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SAP_MobileGuide 2013

  1. 1. SAP Mobile Services Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities
  2. 2. SAP Mobile Services Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities
  3. 3. Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities Published by Sybase, an SAP Company Sybase, One Sybase Drive, Dublin, CA 94568-7902, U.S.A. © 2013 SAP AG or an SAP affiliate company. All rights reserved. No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice. Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors. National product specifications may vary. These materials are provided by SAP AG and its affiliated companies ("SAP Group") for informational purposes only, without representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP Group products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty. SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and other countries. Please see http://www.sap.com/corporate-en/legal/copyright/index.epx#trademark for additional trademark information and notices. Library of Congress Cataloging-in-Publication Data SAP Mobile Services Mobile Operator Guide 2013, The Evolution of Mobile Services: Challenges, Strategies, Opportunities Edited by Peggy Anne Salz p. cm. ISBN 978-0-9885886-2-2 1.Mobile technology. Library of Congress Control Number: # 2012953199 Printed in the United States of America Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.
  4. 4. 3Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities 10 FOREWARD By John Sims, President, SAP Mobile Services 13 PART 1: INTRODUCTION : A WEALTH OF OPPORTUNITIES 14 Mapping A New World For Mobile Operators By John Sims, President, SAP Mobile Services 18 Driving Growth In The Digital Economy By Stephan Gatien, Global Lead, Telecommunications Business Unit, SAP and Jens Amail, Senior Vice President and General Manager for Services, SAP 25 PART 2: STRATEGIES FOR DRIVING REVENUE 26 Long Live SMS Text messaging continues to grow from strength to strength as new services and paradigms around mobile marketing and mobile apps drive volumes and usage. By William Dudley, Group Director, Product Management, SAP Mobile Services 33 Moving To The SMS Hubbing Model Operators are recognising that SMS hubbing is not just about connectivity; it can ease the management burden around cross-border messaging traffic. By Robert Rose, Senior Director, Global Operator Services, SAP Mobile Services 36 Latin America Offers Big SMS Opportunities Personal Paraguay and Tigo Colombia discuss local market requirements and weigh on the tremendous opportunities and innovation that are driving SMS growth. Table of Contents
  5. 5. 4 43 Cybersafety: Everyone’s Responsibility The Cyber Information Sharing and Protection Act addresses how information should be shared between private companies and the government to catch malicious actors breaching networks to steal information or sabotage systems. By Steve Largent, President & CEO, CTIA-The Wireless Association 48 Does The Future Of Mobile Security Lie In The Past? Text messages are a powerful vehicle for reaching people — but they are also increasingly the starting point for malware attacks. By Mary Landesman, Senior Security Researcher, Cloudmark 53 Mobile Number Portability: Increasing Competition And Driving Value Mobile Number Portability has come a long way since it was implemented in the 1990s, but it now confronts mobile operators with a variety of commercial challenges. ByMitulRuparelia,DirectorofSalesEngineering(EMEAandLATAM),SAPMobileServices 58 Intelligent Hubbing: Easing International SMS Routing Complexity A comprehensive checklist and solid advice aimed at helping operators remove the complexity around establishing and managing SMS routing. By Mark Weait, Vice President Sales, SAP Mobile Services 63 Orchestrating Capabilities Delivers High Performance Bharti Airtel details the strategy that has allowed it to spread its wings across the African continent, lay the groundwork for value-added services and deliver high volume at low cost. By N. Arjun, Chief of Projects & Transformation, Bharti Airtel 68 PART 3: IPX: INTERCONNECTING OPERATORS FOR UNLIMITED OPPORTUNITIES 69 Bundling Services Makes Business Sense Korea Telecom discusses the importance of Voice over IPX in its larger strategy to future-proof its network, ensure end-to-end quality of service and grow its wholesale business. Interview with Incheul Park, Head of Wholesale Team, Global Business Unit, Korea Telecom
  6. 6. 5Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities 74 Expanding Voice Connectivity Via IPX: An Operator Perspective In the Philippines Globe Telecom is embarking on an ambitious network change to deliver customer benefit by making cross regional interconnectivity better and easier. By Gil Genio, Head of International and Business Markets, Globe Telecom, Inc. 78 The Value Of A True IPX Mobile Operators can best leverage the full benefits and economies of scale that IPX provides if they look beyond just offering basic services, such as voice and data roaming, and focus on delivering the services their customers will demand next. By John Candish, Senior Director, IPX Business, SAP Mobile Services and William Dudley, Group Director, Product Management, SAP Mobile Services 83 Nine Ways To Get More Value Out Of IPX IPX offers tremendous value and here are 9 things operators need to do to ensure they can reap and maximise the benefits. By John Candish, Senior Director, IPX Business SAP Mobile Services 86 Making The Right Connections SingTel recounts the lessons, learnings and results of its recent IPX trial, the first step in a private international network connecting all the Group companies. Interview with David Ng — Vice President, Regional Technical, of SingTel’s International team in the Group Consumer organization 91 A Brave New All-IP World When it comes to IPX, peering among IPX providers is an essential element because it is the enabler of global reachability. ByElenaSacco,ChairmanoftheIWGattheGSMAandSeniorInterconnectManager,TIM 94 Boosting Trust, Building Business In countries like Africa IPX does more than provide interconnectivity; it also meets the needs of local telecommunications authorities for transparency and accountability. By Ranjeet Wilkhu, Director, Neucom Solutions 98 Voice: The IPX Killer App A candid view of the many benefits IPX provides. While many focus on future scenarios around LTE roaming, PCCW outlines how IPX can already enhance voice. By Richard Midgett, Managing Director – Wireless Business, PCCW
  7. 7. 6 104 PART 4: LTE: UNLEASHING INNOVATION TO DELIVER RESULTS 105 Enabling 4G LTE For ALL MetroPCS discusses its early decision to deploy LTE and how this head start on the competition has allowed the U.S. operator to scale its business and satisfy its customers with value-driven services. By Ed Chao, Senior Vice President, Engineering and Network Operations, MetroPCS 111 Fighting Smart To Win Big A clever approach harnessing RCS will allow operators to compete with OTT players with new services such as group instant messaging or chat, live video sharing and file transfer across any device, on any network, with anyone in a mobile address book. By Madan Jagernauth, Vice President, Marketing & Strategy, Mavenir Systems 117 Positioning LTE For Success Research and insights brings clarity into the industry discussion about LTE, the benefits it delivers and reasons why operators take the lead in educating consumers. By Declan Lonergan, Research VP, Yankee Group 124 Breaking Down Borders: Getting The Most Out Of LTE Roaming LTE is reaching a stage of maturity where technology is no longer a barrier to deployment, so now it’s up to mobile operators to architect the strategies that will leverage the complete range of benefits. By James Middleton, Managing Editor, Telecoms.com 127 Video Communications: “A Perfect Storm” Consumer use of video has entered a new phase of growth, driven by devices, services and networks built to support it. But the wave of interest in mobile video could overwhelm service providers. By Ramsey Masri, Vice President, Sales & Alliances, Aylus Networks 134 Enabling Roaming Across LTE Networks LTE will enable new services, but it will also put high demands on the data roaming backbone and require more bandwidth and resilient network connectivity. By Matthew Tonkin, Global Head, IPX Business, SAP Mobile Services
  8. 8. 7Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities 138 LTE Roaming In Latin America: Conditions For Success The deployment of LTE across Latin America brings with it a host of benefits and equips operators to address the spectrum limitations facing their networks. By Alejandro Martinez, Chairman, Billing & Roaming Working Group (BARG), GSMA LA 142 LTE: New Technology Boosts New Business A review of the business models, approaches and services, such as mobile video calling, that will allow operators to drive even more revenue out of their costly LTE investments. By Michel Van Veen, Group Manager, Product Management, SAP Mobile Services 147 PART 5: OTT: OPEN THREAT OR HIDDEN OPPORTUNITY 148 OTT Threat: Top Strategies To Fight Smart Learn from real-life examples, including KPN and China Mobile, about the real impact of OTT services on voice and messaging revenues and how mobile operators turn the tide. By Pamela Clark Dickson, Senior Analyst, Mobile Content & Applications Intelligence Center, Informa Telecoms & Media 156 Evaluating Strategies To Face OTT Providers Operators need to be more digital. Does Telefónica Digital, a unit aimed at developing new applications and business models for mobile technology show the way? By Eusebio Felguera, Corporate Regulatory Manager, Telefónica 161 NUVOs: An Alternative To Disruptive OTT Not all OTT apps threaten mobile operator revenues. Network Unaffiliated Virtual Operators (NUVOs) actually benefit operators and boost their business. By Austin Murray, Founder & President, textPlus 166 OTT Ecosystem: Paving The Way For Opportunity The inevitable arrival of an all-IP world also reinforces the needs for deeper part- nerships between operators and OTT players. MediaFriends discusses apps and approaches showing the way. By Gene Lew, CTO, MediaFriends
  9. 9. 8 172 PART 6: UNLEASHING THE POWER OF MOBILE COMMERCE 173 Mobile Money For The Masses Qtel has made its mark with its Mobile Money services and an innovative self-serve approach that meets the needs of both migrant workers and affluent customers. By Richard Morecroft, Assistant Director Mobile Money, Qtel 179 Driving Mobile Money Usage In Unbanked Regions Driving customer adoption and increasing activation rates in mobile money is no easy task. The key is proper audience segmentation and a sharp focus on customer education. By Yasmina McCarty, Senior Manager, GSMA MMU 184 Blueprint For A Successful Remittance Service A review of the mobile remittance services available today reveals a variety of different approaches to tackle the challenges of sign-up, cash-in and cash-out. By Diarmuid Mallon, Head of Global Mobile Marketing Programs, Programs & Demand Generation, SAP 190 Operators: Tap Your Strategic Assets Mobile operators might only have scratched the surface when it comes to understanding their true potential to accelerate and enhance the mobile payments and commerce experience for consumers everywhere. By Aditya Kurejkar, Co-Founder and Program Director, Money2020 194 Mobile Commerce Opportunities For Operators Building and deploying a successful mobile payment service requires operators to consider a wide range of variables, from business models to local telecom and financial regulations. By Matthew Talbot, Senior Vice President, Mobile Commerce, SAP 200 PART 7: LEVERAGING MOBILE TO ACHIEVE LASTING LOYALTY 201 Perception vs Reality: What’s Your Mobile Strategy? The arrival of the empowered consumer turns up pressure on operators and enterprises to create and implement a comprehensive mobile strategy that is truly end-to-end, multi-channel and, more importantly, customer-centric. By Howard Stevens, Senior Vice President, Global Messaging Solutions, SAP Mobile Services
