This dissertation examines the business model that MTN should implement in order to become the leader in the mobile data market in South Africa. A literature review is presented on the latest market characteristics and forecasts for the mobile data industry.
Introduction
This dissertation outlines the business model that MTN should implement in order to gain a large share of the mobile data market. This thesis also presents an analysis of the development of mobile data technology, both worldwide and in South Africa.
Background
Company Background
With the appearance of the third operator, Cell-C, the market in South Africa for voice-generated income is rapidly declining. The upgrade to GPRS was an expensive investment for MTN as a large part of the network had to be upgraded.
Business Models for Mobile Data
Design choices in one domain (eg technical domain) can influence choices in the other domains (eg user domain). The development of the business model is largely dependent on the capabilities of the latest available technology, as this determines which services can realistically be delivered.
The Mobile Data Technology Roadmap
The transition from 2G to 3G is extremely challenging from a technical point of view as it requires the development of radical new transmission technologies and is extremely expensive due to the large capital expenditure required for the new network infrastructure. In the evolution from 2G to 3G systems, different migration paths have been identified as shown in Figure 1.2.
Motivation
This will include examining the best technological path to follow to achieve success in the mobile data market. Another motivation is to determine which revenue-generating, pricing and costing strategies to pursue in order to create a sustainable competitive advantage.
Value of the Project
The company has no compelling strategic plan on how to become the market leader for mobile data in South Africa. The motivation for this research is to provide guidance to MTN on the best business model to adopt.
Problem Statement
Objectives of the Study
Methodology
The analysis also examines which mobile data applications, such as web browsing, e-mail or telemetry, subscribers currently use. The other components of the business model, customer service value, organizational and financial arrangements, were largely formulated from an assessment of the mobile data market in South Africa, as well as current strategies being adopted by other operators internationally.
Limitations of the Project
Structure of the Study
The customer value of the service section examines how MTN can improve the perceived value of the service by the subscriber. The technical agreement element outlines the network upgrade strategy while the financial agreement section examines various revenue, pricing and cost models.
Conclusion
Using the proposed business model from Chapter 2, a detailed analysis of MTN's current GPRS model is carried out.
Introduction
Therefore, the mobile data business case can be influenced by numerous factors, both internal and external to the operators (Northstream, 2001). The current characteristics of the mobile data market, along with the revenue and subscriber number forecasts are presented.
Market Analysis
Market Characteristics
While growth has slowed in many countries in the developed world, UMTS forecasts are consistent with worldwide mobile subscriber forecasts by other analysts (UMTS Forum Report No. 18, 2002). As the level of demand increases and manufacturers and mobile operators gain more confidence in the viability of the services, handset production will increase (UMTS Forum Report No. 17, 2001b).
Definition of Business Model
Only if all participants (mobile users, network operators and service providers) can significantly increase their profits, the full market potential can be realized.
Taxonomy of Business Models
The business models discussed in these taxonomies are basic versions of what Weill &. The introduction of all possible intermediaries on the Internet is believed to increase the value flow for both the supply and demand side.
Framework for Mobile Data Business Model
Organisation Design
Actors can be more or less powerful in the value network depending on their resources and capabilities. The organizational issues revolve around the resources and capabilities that need to be made available.
Finance Design
Therefore, there are dynamic variables that can respond to changes in other variables, either in the field of finance or in other fields. Also, the development of a new service goes through phases, which leads to changes in financial arrangements with each phase.
Technology Design
No storage facilities and embedded software vs. f) Applications refer to the user applications running on the technological system. -time and high volume vs. h) Technical functionality refers to the functionality provided by the technological system.
Mobile Data Business Model
- Customer Value of Service
- Organisational Arrangements
- Financial Arrangements .1 Revenue Models
- Pricing Models
- Cost Analysis
- Technical Arrangements
Figure 2.9 shows a simplification of the role models for the mobile data value chain. The level of subsidy depends on the competition within the market and the bargaining power of the operator.
Conclusion
The mobile operator must decide which parts of the new value chain it wants to own. The success of the business model is strongly influenced by the cost of deploying new mobile data services and infrastructure.
Introduction
This chapter examines the three most important technologies for GSM-based networks, namely GPRS, EDGE and UMTS. A comparison of the data capabilities and services that can be provided is also undertaken.
Technology Capabilities
GPRS
No hardware changes were required for the base stations, the switching nodes, or the Home Location Register (HLR). The extent of the impact depends on the possible number of time slots reserved for the exclusive use of GPRS.
EDGE
One of the key elements of EDGE is the form of modulation used. This is due to differences in the header size (and payload size) of the EGPRS packets.
Third Generation Technology
The main purpose of the RAN is to provide connectivity between the handset and the core network and to isolate any radio problems from the core network. It connects the UMTS radio access network to the core network via the Iu interface.
