FMS strategies: taking a slice of the fixed revenue pie

FMS strategies: taking a slice of the fixed revenue pie

In this report, Senior Analysts Carrie Pawsey and Angel Dobardziev analyse the opportunity for mobile operators’ fixed-to-mobile substitution (FMS) strategies. In order to be successful, mobile operators need to understand the user perspective, recognise the competitive threat from fixed operators’ fixed–mobile convergence (FMC) initiatives and apply best practices from FMS services and tariffs currently available in the market.

Arun Sarin, CEO of Vodafone, was quoted at the 3GSM Congress in Barcelona in February 2006, as saying that fixed-to-mobile substitution (FMS) ‘is a massive opportunity’ for Vodafone. At the same event, T-Mobile’s CEO Rene Obermann was quoted as saying ‘future growth will come from… fixed line substitution’, as well as suggesting that ‘mobile will progressively become the primary personal access to the Internet’. These two statements from two European market leaders are indicative of the mobile operator’s appetite to tak.

Up until the last couple of years, mobile operators could afford to benefit from FMS largely in a passive way, as the declining mobile prices in combination with the convenience of mobile have attracted traffic and subscribers. However, today mobile operators are taking an increasingly proactive role in promoting FMS, as a way to grow their ARPUs, to compensate for the slow growth in premium data services and to justify their 3G investments, but also to counter fixed operators’ FMC strategies.

Table of contents

Why attack the fixed line?

A rising tide
FMS: the strategic framework

The user perspective on FMS

Fixed only is no longer an option
Drivers and barriers for FMS
Unique mix for different segments
Consumer perspective
Note: the size of the circle indicates the importance of that factor
Business perspective

Fixed operator defences against FMS

Strategic defences against FMS
Broadband bandwidth and cost advantage
Pricing initiatives
Bundling initiatives
Promotions

Attacking FMS strategies

Careful segmentation
Targeted reduction of mobile premium
Provide broadband access substitutes
Marketing of simplicity and convenience of cellular
Greater handset choice
Address non-price barriers to FMS