  10. 10. 9Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities 205 The Power Of Push Push notifications also open up new opportunities around customer service and marketing, allowing mobile operators to deliver simple alerts to the customer — and trigger the customer to take action. By Coleen Carey, Director of Product Marketing, Urban Airship 211 Harmonising Touch Points, Technology, Processes And People Celcom details the milestones and motivations that have helped it evolve its view of customer experience and sharpen its focus on encouraging lasting loyalty. By Suresh Sidhu, Chief Corporate and Operations Officer, Celcom Axiata Berhad 215 Ask, Listen And Build Lasting Loyalty Talk to your customers, and listen to what they say. A successful mCRM program integrates social interaction, customer engagement and customer feedback. By Sally Burley, Director, The 3rd Degree 220 Why Customer Engagement Campaigns Pay Dividends An in-depth look at how mobile changes the rules of engagement, allowing mobile operators, brands and businesses to maintain continuous customer touch and drive deeper engagement. By Gregory Dunn, Vice President, Product Management, SAP Mobile Services 228 Glossary Of Terms 234 Index Of Contributor Companies 240 Acknowledgements
  11. 11. 10 Mapping A New World For Mobile Operators By John Sims, President, SAP Mobile Services FOREWORD IP is changing the game. Advanced mobile devices, new technologies, increased competition and a shift in subscriber expectations towards truly personal and relevant interactions are coming together to cause disruption in the telecom industry - for operators and all the companies in their business ecosystems. However, the same conditions also spell massive opportunities for companies prepared to take charge of change. As one of the 40+ industry authorities who has provided insights for this Guide, points out: the rapid pace of change and the interplay of supply and demand for services that are aligned with customers’ requirements are combining to generate the mobile industry’s own Perfect Storm. The author in this case was referring to mobile video communications, where growth is driven by devices, services and networks. But mobile video isn’t the only market segment on the brink of the tipping point. This Guide shows that other services, such as SMS, LTE, mobile commerce and mobile customer loyalty, are also entering a new phase of growth and innovation. • SMS: While some analyst reports predict the decline of text messaging, SMS continues to be the number one data communications tool and the most effective direct marketing channel ever created. In almost all emerging markets it remains the ubiquitous data service of choice. In developed markets, the explosion of mobile apps, a development which many thought would mark the death of SMS, has actually pushed application-to-person (A2P) traffic growth to a new level. This spells
  12. 12. 11Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities opportunity for mobile operators and service providers to harness text messaging to supercharge a variety of services, ranging from mobile marketing and mobile advertising, to mobile commerce and mobile banking. • LTE: As mobile network operators move towards 4G/LTE and an all-IP network, many will cooperate to expand their network footprint and pave the way for compelling new services that will delight customers and drive positive results for everyone in the ecosystem. The advance of LTE will also challenge operators to develop strategies to cooperate with and enable Over-the-Top players in a manner that benefits the ecosystem and wrings new revenues out of operator core capa- bilities such as location information, billing support and network management. • Mobile commerce: From researching products to making purchases, consum- ers are increasingly reaching for their mobile devices as an essential shopping companion. At the other end of the spectrum, and particularly in the under- banked regions of the world, consumers are gravitating to services delivered by mobile operators that have expertly leveraged their distribution channels, retail presence and trust to expand and enhance mobile money and mobile banking services. Now it’s up to mobile operators to map out comprehensive strategies that cultivate partnerships with key players, such as banks, and adapt to local market conditions, such as regulations, demographics, and the emergence of new remittance corridors. • Mobile loyalty: Because mobile is a fiercely personal device, it’s an ideal means to reach customers on every step of their daily journey to encourage inter- action and deepen engagement. Whether operators and marketers choose to harness text messaging, new forms of IP-based messaging, mobile web or mobile apps (or all in combination) they can clearly leverage mobile as a channel to boost customer loyalty and recruit true brand advocates. However, just as in real- life, building a relationship is about talking and listening, and that’s why companies must develop mobile loyalty programs that effectively do both. This inaugural edition of the Mobile Operator Guide features the insights of industry thought leaders and innovators to identify market trends, best practices and key lessons learned in deploying mobile services. The purpose of this industry knowledge resource is to provide readers
  13. 13. 12 clear direction and critical information, equipping them to develop strategies to drive messaging revenue, deploy cost saving solutions, generate new revenue streams from mobile commerce, build loyalty through customer engagement programs, plan for LTE roaming through IPX adoption and maintain competitive advantage in an IP-based world. The onward march of next-generation services into daily life has created a new world order in the telecoms industry. Think of this Guide as a starting point to a roadmap, one that will allow you to plot the transformational path your business needs to follow to succeed in this exciting new digital economy.
  14. 14. PART ONE: INTRODUCTION A WEALTH OF OPPORTUNITIES
  15. 15. 14 What a difference a decade makes. You need only go back that far to find the “early days” of mobile network operators’ journey with mobile data, comparatively speak- ing, a world that hardly compares to today’s landscape. Amid the far-reaching changes that have taken hold since then, the com- plexity that now distinguishes operator services brings with it a rich abundance of opportunities to those who are forward-thinking and adaptive in their strategies and capabilities. A decade or so ago, an operator’s world revolved almost exclusively around voice. In an environment of minimal competition, product offerings were comparatively straightforward, with “all-you-can-eat” pricing plans the industry standard. It seems like a long time ago, but it was only in 2001 that the first inter-operator SMS messages were delivered in the U.S., with SAP Mobile Services launching the first inter-operator SMS messaging hub in concert with AT&T Wireless. More signifi- cantly, during those formative years, operators took a walled-garden approach to mobile data, with services delivered within a closed ecosystem – a far cry from the interoperable, pan-operator network topology that has evolved since then. From that initial “closed system” approach, rapidly advancing technology and the explosive growth of international travel by globe-trotting executives and power users contributed to the dramatic changes we have seen take root since then. The eclipse PART ONE: INTRODUCTION: A WEALTH OF OPPORTUNITIES “ As the cost of spectrum and the pace at which new network technologies needed to be deployed rose, operators needed to consider cooperative arrangements with their fellow operators, something that would not have previously been on the table.” Mapping A New World For Mobile Operators By John Sims, President, SAP Mobile Services
  16. 16. 15Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities of voice by data, accompanied by the advent of successively more powerful generations of network technology leading to 4G, an all-IP environment, accompanied by today’s open infrastructure, means operators must generate profits by significantly rethinking their business models. Traditionally, mobile network operators have owned and controlled everything, including physical equipment, radio networks, serv- ices infrastructure, devices and user inter- faces. But amid their changing economics, many have had to rethink this approach. With the rise of the smartphone, driven by the iPhone and Android devices, it was clear that mobile network operators could no longer dictate the user interface. As the cost of spectrum and the pace at which new network technologies needed to be deployed rose, operators needed to consider cooperative arrangements with their fellow operators, something that would not have previously been on the table. In addition, in order to accelerate the adv- ance of the network effect for new services, operators in some countries have come together in joint ventures or cooperatives to lower their costs and seed the market with new service technologies – for example, the Isis joint venture in the United States or the Table 1: Global mobile data growth today is similar to global internet growth in the late 1990s Global internet traffic growth (fixed) Global mobile data traffic growth 1997 178% 2009 140% 1998 124% 2010 159% 1999 128% 2011 133% 2000 195% 2012 (estimate) 110% 2001 133% 2013 (estimate) 90% 2002 103% 2014 (estimate) 78% Figure 1: Based on data from Cisco. Cisco Visual Networking Index Mobile 2012 www.slideshare.net/CiscoSP360/cisco-visual-networking-index-vni-global-mobile-data-traffic-forecast-20112016
  17. 17. 16 proposed mobile payments venture among operators in the United Kingdom. To a certain degree this kind of thinking has been accelerated by operators’ need to compete against Internet-based players, which have arrived in the mobile space as creative and formidable competitors. It also marks a realisation by many mobile network operators that their future success depends more upon the innovative services that they offer subscribers than it does on the under- lying network technology – a substantial shift in emphasis. So, as mobile network operators move towards 4G/LTE and an all-IP network, many will cooperate to achieve a more rapid and ubiquitous network footprint that will allow them to offer compelling new services that will capture the imagination of their subscribers. In doing so, they will compete against other mobile network operators, but they will also have to operate in a much faster cycle of innovation that will allow them to fiercely defend their franchises against the threat from the Internet-based companies or so-called Over-The-Top (OTT) players. As part of their strategy, operators will want to not only create a strong domestic footprint; they will also look to extend this to a global level, much as they have done over the past decade or so with SMS. This is precisely where SAP Mobile Services provides the most critical value. We are delivering the world-class interoperability and reach that comes with our role as an independent custodian residing between and among operators. It is a role that demands a truly holistic level of visibility – horizontally, across geographies spanning the Americas, Europe, the Middle East, Africa and Asia, and vertically, providing the technology and connectivity required to ensure that today’s ever-expanding operator ecosystem continues to flourish. Most importantly, SAP Mobile Services possesses the vision and resources to realise its custo- dial role in every dimension. “ The advent of a new world for operators follows decades of incremental improvements punctuated by breakthrough technologies.”
