Converged Devices and Voice Services – Western European Market Prospects

Question of Convergence: Carriers Look for New Ways to Gain Market Share

In the increasingly saturated European telecommunications market, converged devices and services offer network operators and service providers a chance to enter new markets and differentiate themselves from the competition. Troubled telecom carriers are realising that focusing on these emerging areas can help them increase market share and customer loyalty, to cross-sell and offer cost-effective competitive bundling.

“With competition rapidly intensifying in the telecommunications market, converged services provide a growth market and a powerful way of increasing customer loyalty,” remarks Frost & Sullivan Research Analyst Jan ten Sythoff. “They are gaining in importance enabling carriers to offer additional convenience and services.”

New analysis from Frost & Sullivan estimates that around 4.5 million customers currently subscribe to converged services in Europe. This number is projected to increase to almost 50 million in 2010. The overall pace of growth is expected to be moderate, although 2007 is likely to see it accelerate.

By 2010, almost 13 per cent of contract subscribers are expected to subscribe to a converged service through a single handset. These services will also drive voice usage due to the enhanced convenience, substantial cost savings and better call quality that they offer.

Subscriber growth is, for obvious reasons, highly dependent on the release of such services in various countries and the manner in which they are marketed. Regulators’ policies on, for instance, mobile virtual network operators (MVNOs), consequently, play a critical role in driving converged services.

These policies vary from country to country and are particularly significant since one of the optimal models for offering a converged service is by a fixed carrier becoming an MVNO. Regulators are gradually changing their policies as they realise the considerable price reductions that converged services can offer – such as in Denmark, where MVNOS have revolutionised the market and transformed the prevalent pricing structure. Such regulatory changes will have profound implications on the strategies of carriers, as shown by developments in the Belgian marketplace, for example.

Currently, the converged services market is grappling with various organisational issues as fixed and mobile carriers attempt to synergise their respective network assets into a complete solution. Issues of customer ownership, mutually acceptable revenue and cost-sharing and decreasing margins due to the need to provide the customer with a strong cost benefit can adversely impact the growth of converged services.

“Carriers must find a way for services to be delivered to the market in a manner that is beneficial to the different divisions or partners,” notes Mr. Sythoff. “Apart from sorting customer ownership issues, the different parties must have a clear customer segmentation model to avoid or minimize internal competition.”

Due to the compulsion to offer price incentives, pricing pressure in the market is expected to increase considerably. Lower prices will, however, attract new subscribers and the business market is expected to see higher penetration.

Lack of device availability is a significant restraining factor for converged devices. The reason for this is mainly political, as handset manufacturers do not want to be seen to be developing products that could harm their major customer base. Considering that the handset plays a big part in the consumer’s choice of a mobile subscription, a limited range could severely reduce the appeal of a converged device service.

This situation is likely to change due to increasing pressure from fixed carriers and due to mobile operators gradually beginning to open up to convergence opportunities. Aggressive marketing campaigns positioning these services as a complete voice solution for businesses and consumers are also likely to help increase their sales.

The uptake of converged services is and will vary significantly in the different countries around Europe. This is because of the different regulatory environments, the degree of competition and penetration. However, the pricing advantages on top of other benefits make converged services attractive across the region.

If you are interested in a summary of this research service providing an introduction to the European converged devices and voice sevices markets, please send an email to Kristina Menzefricke, Corporate Communications at kristina.menzefricke@frost.com with the following information: full name, company name, title, contact telephone number, email. Upon receipt of the above information, the summary will be emailed to you.

Title: Converged Devices and Voice Services – Western European Market Prospects, Code: B448

For further information, please contact:

Europe: Kristina Menzefricke, P: +44 (0) 20 7343 8376, E: kristina.menzefricke@frost.com
Americas: Dustin McVey, P: 210.247.3830, E: dmcvey@frost.com