|Europe I 2012
|Mobilising the economy, monetizing the mobile sector
|Dr Austin Gatt
|Minister for Infrastructure, Transport and Communications
Dr Austin Gatt was appointed Parliamentary Secretary in the Office of the Prime Minister after the Maltese General Elections of September 1998. Six months later he was appointed Minister for Justice and Local Government.
Dr Gatt received his education at the Lyceum and the University of Malta. He read Law and graduated as a Doctor of Laws in 1975.
The Maltese mobile market is changing rapidly as stiff competition compels service providers to offer more affordable services. Consumers are responding by shifting usage patterns towards voice and data moving away from a preference for text messaging against voice calls. The demand for mobile data offers immense opportunities. The industry has an opportunity to capitalize on the proliferation of ‘over the top services’.
Year on year, the telecom industry continues to open new frontiers. Never before has the pace of development been so dramatic in an industry affecting everyday life. If we look back 20 years, a very short time in human history, mobile phones were considered to be a luxury gadget by many people. In 2011, mobile phones are in the hands of over 4.6 billion people and are at the heart of their way of life.
Telecom is more than just a growing industry, its scale and depth, and the transformation it is bringing puts it at the heart of economic development across the globe.
Over the years demographic groups were defined by the time of birth such as ‘Baby Boomers’, ‘Internet Generation’, etc. A new socio-economic group is emerging with the following characteristics:
• A desire to be constantly connected to the net whether through mobile phones, tablets, etc.;
• A passion for content generation;
• The tendency to form active communities rather than remain passive;
• A gravitation towards social media sites where they can participate in discussions about different ideas;
• A want for creativity and an ease of life not restricted by rigid social structures.
These characteristics affect how people consume information, content and applications and how they adopt and use communications technology. These users take technology and connectivity for granted and want it as an effective tool at their disposal.
Operators need to think of ways to reach this dynamic market through novel solutions and understand better the exact needs of this new breed of consumers whilst taking care of service performance, customer experience and their profitability.
The majority of mobile operators, despite the economic downturn, have continued to invest in new technologies. Like many other companies they are not immune to today’s debt issues but a few years ago economists were asking how operators would fare with a decline in voice revenues. We today have the answer: the demand for data is unstoppable and the investment in the infrastructure has to keep abreast with this experienced demand.
By the end of 2011 the number of smartphones worldwide will exceed the number of PCs and so wireless will become the principal means of connecting to the Internet. At the same time we are experiencing the fusion of mobile phones and PCs.
For the world’s telecommunication industry to continue growing, service providers must explore not only new areas of business but also new, innovative business models. Cloud services are a promising way for carriers to meet new customer demands while developing important new revenue sources. IT services and resources delivered from the cloud can help customers reduce their capital investment and gain from the financial benefits of using opex-oriented models for software, systems and services. Mobile networks are becoming cloud-ready by extending their broadband data capability. At the same time, mobile applications themselves will become smarter by using cloud services.
We are entering into the era of the ‘Internet of everything’. The potential growth of new users is also large because of the opportunity presented by new devices such as smart cars, set-top boxes and electrical appliances. These machine-to-machine (M2M) applications represent millions of cloud devices that will need to be connected and controlled.
The mobile broadband market continues to grow dynamically. A recent report by industry analyst Analysys Mason argues that it will be one of the primary revenue drivers for European operators in the next five years, contributing to almost ten per cent of total mobile service revenue by 2015. The analyst forecasts that total mobile broadband revenue in Europe will increase from €6 billion in 2009 to €17 billion in 2015 at a compound annual growth rate (CAGR) of 18.7 per cent.