  18. 18. 17Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities This inaugural edition of the Mobile Operator Guide 2013, The Evolution of Mobile Services: Challenges, Strategies, Opportunities provides a rich taste of the bold new world that has materialised and continues to take shape. Inside, our expert stable of authors delve into the current state of play and the most important emerging issues in operator services, including: • Operator strategies for driving and optimising messaging revenue • Roaming and interconnect issues, including the interplay of LTE in an IPX environment • OTT Messaging, voice and video services, including managing the challenges con- fronting operators in a BYOD (Bring Your Own Device) world • Mobile commerce and the myriad of opportunities for operators • Customer engagement, including a roadmap for building loyalty by empowering customers. The advent of a new world for operators follows decades of incremental improv- ements punctuated by break-through technologies. The result has been a new paradigm for communication. All of us at SAP Mobile Services are working with diligence and with our eyes on the future to enable all participants in the value chain to experience the unprecedented power, ease and benefits of this new world of inter- operability, reach and global interaction. John Sims is President of SAP Mobile Services, the recognised global leader in mobile messaging and interconnect services. He has more than 20 years experience with companies supplying technology and solutions to mobile operators. Sims has been recognised with the prestigious Ernst Young Entrepreneur of the Year Award in the communications category. He is also a member of the Board of Directors of CTIA and has been a speaker and panellist at numerous industry events.
  19. 19. 18 In July 2012, just before the London 2012 Olympics, no one could have imagined that one of the first headlines in the main- stream press would be about the local mobile networks’ bandwidth problems. But this is precisely what happened shortly after the Games opened. After having encouraged athletes and fans to tweet freely, Twitter was blamed for disrupting the coverage of the cycling road race. Ironically, the sheer volume of mobile social traffic along the course was so over- whelming that it even interfered with the GPS and telemetry updates from the race, which left those covering the games without information on positions and timings. This twist of fate was a perfect metaphor for the dilemma and challenges faced by communications service providers today. On one hand, the success of smartphones has led to increased data activities, with subscribers happily clocking time to play games, watch videos, post on social sites, tweet and send text messages. This phe- nomenon has contributed to the decline of revenues from voice services, once the cash cow of the entire industry without really offsetting it to date. On the other hand, costs to provide adequate network infrastructure to support this explosion of data traffic are on the rise. As the 2012 Olympic Games in London showed, the infrastructure available still cannot always handle the load and meet expectations for connectivity and reliability. Granted, network upgrade investments represent a heavy financial burden for all players in the ecosystem. However, these network investments are essential building blocks for future services and business models. In fact, 2013 is widely expected to be a blockbuster year for infrastructure Driving Growth In The Digital Economy By Stephan Gatien, Global Lead, Telecommunications Business Unit, SAP and Jens Amail, Senior Vice President and General Manager for Services, SAP PART ONE: INTRODUCTION: A WEALTH OF OPPORTUNITIES 2013 is widely expected to be a blockbuster year for infrastructure spending, with a large number of operators aggressively expanding their LTE networks.
  20. 20. 19Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities August 4 August 3 August 2 August 1 August 5 +36% - 14:20: UK’s Andy Murray beats Roger Federer for gold in tennis +46% - 18:20: Men’s team cycling sprint - UK wins gold London Olympics - UK SMS traffic (Times are local to London - August 1 - August 5) 2:30 3:30 4:30 5:30 6:30 7:30 8:30 9:30 10:30 11:30 12:30 13:30 14:30 15:30 16:30 17:30 18:30 19:30 20:30 21:30 22:30 23:30 0:30 1:30 Figure 2: Based on data from SAP. Figure 1: Based on data from SAP. London Olympics - UK SMS traffic (Times are local to London - August 6 - 8) August 6 August 7 August 8 +10% +18%+ 46% +8% 1:30 2:30 3:30 4:30 5:30 6:30 7:30 8:30 9:30 10:30 11:30 12:30 13:30 14:30 15:30 16:30 17:30 18:30 19:30 20:30 21:30 22:30 23:30 0:30
  21. 21. 20 spending, with a large number of operators aggressively expanding their LTE networks. Tough competition But network upgrades aren’t the only item on the business agenda. Operators also have to develop strategies and capabilities to compete against new rivals. Increased penetration of smartphones has opened the door to powerful and disruptive actors offering OTT services. These services — which include Apple’s Facetime, Google Voice and Skype — allow messaging and VoIP calls between users. While these free services may have a strong appeal to customers, they have a decidedly negative impact on operators’ bottom line. Analysts estimate OTT messaging revenues as much as $13.9b, or 9% of message revenue, in 2011. This decline has led some to wonder whether most incumbent provid- ers are not facing their “Kodak moment”. By way of background, Kodak filed for bank- ruptcy protection in 2012 after recognizing its products were obsolete and the competi- tion was insurmountable. Similarly, mobile July 28 July 27 July 29 July 30 July 31 +36%: 21:10: USA wins gold in Men’s 4 x 200m freestyle relay (swimming) London Olympics - UK SMS traffic (Times are local to London - July 27 - July 31) 2:30 3:30 4:30 5:30 6:30 7:30 8:30 9:30 10:30 11:30 12:30 13:30 14:30 15:30 16:30 17:30 18:30 19:30 20:30 21:30 22:30 23:30 0:30 1:30 Figure 3: Based on data from SAP.
  22. 22. 21Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities players are now struggling to compete against more agile and innovative newcomer companies, as well as OTT providers. Operator assets However, it would be a huge mistake to count operators out of the Digital Economy race too soon. Operators own critical assets they can leverage to build competitive advantage, establish themselves in a position of strength and drive profitable growth in this new era. First and foremost, operators — because they are network operators — control the backbone of the Digital Economy: connectivity. But owning the network is not enough.To avoid being relegated to the role of a“dumb pipe,”operators must also be able to capitalise on their successful track record of service delivery, including five 9s service availability. UK Olympics - Opening Ceremonies (UK SMS traffic - 27 July 2012 17:00 - 28 July 2012 03:00) Normal Traffic Opening Ceremony Traffic 18:00 18:30 19:00 19:30 20:00 20:30 21:00 21:30 22:00 22:30 23:00 23:30 0:00 0:30 1:00 1:30 2:00 2:30 3:00 17:30 22:30 -22:40: +137% Team Great Britain enters the stadium during Parade of Nations 23:50 +56% official opening of games Queen’s speech 00:20 +25% IOC President speaks Pre-ceremony - up to 56% of normal 21:40 +40% Rowan Atkinson “Plays” during Chariots of Fire 21:10 +32% Ceremony begins 21:40: +40% The Queen parachutes in 22:30-22:40 +137% Parade of Nations begins 23:50 +56% Team GB enters the stadium. Figure 4: Based on data from SAP.
  23. 23. 22 Operators also have proven security and data integrity capabilities that will increasingly appeal to business customers as adoption of cloud- based models take off. What’s more, operators also have a long -standing relationship with their customer base. This puts them in a unique position to act as digital service brokers between this large audience and a multitude of partners that want to reach this audience with content, software or new services to offer via the mobile channel. Pursuing this model — often referred to as the Teleco 2.0 model (1) — would allow Com- munications Service Providers (CSPs) to be the conduit between these ‘upstream’ partners and their traditional ‘downstream’ customer base, thus increasing their reach, presence and value-add. Finally, CSPs have insights into a vast quantity of data about their customers, such as service usage patterns, location -based activities, roaming history and on-device behaviour on a daily basis. This impressive store of customer information represents a largely untapped monetisation opportunity for operators in an increasingly data-centred economy. So, how do CSPs move forward to imple- ment the right strategies and — ultimately Porter strategy Telco 2.0 strategy Nature of smartness Characteristics Cost leadership Happy Pipe Smart network Cost efficiency - minimal network, IT and commerical costs. Simple utility offering. Differentiation Full-service Telco 2.0 Smart services Technical and commerical flexibility: improve customer experience by integrating network capabilities with on and third-party services and charging either end user or service provider (or both). Figure 5: Based on data from STL Partners. www.stlpartners.com/telco2_index.php FOOTNOTES 1. As originally defined by STL Partners
  24. 24. 23Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities — succeed in the digital era? We believe they will need to focus on some key areas to drive profitable growth in the new Digital Economy. • CSPs should fully leverage their scale, superior reliability and service delivery capabilities, to invest in new business models in areas such as Cloud and Mob- ility. Operators such as China Telecom or Telstra in Australia have already adopted this strategy with success. They offer on-demand business solutions to a variety of business customer segments, in particular targeting small and medium size businesses. Other mobile operators, such as Rogers Communications in Canada, are launching business-oriented mobile app stores. This is part of a larger effort to become a one-stop shop for business customers, providing everything mobility-related, including mobile app hosting and mobile device management. • Large providers should also think beyond connectivity. Telefónica and SingTel are perfect examples of what operators can achieve. They have transcended their traditional organisational boundaries, and created new digital divisions to seize new opportunities including mobile commerce and machine-to-machine communications (M2M) in order to generate incremental revenue beyond their traditional services. Telefónica’s direct to bill initiative is a strik- ing example of how an operator can lever- age its billing relationship with its mobile customers to increase sales of digital goods and services, while learning to partner — not compete — with OTT players. The monetisation of subscriber data, in accordance with privacy laws, is also emerging as a strong opportunity for CSPs to grow their revenues. By leveraging the vast amounts of customer data they own — in real-time and at scale — CSPs can gain advantage in two important ways. They can serve their existing customers more effec- tively, and they can also use the customer information to take advantage of opportuni- ties in new markets — such as proximity marketing or mobile advertising — where customer data is key. To accomplish this CSPs will need to adopt a highly scalable foundation suited for the real-time world. An examination of the results achieved by 2013 is widely expected to be a blockbuster year for infrastructure spending, with a large number of operators aggressively expanding their LTE networks.
