Mobile telephony – cooperation and value-added are key to further success

This article assesses the future business prospects for mobile telephony in Europe. It highlights the current drags on the sector before suggesting choices to be made between competing future standards such as UMTS and WLAN. It concludes that advanced wireless technologies will not become profitable before the start of the next decade.

Mobile telephony – cooperation and value-added are key to further success

Around the start of the new millennium, mobile telephony experienced an unprecedented upswing. The step toward 3G seemed to herald its imminent entry into the lucrative data telephony business. But soon after the hype, disappointment set in throughout the telecommunications sector. The bursting of the high-tech speculation bubble spelt the end for many a business idea

Today the phase of exorbitant growth in telecommunications is over. Measures such as average revenue per mobile phone user and the penetration rate back this up. The slowdown will lead to more intense competition.

Fiercer competition for market share, lower share prices, high investment costs and enormous licence fees are a drag on the telecommunications sector. The industry is currently undertaking a change of strategy. It is scaling back expansion – even where this results in losses.

The problems currently evident in mobile telephony are leading critics to make overly pessimistic predictions that 3G will never become profitable. However, the resulting calls not to introduce 3G and instead directly back alternative wireless technologies (e.g. WLAN) are a step too far. Ultimately, a profit-oriented service can only create significant value-added with a mix of both UMTS and WLAN technologies.

It is notable that no attractive broadband-dependent applications have emerged as yet. The typical user is only interested in the value-added the application provides, not the underlying wireless technology.

No single killer application will bring about the big commercial breakthrough for broadband mobile telephony alone. Across-technology data services portfolio offering significant value-added on a mass scale has the only chance of success.

Although mobile telephony remains one of the most dynamic areas of the economy, excessive euphoria is misplaced. Advanced wireless technologies will not become profitable before the start of the next decade. But even that is not a given; this will challenge the entrepreneurial spirit of network operators, mobile terminal manufacturers and service providers alike.

Read the full analysis on the

Deutsche Bank Research website.