CUSTOMER ACQUISITIONS: It is Enterprise Hunting Time

The culture of voice communication has changed radically over the past few
years, with mobility becoming more and more important. People use mobile phones
because they want to be reachable while on the move. Additionally, they prefer
mobiles over fixed line calls for reasons such as convenience and lower cost of
mobile telephony.

The possibility of substituting fixed voice lines with mobiles has been
debated since the early days of mobile networks. Now there is solid evidence in
mature voice markets, such as Western Europe, that the fixed to mobile
substitution is taking place. In growth markets, where fixed-line telephone
services are not widely available, people adopt mobile telephony as their sole
means for telecommunication because of its faster and cheaper availability.
India is a classic example of that.

Fixed-to-mobile substitution opens up new revenue opportunities for mobile
operators. The enterprise segment is particularly attractive because it already
has a fixed-to-mobile substitution rate of three percent, which is expected to
rise in the coming years. This is because enterprises recognize the benefits of
mobility and are starting to replace their fixed-voice infrastructure with
mobile phones as the primary voice-communication device.

The key benefit for enterprises is cost reduction that can be achieved by
conducting all voice communication over a single mobile infrastructure. Improved
reach and efficiency are further benefits. Let's look a bit more in detail at
how mobile operators can drive fixed-to-mobile voice substitution among
enterprises.

Mobile Voice Markets Today

- The Challenge of Moving Voice Traffic from Fixed to Mobile: Let's
consider mature mobile markets first. During the 1990s, the number of mobile
phones exceeded fixed phones in Western Europe, leading to a mobile penetration
level of over 80 percent today. However, only 20 percent of all voice traffic is
carried over mobile networks. Increasing the share of voice traffic in mobile
networks through fixed-to-mobile substitution is a major growth potential for
mobile operators. A 50 percent rise in voice calls originating from mobile
networks would lead to network traffic growth of up to 150 percent.

In
the developing mobile markets such as India, the need and the opportunity both
exist. Intense competition has seen tariffs crash and ARPUs (around $10) fall to
amongst the lowest in the world. With the Unified Access Licence regime, major
players are investing all-India footprints, putting further pressure on their
revenues. In this situation, they need innovative ways of driving revenues by
maximizing voice from their existing networks.

- Accessible Business Voice Market: The
mobilization of enterprises with voice services is an unexploited segment for
mobile operators, with 320 million fixed business lines worldwide carrying
around 450 minutes per month and per line (Omsyc 2002).

The fixed business market provides fixed voice business service revenue of 33
billion euros (Gartner 2003) that can be redirected to mobile networks. Mobile
voice will continue to be the dominant service and will account for up to about
63 percent of total mobile market revenue for 2007. Even greater mobile voice
revenue will be achieved by transferring the revenue that is currently generated
by fixed lines to mobile networks.

- Business Market Segmentation: In
Western Europe, 20 percent of mobile subscribers are business users, generating
50 percent of mobile revenue with ARPUs up to three times higher than the
consumers. In India too, business users generate high ARPUs. This calls for
operators to have an enterprise segmentation strategy, one that balances cost
against incremental revenue by providing appropriate service offers.

Acquiring customers through fixed-to-mobile substitution requires clear
market segmentation strategies that will drive revenue and profit in the long
run. For example, an organization's size and the industry in which it works
has an effect on mobile service needs-small companies tend to use standard
solutions limited to basic voice and data services, while large enterprises are
more likely to customize solutions to provide a full set of IT and
communications services to employees.

Mobile telephony costs need to be made transparent with clear pricing, such
as flat rates. Price differentiation will allow operators to earn higher
revenue. Thus, the total revenue becomes a function of willingness to pay for
voice services and the volume of calls made for a certain price. Bundling
services into pricing packages, including voice services, subscriptions or
terminals, for example, to extend the service offering and thus increase
revenue, is an important way to encourage the adoption of mobile voice services.

New Services, Low Investment

- Low-capex voice services: Today's enterprise mobile
voice communication is built mainly on the existing mobile networks, enhanced by
key services for enterprise users. Established core network services such as GSM
supplementary services, conference call, multiple SIM cards or Camel enable the
same services when roaming in other networks, all enhance enterprise
communication.

There are also several new voice services for enterprise users that will
encourage the adoption of the mobile phone as the primary phone. These include
short dialing based on enterprise numbering plans and user-group-specific
tariffing, switchboard attendant services for incoming calls to the main number,
call queuing and distribution features, and electronic phonebook and support for
WAP, SMS, and E-mail for internal messaging.

