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Ruin looms for mobile telcos - report

The stock markets have decided that the mobile telcos are doing well, after all. But a report in Business Week suggests that they haven't actually tackled the underlying problems yet - in particular, confusing data-charge price wars need resolving

Stock prices of mobile operators have been rising. A devastating analysis by Andy Reinhardt in Business Week today suggests that this optimism is not well founded.

Reinhardt points out that GPRS accounts for a trivial 1% of operator revenues for this year, and that the main reason for such a small figure is that the operators simply haven't set it up. Not "haven't set it up correctly" which is also true, he says - but "haven't set it up at all" - he quotes wireless analyst Phil Kendall of Strategy Analytics saying that "only about half of the thousands of bilateral agreements necessary for full roaming have been signed at this point. Operators are shooting themselves in the foot and losing potential revenue," Kendall says.

The analysis also points out the shocking anomalies in data charging which means, Reinhardt says, that it is impossible to make money out of SMS if GPRS carries instant messages - but impossible to sell multimedia messaging if prices rise to protect SMS.

He quotes Danish research firm Strand Consult as saying: "the emergence of vastly cheaper instant messaging over GPRS could completely cannibalize the juicy revenues operators now rake in from text messaging. But charging at the same rate to download, say, a three-minute video clip could cost customers as much as $24, effectively killing off any demand for such services."

It's a longish feature article, well worth reading.