Next Generation Operator: Is the search for Enterprise revenue the real driver for Fixed and Mobile market consolidation

Vodafone is running advertising in the UK extolling the new world in telecommunications where there is no longer a split between mobile and fixed services.  The ads are part of a communication push surrounding the acquisition of Cable and Wireless. There are a number of well discussed reasons for the collapse of differentiation between fixed and mobile markets.  Today I wanted to discuss one of the less obvious drivers for this consolidation, as we see Mobile operators  acquiring fixed operations in order to secure a better position in the enterprise market.  

 The majority of mobile operators are consumer-focused organizations with limited Enterprise market share.  Even mobile operators that have been focusing on enterprise strategies and organic growth for a considerable time period have had limited success.  Vodafone has had enterprise product and focus for many years,  yet it derives  only 27% of its revenue from enterprise – after the acquisition of Cable and Wireless.Compare that to Belgacom Group – which is number one in both the mobile and fixed business in their country.  They get 47% from enterprise, 47% from consumer and 6% from wholesale. 

 The Belgacom mix of service revenues within consumer and enterprise segments is quite interesting

 

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Source Belgacom annual report

The points that leap out to me are:

  •  Despite a quite successful content (IPTV) business and number 1 position in mobile and DSL consumer is still only 47% of revenue .
  • ICT revenue is almost purely enterprise (there is some consumer CPE)
    • The ICT revenue is not just limited to Belgium so it does help boast the enterprise numbers
    • Mobile data is gaining importance at breakneck speed.  Its already almost as large a stream as DSL –  and this is before LTE roll-out…..
    • Voice just doesn’t go away….still hanging in there as a significant revenue stream on fixed side.

There is no question that the enterprise ICT market is huge and mainly untapped by mobile operators.  Enterprise services are an attractive area for Mobile operators to attack as they look for ways to compensate deterioration in the mobile voice business. The mobile operators sense that this is the moment to make moves into enterprise.  They are gaining significant place in the CIO’s mind set because of the rise in tablets, BYOD, and workforce mobility.

 But most mobile operators also realize that it is a significant change to their DNA to move from consumer to enterprise focus.  Every process in the company changes significantly as you get past small business and move into enterprise. Efforts to grow organically into enterprise have proven slow and difficult.  It is too early to say whether acquisition will be more effective.

For many mobile operators it won’t be a question of choice, they will need to expand into enterprise to sustain top line revenue.  As they do so they will need to think carefully about the operating model that allows its enterprise business to flourish.  You can read about one operator approached setting its strategy in our case study http://www.cavellgroup.com/2012-04-23-14-12-27/2012-04-23-11-36-19/mobile-operator-entering-the-hosted-services-market

Author: Gail Smith 

 

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