With two major mergers going ahead and further competitive manoeuvring in prospect, the landscape in the mobile market is changing, but is it a threat, an opportunity, or both for the communications services industry?
The proposed acquisitions of O2 by Three and of EE by BT and the subsequent mergers that will ensue if they are allowed to go ahead, are big news in the mobile market and will completely change the market landscape.
It will lead to a situation where there are just three big players in the market; the two firms created by the proposed purchases will be the biggest, leaving Vodafone as the smallest of the trio. Little wonder then, that the latter was rumoured to be reviving talks with Virgin Media’s owner, Liberty Global, about a potential deal that would give Vodafone, access to fixed line business.
For Vodafone, that deal could be important because the capability to offer quad-play services looks like it is going to be vital in what will become an increasingly competitive battle for the UK’s communications and content consumers. It is very likely that other cards will be played and further agreements and partnerships formed as consumer-facing companies look to a future market that looks certain to be dominated by multi-play offerings.
Impact on business communications market
In the short term, the mergers though would seem to have little or no impact on the business communications market. These companies are primarily chasing the massive and lucrative consumer segment and one of the main reasons for merging is to reduce cost. The combined companies should be able to reduce their backhaul costs significantly and this is likely to be their number-one priority when they have finally brought their organisations together.
But it will take time for the deals to be approved. It will also take time to renegotiate existing backhaul deals and move from the current systems and processes to new ones that take advantage of their greater post-merger economies of scale.
The newly married BT/EE and Three/O2 organisations won’t want to wait that long before unleashing their new quad-play offerings into the market. As we’ve already noted, these services will be attractive and could make it even tougher to compete in the mass consumer broadband, mobile and fixed line markets. There is going to be a good deal of jostling for position over the next few months amongst the key players here.
Consumers drive business adoption
If you are a business-focused service provider, there might seem to be little cause for concern with regard to these mergers. However, if these giants do decide to address the commercial sector with quad-play offerings, that could have a very significant impact down the line. But this is also, we hasten to add, a potential opportunity for service providers.
Why would any of the major companies address the business market? Well one simple reason would be because there is demand from customers. Today, consumers are leading the adoption of new technologies. We’ve seen this happen with cloud computing, VoIP, tablets and the BYOD trend. Users of quad-play services in the home may well start asking why they can’t have similar deals for their businesses.
That effect is likely to gather weight as the big players provide more flexible and affordable mobile services as part of their quad-play deal. When they start to offer single-number services and seamless data roaming between the home base, Wi-Fi hotspots and the 4G network, the clamour for a business offering will grow. And if there is demand and it is easy enough to fulfil, these companies would surely want to address the potential and get back as much return on their investments as quickly as possible.
The fourth element
The needs of businesses and consumers are quite different, of course. They both need connectivity, voice and mobile services, but in the fourth element of their requirements, they are quite different.
Entertainment is a big draw for consumers, so live sport and other content will be a major attraction. But that’s of no use to business users, unless you are a hotel or care home for instance.
For businesses, something that fits with the other services and will help them drive efficiency and reduce their costs will be attractive; given the current market direction, the natural offering here will be virtual or hosted infrastructure and managed IT and services – network management, security, backup, storage capacity and server instances.
By offering a menu of such services, providers could also differentiate their offerings quite significantly. But there are two problems here: first of all, it’s not clear where those services are coming from right now – although they could easily be provided by one or many third-party aggregators; second, they don’t really fit in with the pre-set nature of the connectivity, voice and mobile services that are more or less uniform, with a few options. The variety of managed and hosted service and virtual infrastructure options that can be offered is enormous and the needs of every business will be different.
While the big players might be able to offer a low-cost quad-play option for businesses, they will inevitably try to appeal to the widest possible audience by offering a one-size-fits-all proposition. There will also, in all probability, be some limitations and in terms of bandwidth and service level agreements that only go so far, but don’t over-commit the supplier if you want the very best pricing.
The big players’ weaknesses reveal the opportunity for current focused comms resellers and service providers. They can provide a much more tailored and better level of service for customers. We think that, by the time the big players have pulled together quad-play offerings for business, our partners will have had plenty of time to cover the bases and offer their own multi-play packages.
Moreover, because they can work closely with us to develop a combination of services that are tailored to the needs of individual business customers – from the connectivity to the secure, private WAN – we can offer a much more attractive and reliable service. This is crucial because what more businesses are realising now is that availability and consistency are what matters. Downtime costs businesses money and they will pay a little extra for a personalised service.
Even so, there are some gaps to fill here as well. For example, today Entanet doesn’t offer mobile services, but we do offer some managed infrastructure services and we are helping some of our partners to develop their own offerings. The mobile data market is an enticing one for the channel, although the current state of flux in this sector means that it may be a little while before the right relationships and propositions can be established.
In the meantime, we’re very keen to hear resellers’ views on the kind of service or combination of services they believe will be needed to support the multi-play business market of the future.