Another economic driver is mobile banking and payment. The use of mobile in the banking value chain presents a very significant opportunity for both the banking and telecoms industries. The demand for mobile financial transactions is growing among consumers worldwide. It falls into three categories:
• Mobile banking: this enables customers of banks and financial institutions to assess their account information, transfer funds, trade stocks and buy financial products such as insurance. Recently, mobile banking has seen a substantial rise in the value and volume of transactions;
• Mobile payments: mobile payments allow consumers to use mobile devices to pay for such services as train fares, plane tickets, entertainment tickets (concert, theatre, cinema, football, etc.), parking and digital content;
• Mobile money transfer: this form of m-Commerce involves international remittances and person-to-person transfers. M-Commerce is very popular in countries where most of the population is ‘unbanked’ – where the banking system is not very sophisticated or consumers do not have accounts.
Recent studies by KPMG indicate that the transaction costs for mobile banking are significantly lower than for any other channel, including online transactions and can be provided at a very small fraction of the cost of carrying out the same transaction in a branch or post office.
M-Commerce revenues are growing rapidly: globally, the m-Commerce market was an estimated €340 million in 2009; an increase of 90 per cent over 2008. By 2013, worldwide revenues from m-Commerce are expected to reach €4 billion.
M-Commerce has a role to play, particularly with younger people who are not credit card owners, or people who may not want to use them because of fraud or other security reasons. There is a growing recognition that maximizing opportunities in areas such as gaming and social networking requires greater use of micropayments – many of which will be from mobile devices. The mobile money ecosystem spans a wide range of players: financial institutions, merchants, and chip and equipment manufacturers, to mobile operators requiring close cooperation among all stakeholders.
While mobile data usage on home networks has seen an unprecedented rise in recent years, we are still some way off from a corresponding rise in international mobile data use.
Cost, along with associated complex pricing structures is still the biggest barrier to uptake of international data roaming with around 40 per cent of enterprise customers choosing to switch off their data capabilities while abroad rather than run the risk of incurring high phone bills, according to operator statistics.
Increasing take-up of data services involves:
• Lowering cost points and simplifying pricing models;
• Data service available to prepaid customers;
• Choice of application specific roaming by the customer while roaming.
As the number of new subscriptions dry up effective mobile data roaming strategies can secure continued growth for the mobile operators.
The Maltese mobile market
The Maltese mobile market has evolved in a similar fashion to all mobile markets across Europe, in that we have experienced year on year growth in subscriptions and revenues since the first mobile telephony offerings in 1990 following the award of the first mobile licence in Malta on August 11, 1989. The market had up to recently been characterized by an extraordinary preference for text messaging against voice calls, and a bias towards prepaid services. Today this is fast changing as stiff competition has compelled service providers to offer more affordable services, with consumers responding by shifting usage patterns towards voice and data.
Despite the small size of the local population, demand for mobile services sustains three nationwide network operators, each having their own 3G network, and three MVNOs. The re-farming of the GSM spectrum earlier this year now ensures that all operators have a mix of spectrum allocations allowing them to maximize the potential of 2G and 3G technologies to ensure the best quality of service and coverage for their subscribers.
The future remains unquestionably challenging, but the potential for growth appears to even exceed what we have experienced in the past. The demand for mobile data offers immense opportunities. Malta’s geographic characteristics, in particular its small size and dense population, render it ideal for the rollout of mobile data based services. Our successes on the eGovernment front allow us to extend the services to this new channel as more individuals shift to smartphones with data bundles.
The industry has an opportunity to capitalize on the proliferation of ‘over the top services’ rather than fighting this new development, by partnering with other industries to offer subscribers tailor-made offerings designed to meet the subscriber’s particular preferences in respect to mobile data usage.
The local industry is aware that in an economic downturn, efficiency and economy becomes critical for consumers and business alike. Both these subscriber segments are likely to be willing to pay for new services which either simplify mundane activities, such as obtaining government or banking services, or offer superior entertainment and communication experiences, as long as the payment generates a surplus in terms of increased efficiency or direct cost savings, for example in reduced transport costs.
The take up of such offerings by the general public as well as economic operators, can only result in an improved overall economic performance for our island.
The mobile sector is in an enviable position in this regard as it is the channel via which these efficiencies can be realized. A strong collaboration across the value chain, from handset producers to the network operator and the third party service provider is however required, and this might be the most difficult challenge to overcome in the end.