  25. 25. 24 T-Mobile US, for example, confirms that an in-memory based platform is very well suited to provide such a foundation. Fortune smiles on the brave. It is time for CSPs to make bold moves to develop their growth strategy in the digital era. They have the necessary assets to create new growth engines and focus on the abundant oppor- tunities in the Cloud and Mobility markets. Moreover, operators can innovate and invent new data-driven business models and services (such as proximity marketing). If operators can arm themselves with the correct capabilities and business models, they can seize these opportunities, create lucrative new revenue streams and prosper from the Digital Economy. Jens Amail is Senior Vice President and General Manager for Services Industries at SAP as well as the Business Unit for Billing, Revenue and Innovation Management. Prior to joining SAP in 2008, Jens was with Siemens Communications for 10+ years in a variety of Senior Executive and General Management roles both in Europe and the US. Jens has a broad cross-functional background in the Communications Industry with Executive assignments in Sales, Services, Marketing, Solution Management and Operations. Stephan Gatien is a Global Lead within the Telecommunications Business Unit at SAP focusing on Business Analytics and Database Technology. In that capacity, he is respon- sible for the analytics and data platform strategy in the industry, including SAP HANA, oversees the related solution activities and leads the  analytics and data platform  go- to-market activities globally Prior to joining SAP, Stephan was with Telus where he held a variety of management roles in the wireless division of this Canadian operator. However, it would be a huge mistake to count operators out of the Digital Economy race too soon. Operators own critical assets they can leverage to build competitive advantage, establish themselves in a position of strength and drive profitable growth in this new era.
  26. 26. PART TWO STRATEGIES FOR DRIVING REVENUE
  27. 27. 26 Mobile industry watchers have been predicting the death of the humble text message for over a decade, but a raft of recent research confirms that SMS is very much alive and kicking. Marking the 20th anniversary of SMS, U.K. analyst firm Portio Research points out that SMS has been very successful, generating approximately $821 billion for operators worldwide since it was invented in 1992. Overall, worldwide mobile messaging was the highest earner in the industry, raking in $179.2 billion in 2010 alone. Portio Research forecasts that this total will increase to more than $280 billion in 2014, and exceed $300 billion by 2016. Of this total, SMS alone will generate $155 billion worldwide in 2014, and it promises to continue to play a significant role in revenue terms in the coming years, the report said. Pervasive and personal It’s the simplicity, pervasiveness and sheer dominance of text messaging that has made it the world’s leading data communication tool. People everywhere on the planet can (and do) use their mobile phones to send and receive text messages. Veteran mobile author and analyst Tomi Ahonen estimates people sent a whopping 6.1 trillion text messages in 2011, up from 1.8 trillion in 2007. Meanwhile Informa Telecoms Media state that total SMS traffic will reach 8.7 trillion by 2015, up from over 5 trillion messages in 2010. In its newest forecast analyst firm Portio Research calculates that total traffic will reach nearly 10 trillion messages by 2015. Clearly, SMS is THE most ubiquitous, non-verbal communications medium in the history of mankind. Today, SMS can reach over 5.4 billion people around the world — over 77 percent of the world’s population. In developing countries SMS plays a special role, transforming lives and economies at an amazing scale. Innovation in these regions also allows companies, organisations and governments to harness simple text mes- saging and achieve extraordinary results. From life-simplifying reminders to life-saving medical advice, text message services are changing the nature of commerce, banking, education, healthcare, news reporting and political participation. Long Live sms By William Dudley, Group Director, Product Management, SAP Mobile Services PART TWO: STRATEGIES FOR DRIVING REVENUE
  28. 28. 27Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities In developed markets SMS is by far the most effective way for people to communicate with each other — and connect with companies. Whether chatting with friends, or receiving alerts from banks and favourite brands, text is the primary communications tool. Continuing tide of text Significantly, even the advance of smart- phones — chock-full of features, functional- ity and a wide variety of mobile applications — hasn’t changed consumers’ dependence on text messaging to connect with the world around them. In fact, a recent consumer study from Deloitte shows that SMS holds the lead. More consumers than ever prefer- ring texting, and the vast majority (90 percent) of smartphone users sending at least one text message per day. Another trend that shows no signs of slowing is text use among teenagers. In the U.S. this demographic relies on text more than any other customer segment. Research firm Nielsen, which bases its finding on a variety of data including monthly survey results from 300,000 consumers, reports that texting has tripled, with teenage girls sending 40 percent more text messages than boys.That’s an average of 3,952 text messages per month. It’s a continuing tide of communication Nielsen calls a“mobile data tsunami.” In other countries text messaging continues to dominate. In Canada The Wireless Telecommunications Association reports the number of personal text messages sent every year has nearly quadrupled since 2008 and hit a whopping 78 billion messages in 2011. In the U.K. the Ofcom Telecommunications Market Data Update Q1 2011 reports the total number of SMS and MMS messages sent in Q1 2011 was 36.9 billion, up 22.7 percent over Q1 2010. The impact of OTT Amid this stellar growth, some analysts wonder if the text messaging trend could flip from growth to decline. New messaging capabilities bundled with iPhones and Android phones, as well as the advance of OTT messaging services and applications are among the root causes for the recent dip in SMS volumes in mature markets such as Philippines and Taiwan. News that OTT player WhatsApp reported hitting the mile- stone of ten billion messages a day further suggests operators could be vulnerable to this new competition. However, Analysts point out the race is far from run. It estimates that companies like WhatsApp and BlackBerry will generate 35 percent of the total messaging traffic in 2016, but only 8 percent of the revenues.
  29. 29. 28 Moreover, SMS will continue to dominate messaging and revenues, generating 42 percent of the traffic and some 65 percent of total income. Indeed, Informa is not convinced that OTT apps and services might undermine estab- lished text messaging habits. It argues that many factors — including mobile operator pricing strategies, the penetration of mobile broadband and customer requirements to more open communications — will “determine how quickly and to what extent substitution occurs.” Open rules People are empowered by SMS to commu- nicate with anyone who has a mobile phone. However, alternative messaging apps are limiting, not liberating. Unlike text messag- ing, these OTT services operate in a vacuum. Instead of overarching communities that span the planet, they create isolated islands of users who are completely cut off from friends and family members on the basis of the handsets and software they use. Figure 1: Based on data from Nielsen. Average number of messages exchanged per month By age and gender, Q3, 2011 802604 FemaleMale 13-17 18-24 25-34 35-44 44-54 55-64 65+ 3,417 928 1,914 709 434 167 64
  30. 30. 29Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities A Facebook user and a person using iMessage may be good friends in real-life, but the fact they use different services prevents them sending and receiving messages. This flies in the face of what communica- tions is all about, and presents opportunities for mobile operators to bridge the gap. There are exciting and lucrative options to consider. Some mobile operators will choose to work with OTT players, enabling them to achieve the integration of messag- ing communications. Others will follow the lead of operators like Telefónica, which recently launched a free mobile application that combines free text chat, voice calls, picture and location sharing between users. Interoperability will also be delivered by the GSM Association standard called Rich Communications Suite (RCS), which includes a next-gen, real-time, presence- enabled messaging component that also interworks with the existing SMS eco- system. Indeed, many of the operators featured throughout this first edition of the Mobile Operator Guide are betting on RCS to drive an interoperable, back- ward compatible messaging medium for subscribers and — ultimately — pave the way for new and innovative services. No limits Technology advances like RCS will allow messaging — including text messaging — to evolve and continue to account for a signi- ficant share of operator revenues.The future for OTT providers, however, is not quite so positive. Spoiled by choice and delighted by the freedom to communicate with anyone (and not just people that use that the same application), consumers will no doubt vote with their feet. It’s clear that many of the OTT players will simply fade away. Unlike text messaging, these OTT services operate in a vacuum. Instead of overarching communities that span the planet, they create isolated islands of users who are completely cut off from friends and family members on the basis of the handsets and software they use.
  31. 31. 30 In the meantime, SMS-compatible1 services from companies including textPlus will continue to flourish, offering customers more features and greater reach. But it’s not just person-to-person messaging that will increase. Growth will be also be driven by a desire from companies, businesses and brands to connect with their customers (and potential customers) via SMS. Research underlines the pivotal role of mobile in campaigns to engage with custom- ers, encourage interaction and boost loyalty. From consumer facing brands that use text messaging to deliver brand messages and links to downloadable content and perks,to large retailers that cleverly use text messaging to deliver product vouchers and drive cus- tomer loyalty, the central role of SMS is clear. Perhaps the best confirmation comes from Coca-Cola, that declared that SMS is the “number one priority” in its comprehen- sive strategy to reach a global audience and increase customer engagement. Analysts termed it a “bombshell announcement” because other marketers quickly followed suit, launching strategies with mobile messaging at the center. Ironically, the rise of mobile apps, initially hailed as a new channel to the customer that could potentially dethrone SMS, has actually pushed text messaging growth to a new level. Brands and marketers, as well as applica- tion developers, are harnessing SMS to extend the life of their apps, keeping their users posted on updates, breaking news, location-based opportunities, campaign perks and other important information. More importantly, text messaging allows brands and marketers to re-connect with customers who haven’t used their apps recently — or even deleted it altogether. The result is a booming Application-to-Person (A2P) market Jupiter Research estimates will be worth $70.1 billion by 2016. Positive outlook Clearly, the next five years will see operators in many parts of the world leverage their all-IP networks, but even this progress will not shut the door to SMS. To the contrary, LTE networks using IMS infrastructure will lay the groundwork for messaging services It’s the simplicity, pervasiveness and sheer dominance of text messaging that has made it the world’s leading data communication tool. Footnote: 1. SMS-compatible services include some OTT service providers (also known as NUVOs or Network Unaffiliated Virtual Operators that inter-work with the SMS ecosystem. This stands in strong contrast to other OTT providers, such as WhatsApp, that do not offer SMS interoperability.
