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Mobile Market in Finland

Mobile Market in Finland. Mathias Tallberg TKK Helsinki University of Technology mathias.tallberg@tkk.fi. Outline. Introduction The Finnish Mobile Market The Influence of Price Competition Impacts of 3G Handset Bundling Conclusions. Introduction.

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Mobile Market in Finland

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  1. Mobile Market in Finland Mathias Tallberg TKK Helsinki University of Technology mathias.tallberg@tkk.fi

  2. Outline • Introduction • The Finnish Mobile Market • The Influence of Price Competition • Impacts of 3G Handset Bundling • Conclusions

  3. Introduction • The nature of the mobile communications market is seeing rapid change • Convergence of networks, services and devices • Evolution towards all-IP • The mobile networks are evolving towards: • higher data speeds and capacities, land lower latencies • reasonably priced connections • Declining ARPUs • It has become very difficult to predict what will happen in the future (market uncertainty). Possible reasons may be e.g.: • deregulation of telecommunications in general; • technology evolution; • convergence of networks, services and devices; • new services that are disruptive by nature; • emergence of new and innovative business models.

  4. Introduction • Much has happened during the last five years on the Finnish mobile communications market. • Recent developments include: • the introduction of mobile number portability (MNP) in July 2004 • the emergence of mobile virtual network operators (MVNO) • price war and hyper-competition followed by consolidation • late deployment of 3G networks, however, with early upgrades to HSDPA • the allowing of 3G handset bundling.

  5. The Finnish Mobile Market • Fresh studies and statistics (Ficora, 02.03.2007) • According to market research done by Ficora approximately 100 000 bundled 3G-subscriptions was sold in Finland between October 2006 and December 2006 (Q4) • These accounted for approximately 32% of all “new” subscriptions during this period • Increase in usage compared to the same time period in 2005 e.g.: • growth in mobile voice usage 23% • growth in SMS usage 22% • growth in MMS usage 35% • growth in mobile data traffic nearly 300%

  6. The Influence of Price Competition • Huge impact on the profitability of all Finnish mobile operators • One of the most important factors was the introduction of MNP in July 2004 • a total of over 3 million mobile numbers have been ported during the period between July 2004 and the end of 2006 • recently, there has however been a decline in the amount of ported numbers • started already before the start of 3G handset bundling in 2006 • market consolidation had an impact already before April 2006. • Market consolidation • the acquisition of Saunalahti by Elisa • market exits (Tele2 and ACN Finland) • Finland was the 35th country in the world to open commercial 3G operations • Sonera opened its 3G network for commercial use in Q3/2004 • Elisa followed soon after by opening their network Q4/2004 (HSDPA Q1/2006) • DNA in late in year 2005 (HSDPA Q1/2007)

  7. Impacts of 3G Handset Bundling • Bundling of handset and subscription allowed for 3G from April 2006 • slow progress of 3G and mobile data services has motivated the regulator to allow bundling • for a 3 year period, max. 2 year contracts etc. • Why did mobile operators start offering bundles after the law change? • because bundling helps to reduce churn • because bundled subscriptions bring higher ARPU • a new way to handle marketing and sales of subscriptions • to improve the handset base

  8. Framework: Impacts of 3G Handset Bundling on Mobile Data Usage in Finland

  9. Impacts of 3G Handset Bundling • Rapid transition from no-bundling to 3G handset bundling • Ignores non-usage consequences of handset bundling • also non-bundling factors affecting service usage • Bundling of 3G handsets seem to work in Finland • Bundling of 3G handsets has played a big role on total amount of sold 3G handsets since April 2006 • 300 000+ 3G bundles sold by the end of 2006

  10. Impacts of 3G Handset Bundling • What has happened in Finland? • Regulatory action • Market consolidation => • Improved base of sophisticated handsets • Less focus on price competition (both for bundled and unbundled) • More focus on mobile data services • Faster build-out of 3G network coverage and capacity => • More usage of mobile data services

  11. Impacts of 3G Handset Bundling Sources: COIN Project, Operators, Ficora, Numpac

  12. Conclusions • The nature of the mobile communications market is seeing rapid change • Price competition has had a huge impact on the profitability of all Finnish mobile operators • Targeted 3G handset bundling, if carefully tuned by regulator, can have a positive impact on the adoption of new mobile data services • Bundling of 3G handsets has worked in Finland, at least until now • However, similar positive impacts may not be easy to achieve in the future

  13. Thank You!

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