Average operating profit margin of wireless service providers declined to 19% in 2010, down from 20% in 2009
Margins for wireless operators have reduced, forcing them to embrace new revenue services and business models, such as the cloud, to enhance profits, according to information and analysis provider IHS.
Despite the strong increase in data revenue, the average operating profit margin of wireless service providers declined to 19% in 2010, down from 20% in 2009.
Margins for operators have squeezed as they have been slow to react to increasing broadband usage on smartphones and tablets, said IHS.
The analysis provider said that consumer and enterprise spending on the public segment of the cloud is projected to rise to $110bn in 2015, up from $23bn in 2010.
IHS believes that mobile network operators (MNO) can capture about 7% of the total spend on public cloud services in 2015, up from less than 1% in 2011.
Global wireless data revenue grew by almost 18.5% in 2010 to $218bn, and is expected to rise to approximately $337bn by 2015, added IHS.
However, the transition to could-based services will require new levels of data security, backup and disaster recovery. Moreover, the cloud market is likely to present major competitive challenges for wireless operators. The market already is occupied by traditional IT providers, including IBM, EMC, Microsoft and NetApp, as well as newer players like Apple, Google and Amazon, said IHS.
IHS senior director and principal analyst Jagdish Rebello said mobile communications service providers have lagged behind in the race to unlock the value in the mobile communications industry, which is estimated to grow to a trillion dollars during the next two years.
Rebello continued, "Because of this, the average operating profit for wireless service providers around the world declined in 2010, even as semiconductor suppliers and device manufacturers improved their margins. With the transformative impact of tablets and consumer-centric smartphones, the pace of change is accelerating in the wireless market. And to reclaim their share of profits, wireless carriers must be willing to take risks, move fast and be innovative in their offerings.
"A key offering will be cloud-based services for tablets and other mobile devices that represent a new revenue stream for these companies."