The rapid ascent of mobile applications as a major industry has provided telecom operators with yet another reason to feel sidelined from a fast growing cash-cow.
Operators often appear to be caught off-guard by developments in the sector, particularly those from over-the-top players such as VoIP providers, and the rise of apps, the stores that sell them, are no exception.
Last month’s Planet of the Apps event in Dubai saw some healthy debate about the apps ecosystem, and the position of operators in it.
It is clear that the apps stores from Apple, Google, Blackberry and Microsoft currently dominate, and operators are still debating whether or not they should attempt to get a foot in the door and launch their own stores.
This is a question that operators are faced with globally. While there are different models of store that operators might decide to look at, most telcos appear to be taking more of a “wait and see” approach. Orange, Telefonica, Vodafone and China Mobile have already opened stores, and other operators are no doubt watching the outcome carefully.
But for many industry insiders, the issue is more-clear cut, and operators would be better advised to avoid entering a sector they have little experience in, particularly when they can use their existing expertise to generate new revenue streams from the applications industry.
Indeed, instead of investing vast sums of cash into the complex and risky undertaking of launching app stores, operators should leverage their most valuable asset – their relationship with, and knowledge about, their customers.
Operators should already hold a vast and valuable pool of information about their customers, from the handsets they own, to the type of products and services they use.
Operators that store and use this type of information properly are ideally placed to promote and market applications to a targeted base of potential customers.
By directing these customers to apps that they are interested in, telcos stand to benefit by taking a small fee for each app that they help to sell. It is a model that David Ashford, general manager of Apps Arabia, an Abu Dhabi-based investment fund to develop the region’s apps ecosystem, espouses.
But Ashford warns that many operators in the Middle East may be failing to gather the necessary information about their customers, which could hinder their efforts to generate revenues from apps.
Research firm Booz & Co also makes a strong case for operators to leverage their customer relationship to profit from apps.
In a recent report, the company pointed out that operators “lack the ability to attract large numbers of application developers to their stores” and also that they “lack experience in managing open ecosystems of developer communities”.
But by offering easy access to popular apps stores, operators not only have the potential to earn a small cut from apps sold. They are also likely to reduce churn by having a customer interface that their subscribers like.
This is significant, and Booz & Co offers some sobering statistics to remind operators where their real value lies.
If an operator with 25 million subscribers and an ARPU of $47.40 can reduce churn by just 1%, it can translate into a saving of about $145.8 million in revenue annually, according to Booz & Co.
Furthermore, the research firm also points out that in 2013, the combined revenues of applications captured by the apps stores will amount to about $7 billion, which Booz & Co refers to as a “drop in the bucket” compared with the overall $1.6 trillion revenue that the telecom industry is predicted to generate in the same year.
Apps may be a fast growing industry, and one that operators should aim to be actively involved with, but it is the potential of apps to help telcos further develop their customer relationships that could prove to be the defining factor.