  32. 32. 31Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities that will remain interoperable with today’s text messaging. In other words, there will be no interruption in service, or even reach. The humble text message that just cele- brated its 20th anniversary has seen a lot of changes since the first SMS was sent in 1992 between Neil Papworth (of Sema Group Telecoms) and Richard Jarvis of Vodafone – the message read “Merry Christ- mas”. Today, SMS is the most widely used mobile data service, with two-thirds of the world’s population using the channel to connect and communicate. From a business Figure 2: Source: Juniper Research. (1) Global revenue from A2P SMS split by eight key regions 2016 North America Western Europe Latin America Africa Middle East Central Eastern Europe Rest of Asia Pacific Far East China Indian Sub Continent FOOTNOTE: 1. www.juniperresearch.com/reports/Mobile_Messaging_Markets
  33. 33. 32 perspective, SMS is expected to remain a significant source of revenues and traffic for mobile operators on a global basis for years to come. The bottom line: the advance of an all-IP world will transform SMS, but text messaging will also continue to be alive and well. William Dudley has 25 years experience building and managing telecommunications network infrastructures. He leads SAP Mobile Services Messaging Team, which focuses on solutions including inter-operator SMS and MMS products (P2P) and mobile messaging hubs and services (A2P SMS and MMS). Dudley also provides industry commentary to both internal and external mobile industry publications, through analyst and media interviews, and is active in several industry groups. http://scn.sap.com/people/william. dudley/content
  34. 34. 33Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities SMS is ubiquitous, universal and widely regarded as the truly native language of mobile. However, this phenomenon, and the massive development of SMS since the last years of the 20th century, has not been without its challenges around enabling — and guaranteeing — message delivery. Notably, there have been challenges in North America, where differences in technologies prevented the launch of off- net messaging for a few years. In contrast, almost the rest of the world was well progressed in its adopt- ion of inter-operator SMS based largely on homogenous GSM standards. The solution to the technology differences in North America was provided by hubbing services dedicated to message protocol conversion. Having met the domestic challenges of the North American market, international messaging between non- GSM U.S./Canadian operators and their GSM counterparts worldwide soon also benefitted from the technology and connectivity offered by the hub solution. In developing countries, scarce human and technical resources within operators across these markets has accelerated the requirement for hubbing services. In the case of Tier 1 and 2 operators, for example, hubbing has tended to be a niche solution. In other words, the solution enabled “gap- filling” in a mobile operator’s footprint, thus satisfying subscriber demand for international SMS P2P connections when that operator’s own roaming agreements were not sufficient to provide the required messaging interconnects. Moving To The sms Hubbing Model By Robert Rose, Senior Director, Global Operator Services, SAP Mobile Services In developing countries, scarce human and technical resources within operators across these markets has accelerated the requirement for hubbing services. PART TWO: STRATEGIES FOR DRIVING REVENUE
  35. 35. 34 Making the mainstream The situation began to change when the GSM Association launched the Open Connectivity project in 2005. By seeking to manage and regulate (in a light-touch manner) the development of peering hubs for person-to-person SMS the GSMA effectively endorsed the hubbing concept. This, in turn, ensured the adoption of hubbing as a mainstream business practice for the global operator community. Since 2005 the major hub providers have seen a steady growth in demand for their services. This has resulted in the develop- ment of an abundant revenue stream based on the termination charges on inbound traffic delivered by hubs. The ability to drive new revenues from additional SMS traffic — possible because hub prov-iders have extesive global reach and the ability to provide two-way access to operators previously unreachable — has been an added attraction over and above the greater reach achieved. Since term fees are paid on a strictly per- message basis, this revenue source clearly increases in proportion to the organic as well as incremental growth in traffic. As a result, what might first appear to be a minor contributor to the Roaming Department PL account belonging to a mobile operator can actually become a much more significant benefit. Good business sense Today, economic pressure on most oper- ators is now driving even more traffic (and more revenue for the networks). Headcount cuts, affecting even the most-established operators, are reducing their ability to manage their interworking activity effectively. As a consequence, operators are recogn- ising that a hub can enable them to out- source the management burden around some of their cross-border messaging traffic. This approach also reduces the managerial overhead around areas such as the negotiation and maintenance of bilateral agreements with destination operators and, when traffic is flowing, the upkeep of various number ranges within the SMSC. Routing all traffic for a particular country to a hub mitigates number range management tasks and delivers business benefit. As operators come to embrace the idea of delegating responsibility for some cross- border SMS traffic, they also discover that the more routes they outsource to the hub provider, the more they can increase their revenue “take” from their inbound traffic. In the end, what started out as a simple As a consequence, operators are recognising that a hub can enable them to outsource the management burden around some of their cross-border messaging traffic.
  36. 36. 35Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities exercise to offload a handful of “awkward” destinations soon becomes a full-scale outsourcing venture. Growing revenues The financial ecosystem surrounding cross-border P2P SMS is a complex matrix of MO charges and MT payments. For hub providers, managing this is well worth the effort as long as they can continue to make a margin on the connectivity services they provide. In view of this dynamic, traffic through hubs will continue to grow. Impor- tantly, the opportunities for operators to cultivate a worthwhile revenue stream will also grow in parallel. However, it’s worth noting that outsourcing can impact the revenues operators poten- tially gain from their bulk messaging (or “enterprise messaging”) business. This is because outsourcing all messaging traffic means outsourcing bulk messaging as well. By way of background, this traffic would have been reliant on the prior, direct connect, bilateral routes. Obviously, in cases where these are replaced by a hub’s connections for P2P business, the non-P2P traffic needs to secure its own routing and, potentially, its own commercial agreements. Real-world examples of this problem are currently being addressed. Efforts to resolve this effectively will naturally require flexibility on behalf of both operators and hub providers. In summary, in just over ten years subscrib- ers’ need for global two-way communication via SMS has become the fundamental driver of mobile network data revenues. While domestic interworking is mainly addressed through bilateral relationships, cross-border traffic is increasingly being routed through the established, peered hubs. Though this trend is a consequence of the expedient and effective solution that a hub connection can provide, the opportunity to develop a new and worthwhile revenue stream is now — more than ever — an incentive for operators to subscribe to the hubbing model. A 20-year veteran of the information systems business (both fixed and mobile), Robert Rose began working in the mobile industry as a con- sultant to British Telecom’s mobile operations subsidiary Cellnet. Since 2004 Robert has guided SAP Mobile Services’s international development in P2P messaging services.
