“More Mobile Users will Join the Gigabyte Club”

As mobile makers are cranking out devices at a pace that can rival the speed of light, mobiles are nestling in the palms of over 4 billion people across the globe.

Now the blurring lines between smartphones and economical feature phones are poised to shake up the status quo in the market where mobile has become a commodity and voice is the dominant service.

While mobile marketers are pinning their hopes on content-led mobile data services, what exactly is in store for the future?

Answers Michael O’Hara, chief marketing officer, GSMA (an association of global mobile operators) in an exclusive interview with RMN Digital managing editor, Rakesh Raman.

Qs & As

1. Do you agree that the global mobile market continues to be a voice-only market and mobile data services have not yet taken off?

We are actually seeing a very robust market for mobile data services. Ericsson noted that mobile data traffic surpassed mobile voice traffic for the first time, on a global basis, in December 2009.

And according to a study released earlier this year by Cisco, global mobile data traffic is set to increase 18-fold, from 0.6 exabytes per month in 2011 to 10.8 exabytes per month in 2016. That’s a compounded annual growth rate of 78% from 2011 to 2016; in Asia, this growth will be even higher, at 84% per year.

The study also noted that by 2016, 60 per cent of mobile users will belong to the “Gigabyte Club”, generating more than one gigabyte of mobile data traffic every month. Clearly, mobile data is growing extremely fast around the world, and will continue to do so.

2. What is the role of content to encourage consumers to use mobile data services? Is there sufficient good-quality content available for mobile consumers?

The availability of content is indeed a factor spurring the demand for mobile phones and other devices, including not only information and entertainment services, but also other services such as healthcare diagnostics and monitoring, home management and more. This is only set to grow in the future, as demonstrated by the rapid growth of mobile data services that we are expected to see.

3. Can we say that since majority of the consumers buy mobiles for voice communications, smartphones market is negligibly small as compared to feature phones? Which factors will spur the smartphones market growth?

According to a recent report by industry analyst firm IDC, smartphones accounted for approximately 40 per cent of all mobile phone shipments in Q3 2012, up from approximately 28 per cent in the same period of 2011.  It is expected that smartphone growth will continue, with mobile providing many populations around the world their first, and in some cases their only, access to the Internet.

This growth will be driven by demand for a wide range of services and applications available on smartphones as well as lower price points which make this technology more affordable to a wider section of the population.

4. Can we say that mainly because of their improved form factor, better battery life and attractive apps, the new-generation tablets will cannibalize conventional mobile phones?

The market for tablets is growing very rapidly; industry research firm IDC found that worldwide tablet shipments totaled 27.8 million units in the third quarter of 2012, up 49.5% over the previous year. We’re seeing tablets impacting sales of laptops and PCs at the moment, and it’s possible that in the future, some consumers may opt for a tablet rather than purchasing a smartphone, but it largely depends on their individual requirements and is not a broad trend at this point.

5. Do you agree that today mobile market is facing a unique paradox, as number of subscribers is increasing rapidly but the ARPU (average revenue per user) levels continue to be sluggish?

Total worldwide revenue for the cellular industry passed the US$1 trillion mark in 2009 and continues to grow steadily – industry research firm Wireless Intelligence expects the figure to reach US$1.1 trillion this year.

However, the rapidly increasing number of global mobile connections combined with intensifying competition in the industry has, over time, inevitably forced down ARPU. There are now more than 800 mobile operators worldwide, an increase of more than 40% over the last ten years, and the race by operators to build market share in some developing countries (such as those in the Indian subcontinent or East Africa) caused call prices to drop as low as US$0.01 per minute in 2011.

The growth of mobile broadband offers operators an opportunity to address this challenge. Although mobile broadband ARPU has not completely offset declines in voice revenue for mobile operators at the global level, it has gone some way to stabilise falling blended ARPUs for those operators who have deployed mobile broadband networks and built up a high level of smartphone penetration within their customer base.

A global study of the difference in blended ARPU between mobile broadband operators and those operators that do not provide mobile broadband services shows that the latter group has seen their average blended ARPU decrease at twice the rate of that of the former over the past five years.

While a lack of reported data on the subject means that it is not possible at this time to identify a direct relationship between mobile broadband ARPU and blended ARPU, the findings above are reinforced by case studies of selected operators who, despite seeing falling voice ARPU, have all maintained stable blended ARPU since launching mobile broadband networks in 2005.

6. One of the biggest mobile marketing evils comes from mobile spam. Can GSMA provide a foolproof remedy to deal with mobile spam menace and safeguard the interests of consumers?

The GSMA Spam Reporting Service provides a worldwide clearinghouse of messaging threats and misuse that have been reported by mobile users and is operated on behalf of the GSMA by Cloudmark, Inc.

The GSMA Spam Reporting Service analyses SMS traffic and identifies and aggregates reports of misuse submitted by mobile subscribers of participating networks via a short code. The short code ‘7726’, which spells “SPAM” on most phones, will be used where local national numbering plans permit.

Consumers will be able to direct alleged spam to a responsive feedback system, so that appropriate action can be taken by the operator. This action might include investigations, warnings and blocking of senders who have been reported by end users as sending unsolicited or fraudulent messages.

The GSMA Spam Reporting Service provides operators with correlated reports on SMS threats, originating both within and outside of the network. The data analysis gives operators the insight needed to address sophisticated and evolving messaging threats that could negatively impact the user experience as well as available network resources.

Detailed drill downs into individual attacks can be used to measure effectiveness of fraud and phishing, giving operators the ability to identify and block attacks and plan for network and security services.

This service is currently in deployment with operators in the United States, but could be available to our members elsewhere in the world.

* * *

As chief marketing officer for the GSM Association (GSMA), Michael O’Hara (pictured above) is responsible for the GSMA’s global marketing and communications strategy, working in close partnership with the organization’s membership to identify, prioritize and execute on strategic marketing issues for the mobile industry. Before joining the GSMA, O’Hara held key marketing positions at Microsoft, Sonus Networks and Nortel Networks.

He holds an honors degree in electrical and electronic engineering from the Queens University of Belfast.

This interview is published under the RMN Digital’s “Thought Leaders” series in which top tech market leaders of the world express their views on different burning issues and market trends.