Technology Comparison .1 Data Throughputs
Services Supported
The roadmap for service evolution starts with the introduction of packet-based services such as GPRS. For example, messages will evolve from the current 160 standard characters to the Multimedia Messaging Service (MMS).
Cost of Deployment
The main driver of CAPEX in access network transmission is the number of radio network sites, traffic volume and access network topology. The primary driver of these costs is the size and complexity of the network and services (or the size of the CAPEX investment as a good approximation).
Evolution Paths from 2G to 3G
Its main driver is the number of sites and the area covered by the network operator, which in turn depends on the required coverage, the number of subscribers, the usage and usage profile per subscriber and the topology of the licensed area (distances, environment, etc). The absolute value of these costs is determined by the availability of space and the macroeconomic conditions of the country.
Conclusion
With the continued growth in mobile computing, powerful new handheld computing platforms, an increasing amount of mobile content, multimedia messaging, mobile commerce and location services, mobile data will inevitably become a major industry.
Introduction
South African Mobile Data Market
This is due to the assumption that messaging will continue to be the killer application in GPRS-based networks. Internet traffic is routed via the company's teleport to Honeydew at the base stations (www.Sentech.co.za).
GPRS Business Model
Customer Service Offering
The package is ideally suited for any low-volume application that requires the customer to be connected for extended periods. A VPDN gives the customer the experience of a private network (accessible only to the customer's users) even though it actually runs on MTN's shared (or public) network.
Organisational Arrangements
They will also be exclusively involved in data reverse billing for corporate customers. WDP will be the customer interface and this includes front line commercial and technical support.
Financial Arrangements
On the forward billed model, the original unit (A number) will be billed according to the existing published tariffs for the data carrier used according to the A number's price plan. There will be no prorated charge for the rates listed in the rates section.
Analysis of the GPRS Business Model
It was anticipated that the major retail banks, such as Standard and ABSA Bank, would be the largest users of the mobile data network. Nor did the banks expect to get any tangible benefits from using the GPRS service.
Conclusion
Mobile data service depends on the availability of quality content and truly useful services. As MTN moves forward to the next generation of mobile data services, it must take into account the lessons learned from the business model implemented for GPRS.
Introduction
The technical arrangements section describes the phased approach that MTN must implement to upgrade the network in the most cost-effective manner, while still being able to offer competitive data speeds. The new services and application that the operator can potentially offer to both the mass market and corporate subscribers are discussed in the financial arrangements section.
Mobile Data Business Model
The main costs of the financial arrangements result from the changes in the technical arrangements. Based on the costs and revenues, the Financial Regulation redefines the transformation of the Organizational and Technical Regulation.
Customer Value of Service
These changes also form the basis on which Technical Agreements can enable the delivery of the proposed value to the customer. The lack of attractive mobile data content offered by the operator is another major factor contributing to the poor success rate of the GPRS service.
Organisational Arrangements
The creation of a mobile portal is crucial for the success of the mobile data services. The optimization of the mobile data network is very different from that of the mobile voice network.
Technical Arrangements
EDGE Roll-Out Strategy and Costs
- Transmission
- Software Costs
- Radio Base Station (RBS) Costs
The costs for the EDGE upgrade are based on the latest available prices from Ericsson. The costs of upgrading the RBSs for the entire network are shown in Table 5.4 below.
UMTS Costs
The total number of subscribers in each of the different types of areas is shown in Table 5.9. Based on the number of required sites and switches and the number of subscribers, the total hardware and software costs for each year are shown in Table 5.10.
Financial Arrangement
Revenue Model
- Personal Consumer Services
- Corporate Consumer Services
However, real-time betting places great demands on the mobile infrastructure's ability to provide reliable and immediate service. The killer apps in mobile retail will be those that most resonate with the key strengths of the mobile channel, namely location specificity, personalization and immediacy.
Pricing Model
The pricing model for the contract subscriber is also a combination of metered, fixed charging and transaction charging. As the network evolves, MTN will need to build more radio sites to cater for the increased capacity.
Revenue Forecast
In the first two years, the service will run at a loss, but from the third year the company will start to realize a profit. MTN will have to rely on revenue from current voice services to fund the EDGE deployment for the first two years.
Conclusion
MTN must also develop an exciting and attractive portal for the new mobile data services. The subscriber is billed for the value of the content as well as for the amount of data consumed.
Conclusion
The main reasons for the failure were the lack of applications and the high cost of the service. In order to capture more of the mobile data market, MTN should provide a mobile portal for subscribers.
GPRS Corporate APN Traffic
Cost Breakdown
Average number of links per site Free time slots per site Total number of sites with < 7 TRXs Total number of sites with > 7 TRXs Total number of sites with > 11 TRXs Total number of sites with > 17 TRXs Total number of sites with > 22 TRXs. Number of sites between 7 and 11 TRXs Number of sites with between 17 and 22 TRXs Additional number of BTS El links required.