  37. 37. 36 From the rural regions,where farmers and small businesses use mobile to manage their workday,to exciting city centres where youth — in particular— rely on mobile to connect with friends and family 24/7,LatinAmerica is more connected than ever before. In fact, making or receiving a call or text message in Latin America has never been easier. A new report titled Maximising Mobile, the third in a series on Information and Communications for Development published by the World Bank, reveals that nearly 98 percent of the region’s population have mobile cell signal and 84 percent of households use a mobile service. On average 81 percent of subscriptions in Latin America are prepaid. Understandably, many in the region use mobile phones to make voice calls, averaging 141 minutes of talk-time a month. In most markets the vast majority of users (97 percent in Argentina, for example) regularly use SMS to communicate. Clearly, the level of growth in mobile usage will continue, expanding into ever more rural areas across Latin America. It marks what the report calls “the beginning of the mobile revolution.” SMS leads the pack Interestingly, this revolution also brings a boost to text messaging services. But it’s not just about operator services allowing people with ordinary feature phones to communicate. Analysts note that text messaging continues to provide a solid foundation for a wide range of services, from banking to basic education, to widening access to health information. Against this backdrop, it is clear markets like Latin America — not the more devel- oped markets of Europe and North America — will lead messaging growth and innovation. Feature phones are the focus because Latin America’s smartphone market is still in its infancy. Research firm Pyramid Research reports that the smartphone segment in Latin America will grow to 48 million in 2014. This is a marked increase, but doesn’t negate the fact that Latin America continues to lag behind the rest of the world in smart- phone adoption. But this gap also offers mobile operators a tremendous opportunity to wring more value out of text messaging. Ironically, it is also the low penetration of smartphones that has kept over-the-top (OTT) players Latin America Offers Big sms Opportunites PART TWO: STRATEGIES FOR DRIVING REVENUE
  38. 38. 37Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities Figure 1: Based on data from Infodev. www.infodev.org/en/Document.1178.pdf Maximising mobile for development World’s population with mobile cell signal Over 6 billion mobile subscriptions worldwide 75% of the World now has access to a mobile phone Growth of global mobile subscriptions High-income countries Developing countries 2000 0.7 billion subscriptions 2010 5.9 billion subscriptions 23% 77% 29%71% Send text message Take pictures or video with mobile Use mobile internet Rise of non-voice mobile usage % National population KENYA MEXICO INDIA INDONESIA EGYPT (ARAB REP) UKRAINE 31 29 82 61 18 49 26 38 22 72 58 15 72 48 19 10 89 96 Pace of mobile phones spread globally (billions) 8 6 4 2 0 2003 61% 2010 90% 1876 Alexander Graham Bell holds the first two-way telephone conversation The number of mobile subscriptions will soon take over the world’s population 1978 First commerical cellular mobile services established 2002 There are over 1 billion mobile subscriptions, passing fixed-line users 1875 1900 1925 1950 1975 2000 2011 2015 Global population Fixed-line subscriptions Mobile subscriptions 1961 85 years later, fixed-line subscriptions reach 100 million
  39. 39. 38 at bay. This, in turn, has slowed the advance of messaging apps that enable smartphone users to send unlimited free messages to their friends. These OTT messaging apps such as WhatsApp, Viber and Apple’s iMessage are cannibalising SMS revenue and changing the way mobile users comm- unicate with their peers. This is not the case in Latin America, according to ABI Research, developed markets have experienced a marked decrease in SMS sent because of the rise of OTT alternatives, but the drop in regions such as Latin America and Africa is not as significant. International SMS requirements Clearly, feature phones have several more years to thrive in Latin America.This provides operators a window of opportunity to generate strong revenues from their domestic and international SMS offerings. The international SMS business, for example, provides operators with the potential to drive significant volume and earn hefty margins. Opening new international routes, securing two-way service for their customers and marketing attractive bundle packages are also part of a strategy that would certainly help improve the bottom line. Personal Paraguay, a leading mobile operator in Paraguay and part of Personal Telecom group, has extended its international SMS coverage to reap significant business benefits.“SMS is an important part of how our customers communicate,” notes Miguel Ruiz, Personal Paraguay Roaming Manager.“Our cust- omers want to be in touch with friends, family and colleagues whether they are in the same neighborhood, or living in a different country.” More importantly, customers expect their text message communications to be dependable and robust.“To achieve these SMS connections is a huge task that requires negotiations with operators and technical tests to ensure SMS quality and reliability,” Ruiz explains. To streamline the process and deliver customers the service they expect, Personal Paraguay has teamed up with SAP Mobile Services.“The hub SMS service helps us to have complete coverage with all operators in North America, the U.S., Canada and Mexico, as well as operators across LATAM, Europe, Asia and Africa.” SMS hubbing also allows Personal Paraguay the capabilities to cater to the portion of its customer base that are Paraguay citizens living and working in neighboring Argentina. “About 1.5 million Paraguayan people have
  40. 40. 39Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities emigrated to Argentina, and they want to be in contact with friends and family in an affordable way,” Ruiz says. The answer is International SMS, a popular service that also represents an important differentiator. In a nutshell, the service allows customers to send an SMS to a Telecom Personal Argentina customer and be charged the same rate as a local SMS.“There are a lot of opportunities to be gained by offering customers services that pair a simple way of communication with reasonable tariffs.” Attractive pricing SMS is expected to continue accounting for a major proportion of value-added services revenue as services like banking, mobile money and M2M gain traction. Another driver is social media, the pastime and passion of nearly 100 percent of the Latin American population using mobile or Internet, according to comScore. While social media isn’t a new phenomenon, the growth is phenomenal. To take advantage of this robust growth in text messaging mobile operators are also migrating to more flexible pricing to encourage use and to appeal to new customer segments. A prime example is Tigo Colombia, a mobile operator that is developing a new approach to enable users to do what they want most: communicate with family and friends in other countries at affordable prices, observes Juan Felipe Velasquez, Latam International Roaming Coordinator at Tigo Colombia. At a deeper level, Tigo Colombia’s business model is based on partnership to ensure access to key capabilities and technologies. According to Velasquez, the decision to cooperate with SAP Mobile Services is driven by the internal requirement to keep pace with innovation.“Many times we fail to seize opportunities because technology changes so fast and we sometimes neglect segments that do not have access to new technologies.” Against this backdrop, it is clear markets like Latin America — not the more developed markets of Europe and North America — will lead messaging growth and innovation.
  41. 41. 40 Exciting opportunities ahead What are the highest areas of opportunity on the operator agenda? Personal Paraguay’s Ruiz is squarely focused on extracting more value out of offering a wide variety of packages with truly personal communications at the core. “Our slogan is ‘Cada Persona es un mundo — Each person is a world.’This means delivering each customer the services and bundles that are in tune with their lives. They are at the center.” Looking ahead, Personal Paraguay is also planning to deploy LTE/4G “with IPX to support new services” that satisfy customer requirements for quality, coverage and convenience. Tigo’s Velasquez says he is also looking to a future where continued cooperation between the stakeholders — operators, suppliers and users — creates a win-win for everyone. Additionally, it is important to add these services onto an IPX, where connectivity meets users’ needs for quality and desire to communicate on their terms. Velasquez is also bullish about the outlook for value-added services that harness SMS in new ways. Chief among these is M2M. As he puts it: “I think that the next step in our industry is machine-to-machine, where we can connect all the machines with machines — and with the people managing them — around the world with simple SMS.” Whether it’s person-to-person or machine- to-machine, it’s clear that messaging is king. A promising and fast-growing service that should not be ignored is A2P, or Application- To-Person messaging. In this scenario, soft- ware applications and organisations, such as enterprises and governments, establish a one or two-way communication channel with people using SMS. The revenue potential is significant. Accord- ing to a study published by Portio Research Ltd, a research firm based in the U.K., for the period 2011-2016 worldwide A2P SMS revenue is expected to outpace Person- To-Person (P2P) SMS revenue and grow at a CAGR of 13.1 percent. Looking ahead, Personal Paraguay is also planning to deploy LTE/4G “with IPX to support new services” that satisfy customer requirements for quality, coverage and convenience.
  42. 42. 41Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities As of end-2012, A2P traffic represented 23 percent of total SMS traffic worlwide, and 33 percent of SMS global revenues. In Latin America, A2P traffic accounted for 15.2 percent of total SMS traffic, significantly lower compared with the U.S. and Canada. This would indicate there is a significant potential for A2P growth in the region in the years ahead. Indeed, the outlook for A2P SMS growth is positive. A key driver: the advance of more conversational commerce and advertising, requiring marketers and retailers to deliver campaigns, offers and brand messages via text messaging. Banks are also harnessing SMS to send transaction notifications to their clients, a convenient service that con- sumers have come to accept and appreciate. These examples show there is a lot of mileage — and value — left in text messag- ing. In Latin America, in particular, the growth of SMS shows no signs of slowing, a positive trend that benefits mobile opera- tors that develop the mix of capabilities — billing, bundles and international coverage — their customers expect. Figure 2: Based on data from Portio Research Ltd. P2P A2P SMS revenue – worldwide (in USD billions, 2009-2016F) SMSRevenue(inUSDbillions) 2009 2010 2011F 2012F 2013F 2014F 2015F 2016F 73.4 25.5 30.7 44.2 27.4 52.3 60.4 70.1 75.1 78.5 85.7 94.2 95.593.6 89.5 83.9 A2P SMS Revenue P2P SMS Revenue Note: The sum of A2P and P2P SMS revenues may not add up to total SMS revenue because of rounding off errors.
  43. 43. 42 By 2015 Latin America is forecast to have more than 750 million mobile connec- tions, with an average penetration rate of 122 percent. According to the GSMA, the region is one of the world’s largest mobile markets by volume. With HSPA and LTE connections reaching more than 305 million by 2015, mobile broadband will be a key driver of growth. It will also be the primary means of Internet access for people across the region. Sebastian Cabello, Director of Latin America, GSMA commented: “As well as being one of the largest, Latin America is also one of the world’s fastest-growing mobile markets. We have experienced 13 percent growth per year for the past four years, driven by increasing accessibility, flexibility and affordability of mobile services, and boosted by the increasing affluence of the region and the relative shortage of the fixed line infrastructure.” Strong growth drives penetration, usage SMS traffic break-out-regional (in billions, 2009 – 2016F) Region 2009 2010 2011 2012F 2013F 2014F 2015F 2016F Latin America P2P 203.4 285.3 341.7 381.6 417.6 443.7 460.5 478.3 A2P 22.7 32.9 50.6 68.6 84.7 101.0 118.1 125.8 Note: Sum of regional numbers may not equal total due to rounding off errors. Figure 3: Based on data from Portio Research Ltd. www.slideshare.net/CiscoSP360/cisco-visual-networking-index-vni-global-mobile-data-traffic-forecast-20112016
