Connected Research

Union policy research in the 21st century

Mobile companies and strategy issues: where next?

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Verizon Wireless, the US mobile company joint-owned by Vodafone, this week announced a partnership with Skype. The agreement will see Skype added to smartphones offered by Verizon – the largest mobile operator in the US.

The agreement, which was announced during the Mobile World Congress in Barcelona, follows a similar deal with AT&T and after a similar announcement putting Skype into Nokia’s Ovi application store, thus enabling Nokia smartphone users also to make calls using Skype.

Skype is essentially a piece of software allowing users to make telephone calls over lines which are usually used for data transmitted over the internet. The quality is, therefore, not as good as you would get from a voice call made over the traditional telephone network, but is getting better. The real attraction is its cheapness – international calls (the same as would made as a result of dialling websites or servers located in other countries) for the price of a local one. Skype is already used by some 15% of iPhone and iTouch users, and is reported to carry 12% of international call minutes.

The agreement between Skype and Verizon was heralded as telephone operators beginning to lose their fear of collaborating with voice over internet providers. It’s clearly far too early to make that sort of call just yet. All the same, it is true that the usual view of Skype is that it does threaten the typically lucrative international call market, a clear source of shoring-up revenue for fixed-line telephone operators faced with revenue falls in other markets. Its application in the mobile sphere is thus likely to present the same challenges to mobile carriers. The puff around the agreement is that Skype doesn’t threaten customer numbers – this would be true in the sense that customer numbers won’t be reduced by the agreement and they might even increase were Skype to bring some of its customers over to whichever operator it hooked up with. 3, which has a similar deal with Skype, reports increased customer usage and lower churn  – an interesting lesson. Nevertheless, the reduced revenues associated with calls made over Skype facilities that the operators’ own network are, however, surely likely to remain an issue. Inevitably, therefore, the true worth of the agreement from the perspective of the strategy of mobile operators thus seems to lie in that keeping hold of customers represents a greater prize than maintaining revenues.

It is also an interesting development in the light of ongoing capacity issues created by increasingly intense network demands made by smartphones – though Skype was quick (and mostly correct) in downplaying the network demands placed by pure voice calls in comparison to the data calls made also from smartphones. And Verizon says that it has heavily tested this aspect.

The Mobile World Congress is now concluded and has been a source for many stories in the sector this week including, at the headline level, the new alliance between mobile operators to launch an app store of their own, heralded as mobile companies fighting back against their relegation to a role as no more than pipe suppliers (and likely to reflect how mobile operators see the future monetary value of keeping hold of their customers); the BBC offering iPhone apps for news and sport (subsequently attacked by the Newspaper Publishers Association and likely as a result to be subject to political scutiny as well, depending on the outcome of the next general election); and Vodafone launching a spat with Google over the latter’s dominance of internet advertising revenues. You can find a good round-up of the themes of the week – which are likely to drive technical developments in the sector as well as its strategic focus in the forthcoming period – here.

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Written by Calvin

19/02/2010 at 2:26 pm

Posted in Technology, Telecoms companies

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