Smart Phone

Schroders
Smartphone revolution: Friend or
foe to telecoms operators?
Research written report
Unpredictable fluid data usage creates uncertainty over
futurity cashflows and revenue
James Gautrey
world(a) Sector Specialist,
Technology and Telecoms
August 2011
2
Smartphone revolution: Friend or foe
to telecoms operators?
Unpredictable lively data usage creates uncertainty
over future cashflows and revenue
Executive Summary
Smartphones are increasingly dominating the world of mobile phones. The advent of mobile data has
enabled internet on the fail and now, as the smartphone becomes evermore affordable, it is rapidly
reaching the masses. This has widely been lauded as verificatory by telecoms operators. But industry and
investors alike must beware. officious data actually decreases the amount customers spend and may reduce
revenues at a time when costs are rising. Investors ignore this at their peril.
The impact of mobile data on customer behaviour
As consumers become more familiar with mobile data and the ample services on offer from platforms such as
Apples App Store, mobile operators revenues could actually decline as consumers begin to alternate highpriced
illustration and text edition services for lower-priced data alternatives.
The problem arises partly because data is priced so cheaply.



For example, data in the UK is priced 10-20x
cheaper than traditional voice and SMS on a per bit basis some estimates gift this disparity even higher. If
an operators pricing body structure permits, consumers can substitute some traditional voice and text packets
for cheaper over IP alternatives such as Skype (voice) and WhatsApp (text). The monthly cadence falls while
usage is effectively unchanged. KPN recently provided a skid to demonstrate this effect.
Figure 1: Impact of over IP alternatives on phone bills
Source: KPN company presentation
Research Paper: Smartphone revolution: Friend or
foe to telecoms operators?
For professional investors and advisors only
August 2011
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