  44. 44. 43Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities Imagine identifying a cyberthreat such as a virus, worm or malicious code on your company’s commun- ications network. You know how to remove it, but you also believe that your company isn’t the only one under attack. You tell your boss that others, including your comp- etitors and military commun- ication networks, might likewise be affected (but their IT experts might not have noticed the threat yet, or simply haven’t figured out how to stop it). As a courtesy, you’d like to alert these other parties and offer your assistance to help them protect their networks in anticipation of the virus, or help them remove it altogether. Unfortunately, if you did that, you would put your company and yourself in danger of lawsuits and in violation of antitrust laws, as well as many other significant problems. How canthispossiblybeconsideredefficient,effec- tive or“good business”? It’s not. If you’re like the CTIA-The Wireless Association, and many of its members, then you already know that private sector net- works are targeted every day by hackers, criminals and nation-state actors for cyber exploitation and theft. The scenario I des- cribed above, as well as the attacks that confront the private sector daily, are pivotal reasons why we support the Cyber Informa- tion Sharing and Protection Act [(CISPA) (H.R. 3523)]. This legislation would pave the way for efficient and effective business practice, allowing our members to communicate with all the stakeholders — competitors, federal government agencies, IT directors, academia and experts — to identify potential issues and create solutions before, during and after the problem. Cybersafety: Everyone’s Responsibility By Steve Largent, President CEO, CTIA-The Wireless Association CTIA and its members have already taken an active role in addressing cybersecurity, but time isn’t on our side because the hacker community is moving fast. PART TWO: STRATEGIES FOR DRIVING REVENUE
  45. 45. 44 The cybersecurity ecosystem The CISPA’s sponsors, U.S. House of Representatives Permanent Select Comm- ittee on Intelligence Chairman Mike Rogers (R-AL-3) and Committee Ranking Member Dutch Ruppersberger (D-MD-2), recognise that cyberthreat intelligence sharing and providing clear authority for the private sector to defend its own networks is critically important in today’s world. When passed, CISPA, which has already been approved by the U.S. House of Representatives and is awaiting the U.S. Senate to vote, will carefully balance appro- priate privacy protections with immunity from lawsuit protections so that private and public entities are genuinely incentivised to share cyberthreat information to help our nation get ahead of the challenge. While CISPA is vital, CTIA and its members also want to highlight the importance of other pieces in the cybersecurity puzzle. Of these two are our immediate focus areas. First, is to educate policymakers and con- sumers about the role they play in fighting cyberthreats. Or, as we like to put it, the role these parties play in ensuring cybersafety. Second, is to remind people that the wireless industry’s ecosystem is made up of more than the operators and their networks. It now encompasses several other players, including device manufac- turers, mobile app and content creators, operating system developers and infra- structure producers. Quite simply, every single mobile user and company in the wireless ecosystem has an important role in ensuring cybersafety and protecting all of us from cyberthreats. Work in progress In recognition of the vast and diverse wireless ecosystem and the need to bring all the stakeholders together to address cyberthreats, CTIA created a cybersecurity working group in March 2012. This group is comprised of our members, and maintains an ongoing dialogue with gov- ernment agency representatives, researchers and experts from around the country to help protect the wireless industry — and our customers — against cyberthreats. In particular, this group focuses on sharing: • Best practices and existing standards (including technical exchange) • Known vulnerabilities and countermeasures
  46. 46. 45Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities • Suggestions and ideas on how the industry improves security while being technology agnostic and maintains the openness of the Internet The working group has a number of initiatives already in the works, but I can’t reveal them yet. However, I can share the new Cybersafety pamphlet, which was written in non-techni- cal terms, and provides consumers with easy-to-understand tips on how to protect themselves, their wireless devices and their information. This is important since today’s smartphones and tablets have features and functions that have turned them into mini-computers. Because these mobile devices are also packed with personal information, such as banking and health records, consumers Figure 1: Based on data from McLaughlin Associates. National Survey of IT Decision Makers, July 27, 2012. 96% Agree that government should allow companies to exchange information to help identify vulnerabilities and protect users from hacking and cyberfraud Strongly agree 49.4% Somewhat agree 46.6% Strongly disagree 1.8% Somewhat disagree 2.2%
  47. 47. 46 need to take more responsibility for the pro- tection of this sensitive data. Specifically, consumers need to actively protect them- selves by following simple tips, such as using passwords and PINs. They can also back up their personal information on the cloud, or other external sources, and update the operating systems on their mobile devices. Collaboration is essential Education is key to ensuring cybersecurity for everyone, but there’s only so much the working group can do without CISPA. Right now, the working group may only share limited information, so it isn’t helping us to address the real issues at hand: the daily attacks that threaten industry and consumers. Figure 2: Based on data from McLaughlin Associates. National Survey of IT Decision Makers, July 27, 2012. http://files.ctia.org/pdf/IT-Decisionmaker-Survey-FINAL.pdf How should industry and government proceed on cybersecurity? Industry should take the lead in defining standards. Government should take the lead in defining standards. Industry and government should share information on threats, and work collaboratively to define standards. Industry and government should share information on threats without defining standards. 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 14.8% 4.0% 68.0% 13.2%
  48. 48. 47Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities By enacting CISPA, the private sector will be able to better leverage its own cyberdefense efforts in a coordinated way with govern- ment entities through information sharing to protect the nation’s systems, networks and consumers. Additionally, by helping facilitate the creation of a more robust cybersecurity marketplace, CISPA will lead to expanded research, service offerings and more jobs for cybersecurity experts. Those are positive outcomes that will surely benefit our nation and our economy. CTIA and its members have already taken an active role in addressing cybersecurity, but time isn’t on our side because the hacker community is moving fast. Several independent reports have revealed up to 30 percent growth in the instances malware. They also report rapid growth in spyware designed to steal sensitive personal, finan- cial and work-related information from mobile devices. To counterbalance this significant threat, all of the players in the wireless industry ecosystem must be allowed to work collaboratively to stem the rising tide. For more information and to download the cybersafety brochure, please visit: www.ctia. org/cybersafety Steve Largent has served as President and CEO of CTIA-The Wireless Association® and President of The Wireless Foundation since November 2003. Previously, Largent repre- sented Oklahoma’s First Congressional District in the U.S. House of Representatives from 1994 to 2001. During this time Largent was the Vice-Chairman of the Energy and Air Quality Subcommittee and also served on the Telecommunications Subcommittee, the Oversight and Investigations Subcom- mittee, and the Environment and Hazardous Materials Subcommittee.   This legislation would pave the way for efficient and effective business practice, allowing our members to communicate with all the stake- holders — competitors, federal government agencies, IT directors, academia and experts — to identify potential issues and create solutions before, during and after the problem.
  49. 49. 48 The nature of malware and the entire computer attack spectrum has changed dramatically over the past decade. Originally designed to be disruptive to the computer, today’s malware is no longer the end game, but rather a tool that serves as a means to a new end: criminal profiteering. With that evolution, social manipulation has become a key facilitator in modern attacks, and messaging is the obvious medium through which it is affected. Social engineering entices potential victims into taking some action that will prove harmful to themselves and/or the device they are using. Social engineering is plat- form-agnostic, cannot be patched, and has a seemingly infinite number of angles through which susceptible victims can be manipulated. Further, there are no development costs associated with social engineering, no concerns of cross-platform compatibility issues, and is completely disposable without penalty – if one social campaign fails, the attackers can quickly and cost effectively move on to the next. Open for attack The always-on/always-carried nature of mobile devices enhances the potential for social manipulation. Many social engineer- ing attacks succeed because they foster some sense of urgency. Mobile device users may be more distracted while checking or receiving messages (whether via email or SMS). This is because they are encounter- ing these messages during the normal course of their day, rather than specifically setting aside dedicated time to check messages at their PC. Being distracted a recipient may act more hastily and open messages on their mobile device without thinking about the risk first. Further, people’s inherent trust in their mobile devices and the messages received on those devices, can exacerbate the situation. In concert with evolutionary changes on the malware front, smartphone, tablet and general mobile adoption rates are quickly Does The Future of Mobile Security Lie in the Past? By Mary Landesman, Senior Security Researcher, Cloudmark PART TWO: STRATEGIES FOR DRIVING REVENUE
  50. 50. 49Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities outpacing traditional computers. In develop- ing nations users are bypassing traditional computer adoption altogether and moving directly into smartphone and tablet adopt- ion. This leapfrogging to mobile makes perfect sense; mobile devices are generally less expensive than traditional computers and are highly transportable, a distinct advantage in countries where Internet cafes are the norm. The combination of digital criminal profit- eering and mobile adoption may well be the perfect storm. Not only does widespread mobile adoption provide a steady and increasing supply of potential new victims; mobile devices are also proving to be cost- effective attack tools. Indeed, the ease with which mobile devices can be obtained (either through purchase or theft) signif- icantly lowers the barrier to entry for would-be attackers. Short of having a crystal ball, it’s not entirely possible to determine the exact nature of the future threat for mobile devices. Regard- less, there are tell-tale signs that mobile threats are following a similar – yet greatly accelerated – track first witnessed with traditional computer threats. For example, there is currently a thriving gray-hat market for Android users engaged in click fraud and other forms of advertising manipulation. This closely parallels the computer scene in the early 2000s, when Web 2.0 first provided the opportunity for affiliate marketing relationships. A subset of those affiliates quickly realised they could increase their revenue potential by incorporating unethical (and sometimes illegal) means of generating clicks for profit. Instead of taking several years to crossover, this practice has already materialised in the mobile arena. Likewise, traditional spam – problematic since the beginning of email – received a tremendous boost in 2003 through illicit spam proxies distributed by the SoBig worm. This shift has already occurred on smartphones, with a wide range of bulk mail and proxy tools available to would-be spammers who want to use mobile as the The always-on/always-carried nature of mobile devices enhances the potential for social manipulation.
  51. 51. 50 sending device. In early 2011 the first observed spam attack originating from Android devices occurred. This culminated in a mass spam campaign in mid-2012, thus demonstrating mobile’s suitability for use as a spam tool. Spam goes mobile The nature of spam attacks targeting mobile users has also adapted to the new ecosystem. Attackers do not necessarily need to rely on installation of malware or covert phishing attacks to profit. Instead, a mobile attack may simply trick the recipient into agreeing to send premium rate SMS messages. This results in expensive and unexpected charges to the victim, allowing the attacker to profit. Indeed, the majority of SMS spam falls into the category of scam or fraud, which is defined as a campaign to entice the recip- ient into taking some action that unwitt- ingly results in information disclosure or financial loss. Recent estimates suggest that up to 70 percent of unwanted text messages are attempts at financial fraud. Social engineering factors heavily in scam and fraud campaigns and, as a result, the exact pitch, or hook, used by the scammer varies by geographical region. Scams offering free Wal-Mart or Best Buy gift cards abound in the U.S., a country where the Wal-Mart and Best Buy chains are well known. In the U.K. scams use PPI compensation or accident claims as the primary hook. Text messages are a powerful vehicle for reaching people. Currently, SMS marketers claim SMS message open rates are higher than 90 percent and opened within 15 minutes of receipt. By regionalising topics to the victim’s locale, attackers are simply ensuring a higher open and reaction rate for these text messages in an environment that already fosters a high open/reaction rate. (Traditional email, by contrast, has an open rate of only 20-25 percent within 24 hours of receipt). Attackers do not necessarily need to rely on installation of malware or covert phishing attacks to profit. Instead, a mobile attack may simply trick the recipient into agreeing to send premium rate SMS messages.
