Profits Tumble for Mobile Telecom Operators

According to a new report mobile telecom operators in the UK have suffered a decline in their profit per customer, with the UK consumers giving the least amount of profit in the whole of Europe.

The latest Group 1 Software report (the customer communications specialists) has revealed that Mobile Telecom operators in the UK have suffered a decline in their profit per customer. Profits are down 9.6% from £43.20 per customer in 2005 to £39.20 in 2006. Further, in Europe, UK Mobile Telecoms operators showed the lowest level of profit per customer.

Profit per customer is the essential measurement of company business performance and shareholder value creation. The new metric is being increasingly used to measure efficiency of profit generation, and sustainability of future profits. The efficiency with which companies produce their profits is absolutely critical to sustainable shareholder value.   

Revenues and profits may be built in the short-term through scale growth, either organically or by acquisition.  But if with each year that passes, profit per customer is dwindling, then the future will be bleak – offering the prospect of either the cost of winning and servicing customers becoming unaffordable, or even running out of customers entirely as market share reaches saturation point.

The Mobile Telecoms sector is typified by high customer churn rates – on average 33.4% in the UK earlier this year, according to our research, and – anecdotally – starting to move towards this level in Europe.  Moreover, because equipment is usually bundled into service provision, the cost of churn can be much higher than in other industries. Containing levels of customer defection is therefore one of the most important goals in the struggle to maintain or even improve customer profitability.  

Technology convergence is likely to be one of the most fruitful methods for Mobile Telecoms companies to enhance profit per customer, in particular the current trends towards enabling email and other existing messaging and information services over the mobile device.  Mobile network providers already have disproportionately large marketing budgets and, coupled with the fact that mobile phone penetration now exceeds 100% (source: Mobile Data Association), we can expect a battle royal between internet service providers (ISPs) and the Mobile industry in the second half of the decade

The graph below illustrates how Mobile operators in Europe have performed.

Andrew Greenyer, VP International Marketing, Group 1 Software comments;
“A growing competitive market place and high levels of customer defection has contributed in part to the decrease. Those Mobile Telecom providers who understand their customers and are driven to providing a customer centric approach to deliver targeted offers to different customer segments will benefit. Company’s will increase their profitability and customers will grow evermore satisfied with service and personalised attention, thereby creating a sustainable future herein. "