Driving mobile revenues

AS THE CELLULAR MARKET becomes more saturated, network operators worldwide are grappling with declining average revenues per user (ARPU) – the standard measure for cellular revenue.

Research house BMI-T says that ARPUs in the South African market have dropped by 35%, from around R214 in 2001 to R150 in 2005. Launching data services such as 3G and HSDPA has enabled operators to drive more revenues in order to stem the tide of declining ARPUs.

Though the market is responding positively, BMI-T analyst Tertia Smit says the uptake in data services is still embryonic, with the sector currently making up just R3,8bn of the R57bn revenue from SA operators in 2005.

Smit says that person-to-person SMSs are still the major revenue spinner for networks. SMSs currently contribute around 70% of data revenues generated by SA network operators, and Smit attributes that growth to the fact that almost all cellphones have SMS capabilities.

However, the dependence of multimedia messaging (MMS) – which allows subscribers to send/receive content, such as music and pictures on handsets supporting the technology – has hampered adoption. Of the approximately 27m active handsets, Smit says that less than half – roughly 12m – are currently MMS enabled and of those only 25% actually send MMSs. "What is good though is that SA operators are pushing the picture element service – but that will certainly evolve to audio, animation and video downloads. Capitalising on those lucrative markets, equipment vendors are striking close alliances with operators in order to provide equipment and content," she says.

Massimo Sangiovanni – Motorola marketing and strategy director for its EMEA network business – says all its new handsets are MMS enabled. "In as much as demand for MMS-enabled networks is rising, the same can be said of MMS-enabled handsets."

BMI-T estimates that more than 30m devices in the SA market will be MMS capable by 2010. "All these factors will lead to an increase of MMS adoption, with young people already leading the way as early adopters."

Of the SA operators, Vodacom seems the most aggressive in adopting data services, though rival MTN isn’t far behind. Owing mainly to its new data initiatives – such as 3G, Vodafone Live, BlackBerry and, most recently, Mobile TV, as well as the popularity of SMS and MMS – Vodacom’s revenue from data increased by 52,1% to R2bn compared with R1,3bn over the 12-month period.

Vodacom has over the past 12 months tripled the number of MMS users to 867 119 at end-March this year. Vodacom communications executive Dot Field says: "We’re encouraging the use of MMSs in the SA market by providing education to our subscribers on how to set up their cellphones to send and retrieve MMSs.

"Education campaigns catering for the lower end of the market are run in conjunction with Rank TV, which is broadcast at taxi ranks countrywide. However, the cost factor has contributed immensely to the uptake of MMSs by our subscribers. Vodacom’s MMS rate (up to 300Kb) is the same as a peak rate SMS – 80c.

Though MTN is more guarded regarding its subscribers’ response to MMS services, head of marketing and corporate affairs Santie Botha says revenue from its range of data services accounted for around 8,2% of group revenue of R15,5bn.

Cell C – SA’s smallest network operator – couldn’t provide any details on MMS.

After a stuttering uptake, subscribers in the trend-setting US market are only just beginning to embrace MMS. Global technology research house IDC projects that 2006 will prove to be the year in which MMS finally takes off in terms of adoption, with the number of users forecast to triple over the next 12 months to more than 18% of users.

IDC expects the wireless industry to replicate the success of SMS adoption efforts with MMS, such as tying it to entertainment, such as TV shows, games and movie promotions. IDC forecasts that MMS will be the second most popular messaging type after SMS and will be used by just over 45% of all wireless subscribers by year-end 2009.

Says Smit: "Improved image quality of camera phones, increased length of higher quality video and new types of content – such as music videos and TV programming developed for cellphones – will all contribute to subscriber adoption of MMS worldwide."

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Driving mobile revenues