Predicting the future

When writing our predictions for 2009, there is no way of avoiding relating my predictions to the new reality that has emerged due to the international financial crisis. At Strand Consult we make a living out of viewing events objectively, but on the other hand we are also realistic, so we know that the international recession that large parts of the world is currently experiencing will also influence an industry that primarily does business by delivering a basic service like good old-fashioned telephony – we are in a commodity industry.

An editorial by Strand Consult. The company analyses mobile markets and developments, publishes reports, conducts executive workshops, and helps telecoms industry participants focus on their business strategies. Strand Consult is based in Copenhagen, Denmark.

How will the mobile market develop in 2009? There will be some main trends that will dominate the 2009 mobile market. This will be the year where almost all the world’s mobile operators will primarily focus on mobile broadband. This market will grow, but competition may be so tough that it will result in very low prices in most markets. These low prices will result in operators over time having five choices of how to continue to do business. Reduce subscriber acquisition costs; reduce customers’ consumption; launch a number of premium products; bundle services with a mobile broadband product; or launch premium billing on mobile broadband.

The current financial reality will result in demand decreasing and a great deal of the sales created in 2009 will primarily derive from the innovation that the industry must deliver. This
will come from new and smart handsets, and new and innovative services that will create a large part of the revenue on top of the basic products and services that customers purchase. Those that do not understand the importance of innovation will experience a decreasing demand for their products and services during 2009.

This will be the year where there is an extra large focus on cash flow. Some will have a positive cash flow they can take advantage of, while others will have a negative cash flow and will need to enter into some form of consolidation, one way or another. This year will be the year where innovation is king and cash is King Kong.

Consumer behaviour in 2009

If you look at how customers will behave during 2009, we predict that their main focus will be on value for money. Companies that can give customers value for money will be successful – those that focus on premium products that do not differentiate from their competitors will experience a tough year. When customers experience a financial recession as currently being described by the media, they become much more price sensitive and this happens quickly. One of the areas where operators will rapidly experience this will be the acceleration of customers migrating from fixed-lines to mobile, and an increasing number of subscribers will discontinue their fixed-line phone subscription and instead use their mobile phone.

The operator business

If you sell infrastructure, 2009 will be a tough year. We are certain that operators will focus on limiting their CAPEX and will focus on getting value for money. This will result in operators increasingly limiting their investments to the absolute minimum – competition will be tough. Operators will primarily purchase extra capacity and expansion of their mobile broadband networks; investments in improving coverage will be limited.

We believe that the MVNO market will continue to grow; we will see this market spread to South America, the Middle East and perhaps Asia. Successful MVNOs will move from being a European phenomenon to becoming global phenomena and new types of MVNOs will emerge. We believe we will see a number of data-based MVNOs across the world and some of these will emerge from the IT industry. Some of these MVNOs will focus on becoming mobile ISPs, while others will focus on delivering data services, including machine-tomachine solutions.

The technology business

During 2009 there will be a great deal of focus on a number of technologies. The media will be flooded with stories about DSL, fibre-to-the-home (FTTH), femtocells, WiMAX, CDMA, LTE, HSUPA, GSM/CDMA- 450MHz, UWB and DVB-H.

On the whole, a lot of this communication will be driven by the technology providers that make a living from selling these technologies – they will all claim that they are selling the winning technology, but many of them will fail – and only a few will succeed.

Regarding FTTH, we have little doubt that most fibre providers are having difficulty getting their business cases to work. There is no doubt that there is a market for fibre and a need for FTTH, the big question however, is whether the providers can attract enough customers to achieve a ROI on the enormous investments that FTTH require?

The handset business

Just like in 2008, 2009 will also see many new products launched. We believe the actual numbers will be a little less, but on the other hand those that are launched will represent a wider spectrum. There is no doubt we will experience the ‘Apple’ effect and this will result in many new and exciting products. On the other hand a market player like Apple will probably experience a greater resistance than it had expected and unless it launches new products its role might quickly be marginalised – once again innovation is needed to drive new sales.