The mobile industry is going through a transformational phase with revenue growth increasingly coming from data. That is a fundamental problem for MNOs.
Voice and SMS have an end utility by themselves, with MNOs able to control almost all the parameters affecting the experience, whereas data bytes supplied by MNOs do not have an end utility on their own without an app. Except for price and in part quality, MNOs do not have much control of many aspects of the data experience.
The industry is also going through an inflection point as customers increasingly use data services to substitute high-margin core revenue like voice and SMS with OTT services.
What happened to Kodak could happen to MNOs if we don't differentiate.
The OTT threat is more accentuated in mature markets with high smartphone penetration, and there is still some core revenue growth left in the geographies we operate. But as data consumption increases in our markets we have to invest heavily.
This is putting greater pressure on our cost structure (both capex and opex) and there is no easy way out of it.
Driven by this substantial threat and mounting costs, many MNOs are desperately looking at adjacencies such as digital services, M2M, enterprise solutions, mobile advertising and data analytics as natural extensions. But the skillsets, investment cycles, monetization models, returns and risks in digital services are different from that of MNOs.
This has led them to venture into the space following different paths and different strategies. Some are investing in companies, some are taking the VC/incubation path while others are developing services organically.
At Axiata we have broken away from the so-called "walled garden" model and are experimenting with five different approaches to different segments of digital services.