Thursday, August 03, 2006

Ovum: 3G in Australia: subscribers are growing, but what about the services?

Neale Anderson at Ovum writes that 3G growth in Australia is now picking up. He attributes this to several factors:

natural migration to 3G is accelerating due to the closure of networks, 3G handsets are vastly improved and 3G-based packages are forming a greater percentage of the overall mix. Consequently, we expect 2.3 million 3G subscribers in Australia by the end of 2006 - around 10% of the overall base.
Citing that "quickening migration to 3G services is a global trend," Anderson continues that:
In Australia, 3G subscribers formed 8% of the market (1.6 million customers) at the end of June 2006, up from 3.2% at end of June 2005. Part of this has been operator-driven: 3 Australia rapidly migrated the bulk of its CDMA customers to its WCDMA platform early this year. From 2007 onwards, Telstra begins the much larger project of migrating its CDMA base onto the new UMTS 850 network. Now 3G offers are increasingly visible in the marketing mix from all carriers, not just 3 Australia. From its soft launch in the final quarter of last year, about half of Telstra's top six mobile offers feature 3G phones. Vodafone is the same - 3G phones make up 50% of its featured offers. Optus is also using core services to promote its 3G offerings.
Anderson then discusses the possible implications of this trend stating "a bigger 3G user-base makes the marketing proposition for mobile services a different story. Rather than spend large sums marketing 'pilot' services to a tiny user base, the operator has a higher potential return, both as a result of the network effect and the profile of these customers. Those customers who have upgraded to 3G at this stage are likely to be of high potential value - they will likely have done so as a result of either being attracted to a particular'iconic' handset or having their interest piqued by a particular service."

Anderson concludes with:
Unlocking this potential value is the tricky part. All operators are now extensively marketing a range of services, and several are seeing traction. Full-track music downloads, streaming video (particularly sports) and adult content offer the most near-term potential. Yet for the majority of mobile phone owners, (non-messaging) mobile data usage is not habitual, and it can still be (very) expensive. This makes it questionable whether the network effect of a wider 3G base will deliver much financial gain. In Japan, the combination of flat-rate data, a high installed base and a wealth of off-portal content has led to increased spend on mobile content. In Australia, 3G growth is picking up, but the main financial benefits will be on the supply side (capacity and efficiency) in the medium-term, rather than from the widespread adoption of multimedia services.