MWC 2016: Looking For New Business Models

The mobile industry is on the hunt for new business models as it descends on Barcelona for MWC 2016. Some notes on themes we see emerging for this week:

Operators as media companies. Tired of being a non-participant in the massive value being created on their networks, mobile carriers are pushing back against simply being plumbing. They are entering the media business in a major way, securing rights and creating entertainment services with the aim of arresting declining ARPU and reducing churn. AT&T’s integration of DirecTV into its consumer entertainment business, Verizon’s Go90 Millennial play, Australia’s Optus securing the Premier League rights are examples of operator media strategy in action. Innovation around mobile video and starting to think about subscribers as audiences will lead to massive changes in the way operators sell their services and structure their business.


Barcelona, home of Mobile World Congress

Hardware costs trending to zero. Peak iPhone may have been reached, but Apple is still an immensely profitable business. How long will this continue? Rivals (apart from Samsung) don’t come close to the margins generated by Apple and they are increasingly turning to services as growth slows and prices for mobile hardware continue to decline. HTC,  Sony, LG, Huawei, and MWC debutant Xiaomi will all be making a splash but differentiation on design and features alone is challenging. Expect to see more innovation around mobile payments, carrier VAS and sponsored data models that are bundled with the hardware as OEMs seek to create new revenue streams beyond moving boxes.

The rise of the MVNOs. Mobile Virtual Network Operators have been around for a 15 years, but a new wave of entrants is taking on the incumbents with innovative new services. Dubbed “MVNO 2.0“, these players enter mature markets with new business models and services catering to specific niches. FreedomPopAmaysim and giffgaff and examples of MVNOs gaining traction in saturated markets like the US, Australia and the UK. Lightweight organization structures mean these players can move quickly, unencumbered by legacy systems and business models. With super-low customer acquisition costs, and in the case of giffgaff, no customer call center, these MVNOs can afford to create real disruption in their markets. MVNOs will potentially lead the industry in terms of business model innovation, so watch for some interesting announcements at the show.