. “The regulatory bodies should creatively enable the fostering of a liberated environment that would feed the growth of multi-model voice, data, location, content, and messaging powered services,” adds Karabatur. According to figures published by research house iSuppli, telecoms companies across the globe will fork out US$41 billion during 2007 in a bid to offer enhanced premium content services. While this figure may appear staggering the firm highlights that it represents a slowdown in growth, representing a 1.6% year-on-year increase in telco spending from US$40.4 billion in 2006. This percentage growth is small compared to the 10.7% year-on-year rise in spending between 2005 and 2006, and the 8.3% rise during the 12 months prior to that, the report concludes. Operators in the Middle East and North Africa are regarded as lagging behind their counterparts in the West with respect to the development of comprehensive non-voice services, though this view is changing. As a company specialising in providing communications software to small-to-medium sized businesses in the Gulf region, Avaya reports that many sectors of the region’s industries are dawdling when it comes to the uptake of next generation services. “The amount of businesses in the enterprise and government sectors still using fax documents as a primary mode of communications is sizable, even when it comes to large enterprises,” says Neville Perry, converged applications manager for Avaya MENA. “There are certain financial reasons for this as a lot of companies in the region have upgraded to using fax systems as little as three years ago and they are now somewhat hesitant to throw them out,” he adds. “However, there are some companies and industries that are making the move towards the e-channel. There has been some decline in the UAE’s public sector use of fax traffic but in the banking and telecoms sector I can see no substantive shift to using other forms of data transfer.” Jordanian mobile operator MTC Fastlink anticipates future growth in non-voice revenues in the region, claiming data and value added services already account for 12% of its total revenues. “There is a lot of potential in the Middle East and Africa. Data and value added services typically contribute around 4%-12% of total revenue,” claims Ziad Al Masri, mobile data services senior manager at MTC Fastlink. “Fastlink with 12% of overall revenues coming from non-voice services is one of the market leaders in this area in the MEA region but compared to Western Europe and the developed Asian markets such as Japan and Korea, the MEA markets have a long way to go,” Al Masri adds. MTC Fastlink also reports that SMS accounts for an overwhelming proportion of data revenues in the consumer market. Telenity also highlights the importance of peer-to-peer messaging in contributing to non-voice revenues, though the company identifies location and rich multimedia enhanced community services such as location based chatting, video ring back tones, multimedia-blogging and content sharing, as spurring the market. Telenity’s Karabatur also cites research claiming that Middle East and Africa operators will leverage the broader deployment of both cable and wireless technologies to drive non-voice revenues. “According to industry analysts Ovum, non-voice revenues in the MEA region will grow from US$5.8 billion in 2007 to US$9.5 billion by 2010, representing a 13% compound annual growth rate. This is compared to a 9% CAGR in Eastern Europe, a 6% CAGR in Western Europe and an 11% CAGR in Latin America,” quotes Karabatur. Telenity further claims that the MEA region is second only to the Asian market in terms of profitability, with EBITDA standing typically at 47% compared to 48% in Asia. With the UAE widely regarded as one of the most developed markets in the region, the enterprise sector is looking towards network operators du and Etisalat to lead the market in terms of service provision. Market newcomer du claims that market players must increase the levels of cooperation in order to boost content-based services such as WiFi and WiMAX. “Roaming agreements on GPRS, 3G, WiFi across borders will help to foster data services especially among the business and leisure visitors to the region,” claims a company spokesperson. “One other element is the need to ensure standards in the devices that can provide access to non-voice applications, today this is a fragmented market,” he adds. Etisalat was the first network operator in the Gulf region to launch BlackBerry to enterprise customers 12 months ago and claims that UAE businesses have responded so positively that it had to extend the service to incorporate leisure-users in 1Q07. ||**||Blackberry|~|Data.Japan-200.jpg|~|Japanese network operators have leverage their network capabilities to produce ARPUs of US$57.|~|“After the success of the BlackBerry service in the enterprise segment we decided to implement a segmented approach with this solution,” says Sadik Al-Jadir, senior manager of marketing for businesses at Etisalat. The operator claims to have leveraged BlackBerry’s reputation in the push e-mail segment to win over an additional 8,000 consumers since its launch in February 2007 with an additional 1,000 users taking up the service every month. “We believe that this trend is being driven by the end-users who are utilising the service to access both work related data as well as personal e-mails,” adds Al-Jadir. Etisalat also claims that a process of localisation will prove successful. “We are currently working closely with Research In Motion to be the first operator in the region to offer this service on an Arabised platform in 3Q07,” Al-Jadir says. In Jordan, MTC Fastlink