This is a continuation on my guide to dividend investing with the 3 Singapore Telcos.
Here we will see that VOIP might be an inevitable situation that will cannibalize Singtel Starhub and M1’s voice revenue stream:
There have been indications over the last year that Europe’s mobile VoIP market is starting to open up. A few operators have struck or broadened partnerships with mobile VoIP providers, some of which have themselves noted a change in attitude to their presence in the market.
One of the clearest examples was 3 UK’s move in May to allow any customer with a compatible handset to make unlimited Skype-to-Skype calls for free. Austrian operator Mobilkom has also struck up partnerships with mobile VoIP providers Fring and Nimbuzz.
T-Mobile Germany has separately started allowing mobile VoIP calls on its network and is in discussions about later collaborating in this area with the likes of Google and Yahoo. Mobile VoIP providers including Fring and Jajah also say that operators are becoming more accommodating.
Industry observers have for a long time warned of the looming threat that mobile VoIP poses to operators’ voice offerings and it is true that voice revenues are set to decline in the coming years. However, a number of factors mean that the market for mobile VoIP could be limited for some time.
In the years that mobile VoIP has remained a niche offering, operators’ voice prices have been falling and bundles of monthly minutes and texts increasing. These factors could lessen the need for mobile VoIP. In addition, roaming regulation is helping to bring down charges for international calling, even though there is still plenty of room to undercut these prices.
Mobilkom Austria additionally says that the impact of mobile VoIP on international calling and roaming has been limited and that there have been only a small number of early adopters.
It may also be necessary for one of Europe’s larger operators to really open up to the mobile VoIP community for such services to take off. This is because customers seem less likely to use such services unless they are easily accessible on the handset.
At the same time, larger operators have been reluctant to open up soon or launch their own VoIP services because of the potential cannibalization of their voice revenues.
Indeed, many are blocking mobile VoIP services, or only allowing them on higher-value price plans. In a survey of 27 operators in major European markets, Informa Telecoms & Media found that 19 do not allow VoIP usage on their main mobile broadband tariffs. Operators are also restricting usage on data-browsing plans.
And T-Mobile Germany, which has begun allowing mobile VoIP services, has taken the step of charging for them. Depending on the customer’s contract, the price is at least €9.95 (US$14) per month and represents a significant barrier to adoption.
Even Mobilkom, which is one of the more open operators toward mobile VoIP, has not been heavily marketing such services in order to avoid eating into roaming traffic. Meanwhile, Fring has not announced any deals with network operators since its alliance with Mobilkom last October, even though it said the market was opening up.
And mobile VoIP provider Jajah says there has been slower movement than it would have hoped in collaborating with Deutsche Telekom, which took a minority shareholding in the company in 2007.
Nonetheless, there are indications that the market is slowly changing and the VoIP community has a number of reasons for optimism about its long-term future.
One of the keys for mobile VoIP providers could be to focus on striking partnerships with smaller European operators, which have less to lose in voice revenues than larger players. If mobile VoIP providers can gain traction with them and help their market share, larger operators may be forced to take their presence more seriously.
One such example is 3 UK’s relationship with Skype. The operator’s decision to allow free Skype-to-Skype calls for any customer from May could have an effect on the market over time, even though 3’s addressable subscriber base is still relatively low compared with that of rivals.
The strategy is the latest stage in 3’s relationship with Skype in Europe over the last few years. The operator previously made the VoIP provider’s service available on its X-Series mobile Internet offering and later launched a dedicated Skypephone.
3 UK already announced some impressive-sounding numbers for Skype usage on its network before the latest iteration. The operator said it was carrying 1.5 million Skype-to-Skype calls per day. A spokesman also said that since launching its new offer and marketing campaign, the company has seen a significant lift in volumes and has “hundreds of thousands” of users.
New devices such as the iPhone are also making mobile VoIP more visible. And Fring says that the willingness of operators to add its service to their new application stores shows how mobile players are opening up to the company.
Developments like the launch of Google’s revamped VoIP service in March could also be a significant help, as a move by a major Internet player that operators may perceive as a threat. Indeed, Jajah says it started receiving calls from operators about partnerships immediately after Google Voice’s launch.
Mobile VoIP players could additionally appeal to operators by launching more value-added services that would enhance their offerings and help drive data uptake. Fring has followed this strategy, launching features such as social-networking add-ons and APIs.
Such approaches could become more valuable to operators as they move toward the provision of “rich” communications, with enhanced voice, messaging and presence services. However, mobile VoIP players may have to wait a few years for these services to really take off once LTE networks are up and running.
Meanwhile, mobile VoIP providers could also benefit from targeting particular segments. As an example, they could position and market themselves in the same vein as ethnic MVNOs that have proved so popular in Europe. And mobile VoIP provider Vyke is targeting the enterprise segment, an area that has been underserved by such services.
Ultimately, any mobile VoIP provider that is able to carve out their own niche could be on the first step toward wider acceptance in the market.
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