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December 8, 2014

OTT partnerships: 3 challenges mobile operators must overcome

Thorsten Trapp, CTO for tyntec, highlights the challenges operators must overcome to make OTT partnerships a success.

By Cbr Rolling Blog

The rise of smartphones and messaging apps has changed the way consumers communicate meaning mobile operators can no longer depend on receiving revenue from traditional services such as voice calls and text messages. New global survey results have revealed that to tackle this issue, four in five operators are now open to partnering with popular Over-The-Top (OTT) communication services such as Facebook and WhatsApp.

The research marks a dramatic step change in operator attitudes towards OTT players. Previous strategies to compete against OTT providers included operators developing their own competitive advanced messaging services. However, the number of mobile operators implementing this fell from 43% in 2013 to just 5% in 2014. Similarly, the number of operators looking to block customers from accessing OTT services has also decreased from 10% in 2012 to zero.

However, there are still challenges that operators need to overcome in order to make partnerships with OTTs a success.

1. Establishing contractual agreements
Despite 96% of mobile operators seeing the benefits in OTT partnerships, many still have questions about how these partnerships can be implemented. One in three (32%) have no idea what a contractual agreement would look like in terms of margin split, staffing levels, setting KPIs and measuring the success of the partnership. Others are unsure how to deal with infrastructure complexities (26%) and overcome regulatory hurdles (23%).

Finding a collaborative business model that both OTTs and mobile operators can embrace is necessary but difficult. Third parties who understand both sides and have already partnered with both are often well placed to help overcome the existing fragmentation of the telco world that is foreign to global acting OTT players.

2. Understanding the monetisation opportunity
Operators are currently struggling to curb their diminishing subscriber base while at the same time having to think about making costly infrastructure changes to boost the performance of their network. Similarly, OTTs are quickly learning that they too will need to find a way to generate revenue in order to grow.

Mobilesquared has forecast that through forming partnerships, the opportunity for OTT communication could be worth $42.9 billion in 2018. For mobile operators, one opportunity for monetisation lies in the use of messaging, voice usage and notably data. More than seventy per cent (71%) of mobile operators believe that offering an OTT communications-based service will drive customer loyalty and almost half (45%) believe this can be monetised through the inclusion of data as part of the standard data bundle.

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While Person-to- Person (P2P) traffic is declining, one in three mobile operators reported at least a 6% growth in Application-to-Person (A2P) traffic over the last year. In contrast, almost one in five mobile operators have seen P2P traffic decline by more than 5%.

3. Driving innovation
Given the dynamics of the industry landscape, charging for data and A2P traffic alone will not solve the fundamental issues that mobile operators are facing. In order to change the trajectory of their declining Average Revenue Per User (ARPU), they will have to innovate.

As the market moves towards seamless telecom-web interoperability, new opportunities are opening up for legacy service. For example, mobile phone numbers, one of the most valuable assets the operators still own, can be used as unique identifiers to enable the much needed seamless communication. The real challenge for operators is to become agile enough to exploit the emerging opportunities.



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