agrees that localised content specifically targeted towards Arab and African audiences will encourage uptake of data services. “Different segments demand different services to cater for their specific needs and requirements, which is why operators and their partners need to develop and work towards the customisation of their services and not just provide a simple plug and play solution and service,” Al Masri suggests. “The consumer has a specific requirement, and so does the corporate sector. Integration with their backhaul and systems is crucial for adoption,” Al Masri says. Additionally, MTC Fastlink argues that the development of this segment depends on several variables and operators must be patient when it comes to expecting a return on their investment. “Smartphone penetration across the region is crucial to the development data services, as are the levels of internet penetration, which remains low in most markets in the MEA,” asserts Al Masri. With network operators in almost universal agreement that the enterprise segment will be the next driver for non-voice mobile services due to the demand for always-on e-mail connectivity, the next challenge appears to be how to broach the all-important consumer market. Dubai-based consultancy and mobile telecoms supply chain execution and management company Workz recently paired with multimedia company Mobile Streams in a bid to offer regional network operators premium content aimed at local audiences. “We have agreements with some of the world’s leading content providers and media producers and a large amount of this media can easily be translated to the internet message access protocol market and its wide segment of users,” says Warren Platt, executive vice president, global business development, Mobile Streams. The two companies maintain that content services such as downloadable monophonic, polyphonic and real-tone ring tones, wallpapers, music and videos as well as cartoon animation and games increase customer satisfaction and balance or increasing ARPUs by appealing to the youth segment. “With the rising cost of new subscriber acquisition, it is crucial for mobile operators to maximise revenues through existing users. Encouraging existing users to access premium network services will increase customer revenues significantly,” says Alan Barry business development director at Workz. “With the operators directly hosting the media content they also have the potential to provide the customer with an overall improved user experience thereby increasing customer satisfaction,” he adds. Network operators are increasingly looking towards the developed markets of the Far East where content services have grown exponentially over the last few years highlighting the need for increased availability of higher bandwidth capacity across the region. “Operators need to take the lead in creating environments and ecosystems where small-to-medium sized content and service providers can propose new services to customers,” claims the du spokesman. Telenity cites research highlighting how Japanese network operators have successfully leveraged 3G network infrastructures to achieve the highest ARPUs in the world. “According to figures published by the Yankee Group, Japan seems to outshine the rest of Asia with mobile data ARPU levels of US$57. While operators are struggling to retain profit levels, mobile data revenue streams continue robust growth, generating US$76 billion, with 860 million people using the services in 2006,” claims Karabatur. UAE second operator du asserts that in many cases, operators need to educate customers on services that they have already launched while launching new services across enhanced service delivery platforms (SDP). Telenity also adds that operators should have a complete ecosystem in place for the rapid deployment, provisioning, execution, management and billing of such applications. In addition, the company claims that SDPs have the ability to combine both wireline and wireless value-added services through common service enablers such as messaging location, and multimedia. “Operators will be able to launch thousands of new services quickly using SDP and open up new business model to third-party application developers and content providers,” adds Karabatur. iSuppli estimates that the internet protocol television (IPTV) market will provide the next growth spurt for telecoms operators in the near future, estimating that carriers will spend US$9 billion on IPTV-related communications equipment in 2007 alone. “Telcos have been losing an average of 4% annually from their subscriber base, and more than 4% per year from voice revenues. This phenomenon is universal, with no region and no telecoms company unaffected,” says Steve Rago, principal analyst, IPTV, broadband and digital home research for iSuppli. Earmarking the North American and European markets as the main drivers of this trend, the iSuppli forecasts that global IPTV subscribers will soar to 105.8 million in 2011, representing 98% CAGR from 3.4 million in 2006. Motorola claims the crossover appeal of mobile TV is another opportunity for industry to drive non-voice revenues. “We anticipate that business and leisure users will want to take advantage of the exciting new technologies available in the region,” says Hassan Tavakoli, vice-president of Motorola MEA. “The Middle East is poised to make an unprecedented leap in the next two years in terms of its capability to deploy solutions such as IPTV and create wireless broadband networks that will enable data access to grow well into double digits,” he adds. This trend is already taking root in the region.||**||

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