LTE is no magic bullet

Caroline Gabriel/Wireless Watch
29 Apr 2013

As mobile operators continue to battle amidst recessions, price wars and data storms, LTE is the most commonly cited remedy. To listen to recent carrier earnings calls, it would seem that 4G networks – still embryonic in most countries – will be a cure for all ills.

China Mobile suffers a poor quarter but reassures investors with promises of accelerated investment in TD-LTE. France Telecom/Orange, deeply challenged by the price war sparked by Free Mobile, promises that its 4G roll-out will put everything right.

And so it goes on – and operators are in danger of falling back into their old habits, of relying on faster networks, per se, for redemption, rather than on delivering innovative services on top of those networks.

Are LTE trailblazers profiting yet?

Strong services, personalization and flexible pricing are the hallmarks of carrier competitiveness, as seen at a small handful of operators. These may be significantly easier to deliver on LTE – because of its capacity and, more importantly, its data-driven, IP-based nature – but they are not reliant on 4G. And many 4G carriers are very far from implementing this important set of changes.

The usual Asian powerhouses are a long way down the road, and some, notably SK Telecom, are starting to reap the rewards with higher ARPU – though only where they deliver innovative services. In such a data-hungry market as South Korea, the largest cellco has seen slides in its ARPU and profits despite huge investment in networks and services, but has begun to see a rebound partly down to 4G, but equally importantly to its SK Planet web services. And of course the LTE roll-out continues to weigh on profits, which were down 54% year-on-year in its most recently reported quarter, to December.

Similarly, Verizon is seeing steady LTE adoption, but how far is this helping its top line results? It certainly moves users to a more efficient network with a lower cost of data delivery, and whose superior customer experience may boost retention. It will also encourage far higher data usage, as already seen among the early adopters – 28% of the carrier‟s postpaid base were on LTE as of the end of Q1, but they accounted for 54% of data traffic.

It is not yet clear exactly how Verizon will convert that into revenue and profit. With AT&T snapping at its heels, it does not dare charge an obvious premium for 4G, and has to rely, instead, on using the move to LTE to introduce new approaches to pricing. Its Share Everything plans, initially criticized for being too complicated, have proved popular because they allow several devices to tap into one pool of megabytes and minutes. But they appear to be the key positive top line driver in Q1, and they are not confined to LTE.

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