All these mobile network-based services need no new infrastructure at the
enterprise premises and can enhance enterprise communications for both SMEs and
large corporations. This results in virtually no start-up investment for mobile
voice services and keeps operational costs low in the long run. Mobile network
voice features can be integrated easily with enterprises' existing
communications infrastructure and therefore have a short payback time. Current
radio networks can support an increase in voice usage in terms of coverage,
capacity, and voice quality. Increasing the use of mobile voice brings economies
of scale to existing investments and network running costs. In particular, WCDMA
networks remove any capacity constraints and improve the cost structure of
mobile networks still further. This will accelerate the replacement of fixed
voice because it opens the opportunity for competitive mobile tariffs to
stimulate mass migration.

Lower Costs for Users, Higher ARPU from Full-voice Mobility: Full-voice
mobility makes enterprise communication more efficient, bringing all the voice
services through their fixed-line systems, as well as new features, such as
short-number dialing or making the corporate address book available over a
mobile. Most companies today have two infrastructures for voice, a fixed
solution and a mobile solution. Switching to a single telephone system based on
one mobile infrastructure brings substantial cost savings-monetary benefits
result from lower costs for subscriptions and service fees, reduced maintenance
of fixed lines and less administration with one bill for every employee; as well
as savings on call-related costs.

Competitive mobile-to-mobile tariffs in markets with high mobile penetration
reduce the total mobile voice cost, because of the large proportion of
mobile-to-mobile calls, which typically have lower tariffs than fixed-to-mobile
calls. Enterprises can cut day-to-day voice communications expenditure by up to
25 percent. In a developing market like India, fixed-to-mobile calls are
slightly more expensive than mobile-to-mobile calls as a result of the subsidies
offered on fixed calls. However, Indian operators can address this by offering
lower prices against committed volumes to enterprises.

The enterprise benefits of reach and cost savings are the new revenue
opportunities for operators. Case experiences from Scandinavia prove that fully
mobile enterprises bring up to 50 percent higher ARPU than normal business
users, because of increased mobile voice usage over fixed voice lines.

New subscriptions, basic voice and voice enhanced with enterprise-specific
services, as well as multiple devices, are foundations for gaining market share
in this profitable segment.

- Key Drivers for Accelerating Mobile
Business Voice: Enterprises place great emphasis on employee communication
needs, such as reach and organizational factors, when deciding on the mix of
fixed and mobile subscriptions that they use. The common perception among
enterprises is that mobile telephony is more expensive than fixed telephony,
thus companies are sometimes reluctant to increase the proportion of mobile
telephony. This perception stems from mobile tariffs often appearing higher than
fixed tariffs when one compares calling within the same type of network (fixed
or mobile). As fixed-to-fixed calling has typically been cheaper than mobile to
mobile calling, the largely prevalent thinking is that mobile calling is always
more expensive.

Simple
pricing and invoicing can remove the barriers of perceived high telephony costs.

The operator itself has a direct influence on these key drivers and thus can
increase mobile voice usage among business users. Crucial for selling voice
services effectively are commercial drivers such as tariffs and pricing
structure.

In addition to these commercial drivers, voice and network quality as well as
key PBX-like functions for mobile handsets need to be in place to accelerate
fixed-to-mobile substitution in the enterprise segment.

Fixed-to-mobile substitution in enterprises is easiest in the service sector,
finance, media, and transportation industries. These segments traditionally
enjoy a high proportion of mobile workforce and tele-commuters and they form a
significant portion of the Indian economy. The contribution of services as a
percentage of GDP stands at over 50 percent, and presents a tremendous
opportunity to Indian operators.

To conclude, voice still presents a huge revenue opportunity for operators
globally and in India, by accelerating the fixed-to-mobile substitution among
business users. Radio network coverage and voice quality are mature, and key
PBX-like features are available in mobile networks today for a minimum of start
up investment for the complete mobile business voice solution. Enterprises have
started to replace fixed voice lines with mobile phones because they clearly
recognize the benefits. The key drivers to accelerate substitution in
enterprises are attractive voice service prices and simple pricing structures.
The telecom industry with mobile operators as the key players has all the means
in its hands to generate new growth from fixed-to-mobile

substitution.

Ashish Chowdhary, country head — India and South Asia, Nokia
Networks