  52. 52. 51Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities Exacerbating the problem, the typical SMS text scam is seldom single-purposed; rather each click through or response from the recipient leads to another possible angle to the scam. For example, a free gift card spam may begin with ‘just’ a survey. However, not only is personal information collected (and sold in aggregate), but the often obscured terms of service for the survey spell out insidious actions such as the inability to cancel the account or the unwitting agreement to send SMS texts to premium rate numbers. Also, a ‘free’ offer often requires the partici- pant to pay various fees in order to continue progressing towards the final giveaway. This can progress to the point that, even if actual merchandise is ever ‘won’, the participant has spent more in up-front fees and unan- ticipated SMS charges than the actual merchandise is worth. Fighting back Mobile devices have already proven to be favourable and cost effective, both as an attack tool and as an attack target, with social manipulation playing a key role. Further, the ease of disposal and/or replacement of mobile devices will naturally hamper law enforcement efforts and make it more difficult to thwart attacks. Hopefully, we can all learn from past mis- takes. Central to the success of traditional computer attacks was a failure to recognise or act on early indications that malware had turned to profit. Criminal attacks on mobile devices are following an accelerated path leading in the same direction. Let’s hope that we will act as quickly and adopt the appropriate counter - measures before the tipping point is reached. Mary Landesman has over 20 years experi- ence in the security industry and is a widely cited expert in the field of antivirus, malware and computer security trends. Apollo Research named her the top spokesperson for both malware and phishing, the third for DLP (data loss prevention) and the third most quoted security spokesperson overall. Additionally, she was recently named one of the top 10 women in information security by eWeek. Since 2007, Landesman has also been an annual recipient of a Microsoft MVP award for her work in consumer security.
  53. 53. 52 The growing threat of smartphone hackers. Mobile malware and what you need to know Do you think it’s safe to access sensitive data on your mobile phone? Perhaps you should think again. With malicious programs designed to target cell phones skyrocketing, it’s becoming increasingly dangerous to use your phone without the necessary precautions. Here’s how to prevent malware from taking over your phone... and your life. What is mobile malware Malware is software with a malicious purpose. It may be designed to disable your phone, remotely control your device, or steal valuable information. Mobile malware uses the same techniques as PC malware to infect mobile devices. The real dangers of malware • Bank account passwords are stolen • Private information is captured • The phone is forced to send messages to premium numbers • Phone data is deleted • Device is “bricked” and needs replacing • Malware-infected devices can be used by botnet owners to launch attacks on digital targets. The growth of malware Number of mobile malware 201020092008200720062005 52 119 229 437 853 2,500 Figure 1: Based on data from Bullguard.
  54. 54. 53Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities Mobile Number Portability: Increasing Competition And Driving Value By Mitul Ruparelia, Director of Sales Engineering, SAP Mobile Services Mobile operators are understand- ably concerned about subscriber churn and constantly on the watch for ways to prevent it. But this task has become more difficult since the advent of Mobile Number Port- ability (MNP), also known as Wire- less Number Portability (WNP), which allows subscribers to vote with their feet when services are not satisfactory. This is because MNP allows the subscriber to take their phone number with them — even when they switch to another operator in the same country. In principle, MNP simply allows subscribers to retain their phone number. However, the process of porting a number from one mobile operator to the other can be complicated. It involves a number of steps including the initiation of the port from the subscriber, which is the request to the donor network that starts off the handover. It also involves an exchange of porting information among the mobile operators, and results in an update to the network routing scheme and internal home location registry databases. The turnaround time for this process depends on the country where this takes place because it is dictated by the technology and regulation present in the country in question. MNP advances MNP was first implemented in the late 1990s in mature European markets such as the U.K. and the Netherlands. The objective was to enable mobile operators to compete for customers on other networks. To date 70 countries worldwide have imple- mented MNP, and this number continues to increase as new markets and regions advance. Predictably, we see it’s the dominant mobile operators with stronger market share that are less likely to support the implementation of MNP. This is because they perceive it as a scheme that will likely increase the chances that they will lose — not gain — subscribers. Indeed, this is a realistic scenario, and one that has effectively motivated mobile opera- tors to innovate and deliver value-added 24 19 PART TWO: STRATEGIES FOR DRIVING REVENUE
  55. 55. 54 services to delight and retain their custom- ers. They have also introduced lower pricing and exclusive packages with unique hand- sets in order to meet consumer require- ments for services and — ultimately — grow their subscriber base. A prime example of this approach is how mobile operators marketed the Apple iPhone to attract customers to their brand. In the U.K. Apple awarded Telefónica UK (O2 UK) a two-year exclusivity on the handset, making it the only network sup- porting the iconic device. This gave Telefónica UK a significant advantage, allowing it to report the lowest churn rate in the country. Churn stood at a mere 1.1 percent in both 2009 and 2010. During the same period other U.K. operators lost a significant number of their subscrib- ers to Telefónica U.K. — no doubt attracted by the Apple iPhone package. In fact our figures for 2009 show that 15 percent of subscribers in the U.K. ported their number from one network to another. Fierce competition Since the economic slowdown that marked 2008 and 2009, mobile operators across the globe have become more cost conscious than ever before. This shift in mindset is also a reaction to fierce competition and mount- ing pressure from regional bodies and insti- tutions to accept MNP. This has combined to result in a significant decline in operator ARPU. Another outcome of this is the impact on OPEX and CAPEX budgets, limiting the investments operators can make in key technologies such as LTE/4G. Regulators and government institutions have moved forward with plans to liberalise markets by mandating the implementation of MNP. This is also the focus in the more mature and saturated markets, where penetration is near 100-percent and thus Investment in MNP solutions is critical to the capabilities of any telecommunications company to satisfy and retain their customers, as well as successfully complete calls and messages routed via their network.
  56. 56. 55Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities limits the number of new customers/non- subscribers that can be won by mobile operators in those countries. MNP clearly benefits subscribers by offer- ing lower tariffs and the freedom to switch. But it also creates commercial and technical challenges for mobile operators across the board. Chief among these is the lack of a standard process that allows operators in all countries, including those where MNP is not the accepted procedure, to know when subscribers who have chosen to retain their number and to route messages and voice calls to them. This confusion exists because mobile operators, as a default, will typically route voice calls and messages to a subscriber based on pre-allocated number ranges. Figure 1: Based on data from Wireless Intelligence. https://wirelessintelligence.com/analysis/2011/04/o2-records-lowest-churn-rates-in-uk/ UK contract churn (%) by operator 2005-2010 (annual average) 2005 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2006 2007 2008 2009 2010 02 (Teléfonica) Vodafone Orange T-Mobile (Hutchinson)* Everything everywhere
  57. 57. 56 In cases where MNP has been implemented by the destination country, the originating mobile operator is dependent on either direct GSM connectivity (GSM Forwarding/ Onward Routing) with all of the operators in the country to route calls and messages, or they rely on a service provider — such as a voice operator or a SMS hub — to handle both the MNP and delivery. Choosing not to adopt one of these two options can have a negative impact on the call and message success rate. This was precisely the outcome in January 2011, the year MNP was introduced in India. Two oper- ators in the Middle East region were proac- tively measuring KPIs at the time. They saw a 12 percent increase in failed SMS in the first quarter alone, which is quite significant given the tremendous volume of traffic exchanged between the Middle East and Asian operators. Critical capability As this example clearly shows, investment in MNP solutions is critical to the capabilities of any telecommunications company to satisfy and retain their customers, as well as successfully complete calls and messages routed via their network. Clearly, MNP is a good news story for sub- scribers, because it allows them to switch operators and retain their phone numbers. However, it also confronts mobile operators with a variety of commercial challenges. To delight and retain their subscribers and stand up to formidable competition in the marketplace mobile operators must be innovative and agile. To accomplish this operators are well advised to create services to offer more value to their customers and begin — through outsourcing and partner- ship — to build the capabilities to ensure the successful delivery of all messaging, voice and data. Regulators and government institutions have moved forward with plans to liberalise markets by mandating the implementation of MNP. This is also the focus in the more mature and saturated markets.
  58. 58. 57Mobile Operator Guide 2013 The Evolution of Mobile Services: Challenges, Strategies, Opportunities Mitul Ruparelia joined SAP Mobile Services in 2007 as a Pre-Sales Engineer after graduating with a first-class honours degree in Computer Information Systems. In 2010, he was named the design authority for the Intelligent Hubbing solution, which is a unique, patent-pending technology, allowing mobile operators to increase revenues, reduce operational costs and improve customer experience.
  59. 59. 58 Atahighlevel,mostMobileOperators roaming teams are focused on achieving two key objectives: achieving the best possible Quality of Service for subscribers, and optimising the associated retail and wholesale revenues. How does an operator achieve these aims? First, operators must ensure they have the network connectivity in place to deliver their subscribers’ text messages to their destina- tion. Of course, operators must also enable a reply path to guarantee the delivery of the SMS response. Second, operators need to have the com- mercial mechanisms in place to monetise the message flow. Sounds simple, right? Well, it isn’t! Today operators that want to enable this are confronted by a variety of hurdles. To complicate matters, operators’ operating margins are coming under increasing pressure, a situation that can limit the avail- able resources operators can direct toward enabling and monetising the message flow in the first place. What’s more, operators must cope with the advance of Mobile Number Portability (MNP), a development that has made the messaging landscape even more complex. PART TWO: STRATEGIES FOR DRIVING REVENUE Intelligent Hubbing: Easing International sms Routing Complexity By Mark Weait, Vice President Sales (EMEA LATAM), SAP Mobile Services This approach has enabled operators to dramatically increase the number of messages they have successfully delivered on behalf of their subscribers. This, in turn, has sharply increased retail revenues and customer satisfaction.

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