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Smartphone Market Strategies - How Devices Can Revitalize the Role of Operators in the Mobile Ecosystem

 

Dallas, TX -- (ReleaseWire) -- 03/11/2014 -- Revolution has been sweeping the mobile telecom world for years by the rise of a new ruler - the smartphone. In this report, Pyramid Research presents strategies for mobile operators to use in response to the challenges brought by the new situation. It examines strategies such as device portfolios, smartphone distribution, subsidies, buy-backs, trade-ins, reverse subsidies, own-branded devices, handset financing, data-sharing, tablets, OTT services. This report examines the device strategies of five mobile operators in depth: ATandT, MTS, Telefónica, China Unicom and Orange.

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Introduction and Landscape
Revolution has been sweeping the mobile telecom world for the past few years. Despite being characterized by fast-paced change from its infancy, the industry has been shaken to its foundations by the rise of a new ruler: the smartphone. Under its reign, traffic has moved from voice to data, and power has shifted from the mobile operators to application developers, OTT service providers and most of all the leading OS providers. In the report Smartphone Strategies: How Devices Can Revitalize the Role of Operators in the Mobile Ecosystem, Pyramid Research presents strategies for mobile operators to use in response to the challenges brought by the new situation. The report shows how a mobile operator can use its device strategy to reposition its business in order to both defend itself against damage from the smartphone revolution and to make the most of the many opportunities the revolution has ushered in.

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It examines strategies such as device portfolios, smartphone distribution, subsidies, buy-backs, trade-ins, reverse subsidies, own-branded devices, handset financing, data-sharing, tablets, OTT services. This report examines the device strategies of five mobile operators in depth. In terms of their business environment and device strategy, each of the five has specific experience that we believe provides valuable insights from which providers from around the globe can learn when drawing up their own strategies: ATandT, MTS, Telefónica, China Unicom and Orange.

Table Of Contents

Table of contents 3

Table of exhibits 5

Executive summary 7

Section 1: Introduction 10
1.1 Business context: In the land of the smartphone revolution 10

Smartphones are rapidly turning the mobile industry software-centric, with the rise of app stores having adverse effects on mobile operators'' business 12

Power and revenue shifts prompt mobile operators to take action 14

1.2 Report objective, structure and definitions 16

Definitions 16

Section 2: Device strategies - key to reinventing mobile operators in an industry transfigured by smartphones 18

2.1 How the rise of OS ecosystems changed mobile operators'' position in the industry and what they can rely on to fight back 18

Despite the changes, mobile operators still have strengths they can draw on to reinvent their device strategies and regain lost market relevance 23

2.2 Device strategies: realigning mobile operators'' business and redefining their role in the disrupted mobile industry 28

Distribution strategy: mobile operators'' role in device retail 28

An experiential sales approach is vital to deepening operators'' involvement in device retail and contributes to smartphone penetration growth 31

Smartphones are leading many emerging-market operators to increase their involvement in handset distribution and expand their retail chains 32

Using device partnerships can help mobile operators influence the existing OS ecosystem duopoly that comfortably rules the industry. 33

Profit pressures stemming from smartphone subsidies suggest that mobile operators should consider alternative business models 34

Telefónica in Spain shows unsubsidized handsets combined with device financing is a viable business model 37

Some emerging market operators combine subsidies with more affordable smartphones to improve penetration and profitability 38

Mobile operators increasingly use alternative business models such as reverse subsidies, “buy-back and trade-in” and handset leasing 38

Other players can offer handset financing in place of the mobile operator 42

Own-brand device strategies help strengthen operator market influence 43

Device customization can raise the profile of operator data services, giving them an edge over OTT players 46

New devices, such as tablets, open new business opportunities for operators 47

Data sharing plans are proving effective at attracting new devices 49

To fight the threat from OS ecosystems and OTTs, operators must adopt strategies where software is vital and where devices are an important tool 50

The acquisition of software skills is important to the future of mobile operators, affecting in particular their device strategy 52

Rich communications fully integrated with devices and networks may be key in mobile operators'' battle against OTT communication providers 52

Multiscreen: mobile operators'' advantage over OTT service providers 55

Partnering with OTTs may also be an option when fighting the impending OTT menace, using models such as toll-free data access to apps 56

2.3 Conclusions, recommendations and emerging trends 58

Section 3: Operator case studies 62

3.1 ATandT: The first iPhone supporter rethinks its smartphone subsidy as competition weighs on revenue and profits 63

ATandT embraced iPhone exclusivity in order to become more competitive, attract new customers and create new revenue opportunities 64

The iPhone strategy had benefits but also caveats, revealed by the loss of exclusivity, which eventually prompted ATandT to take action to curb mounting profitability pressures 66

ATandT''s strategy readjustments are starting to show results, but more change is to come as the market evolves toward lower subsidies - or none 69

3.2 MTS: boosts smartphone penetration without subsidies 73

A ban on device subsidies challenges MTS as it seeks to expand smartphone uptake across its footprint 74

MTS drew up a new strategy to face challenges and pursue the data opportunity 75

Increased retail presence, vendor partnerships, own-brand devices and financing options such as reverse subsidies were decisive in strategy rollout 76

New device strategy is producing good results, contributing decisively for increased smartphone uptake and revenue growth 78

3.3 Telefónica: Discontinuing subsidies in Spain and supporting Mozilla''s Firefox OS to pursue data opportunity in Latin America 81

Discontinuing subsidies as a part of its New Commercial Model in Spain 83

The no-subsidy strategy has had mixed results 87

Supporting Mozilla to pursue data opportunity in Latin America 93

3.4 China Unicom: expanding value chain presence while using affordable smartphones to drive 3G and gain market share 99

Using smartphones and data services to boost its competitiveness in the market 100

Affordable handsets proved key to boosting 3G uptake in a strategy based on crucial retail and vendor partnerships 101

Strategic results for China Unicom 104

3.5 Orange: Using scale to build partnerships and develop an own-brand device ecosystem, reinforcing its value chain position 108

Orange''s device strategy uses scale to build beneficial partnerships 109

A global unit coordinates handset procurement and related partnerships, supporting local operations in delivering attractive devices that drive demand 110

Valuable vendor partnerships and an own-brand device ecosystem has strengthened Orange''s position in the value chain 111

Own-brand devices and customization also support the growth of Orange''s data services offering, beefed up by content partnerships 114

Companies mentioned 116

Acronyms and abbreviations 117

Related resources 118

List Of Exhibits

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