Offsetting the Costs of Running a Mobile Network

News have appeared that a study by the French government says that Free, France’s fourth national and very disruptive mobile operator, is falling behind on mobile network infrastructure deployment as mandated by the terms of the license.

Free, owned by the Iliad group, was a unique appearance on the mature markets of Western Europe, offering cutthroat low prices across a range of plans, including generous roaming and data offers. Naturally, incumbent operators didn’t really like having a discounting competitor who was also piggybacking on their infrastructure and there were some minor disagreements between the competitors.

If Free is indeed behind its obligations, it only goes to show one thing: operating a full mobile network, with all the frills and full coverage, is a very expensive game and mobile users are not even aware of how expensive.

It’s everyone’s favorite thing – bashing mobile operators because of their high prices for plans and handsets, service outages, or bureaucracy. In many cases those complaints are legitimate, but things are not so clear cut as they appear. The average user rarely, if ever, considers the costs of running a mobile network, or the wizardry needed to come up with financially viable plans which won’t drive off users to a competitor.

Adding insult to injury, now Apple is testing whether the network is suitable for the iPhone, and not vice versa. This is probably the best and most relatable example of how times have changed in the mobile industry and what are the coveted items and brands.

What the Free case shows, whatever the final outcome may be, is that you can’t have it both ways – be an ultra-competitive operator, and be a full operator. Achieving coverage through roaming agreements with other national operators means no control over the entire network or user experience, and of course, it’s a business practice frowned upon by competition watchdogs.

But once operators have their infrastructure in place, there are ways to offset losses and monetize network capacities. We’ve mentioned before that A2P SMS traffic is steadily rising, driven by the demand for reliable mobile marketing solutions. Aware of the precarious position of MNOs today, Infobip’s business model for operators is as simple as it is efficient: we bring in traffic, the operators count the cash.

Many operators have been forced to make trade-offs to achieve profitability, but an elegant solution such as this one virtually eliminates the need for layoffs, reduced scope of international operations, or loans. The average mobile user will continue to want more for less, and an extra cash flow can only help operators provide a competitive service.

Jan 28th, 2013
2 min read