This article originally appeared in the March 2011 issue of NGN.
Softbank’s chairman and CEO was referring, of course, to the situation in which mobile operators find themselves today. And that is between a rock and a hard place – or, as Masayoshi called it, zero growth for mobile services.
Mobile data traffic has gone through the roof and is headed into the stratosphere. Between 2002 and 2011 the average user’s mobile bandwidth usage has multiplied 1,200 times. Wireless data between 2010 and 2015 is forecast to grow my thirty times, said Son, and over the next ten years it is expected to increase a thousand times more.
At first glance this might look like a good thing. Growing demand would seem to indicate growing revenues. Yet wireless network operators are worried. Sure, we all love the mobile Internet. But the wild upswing in traffic is not tracking with the cost per bit – far from it. Not only that, but mobile carriers are under pressure to continue to invest big money in next-generation networks just to keep up with demand.
One strategy that businesses tend to look toward in zero- or low-growth situations like this is to increase their numbers of customers. But, as Son noted, that will be a challenge given there’s already 78 percent mobile penetration worldwide, so growing the subscriber base much more is not an option. Capturing new customers, in large part, will involve wresting them away from the competition.
Another avenue is to increase average revenue per user. That seems to be what the industry at large is shooting for, but it won’t be easy. ARPU for mobile is decreasing – down 42 percent worldwide between 2005 and 2010, according to Son, who said Vodafone (News - Alert) Japan is leveraging both of the above-mentioned strategies for growth.
Despite all of these difficulties, however, the fact remains that people have grown attached to their mobile devices and services. The average user spends 2.5 hours on the mobile Internet, according to Son. And the vast majority of high school and college students – the customers of today and the future – strongly prefer smartphones.
That may help explain why Son remains bullish on mobile services. So much so, in fact, that in 2006 Softbank (News - Alert) acquired Vodafone Japan for more than $20 billion in cash and has taken on debt as part of the deal.
“Some people criticize me and call me crazy,” Son said. He went on to comment that “sometimes craziness gives a great return.”
Indeed. Although Vodafone Japan’s profit dropped every year since at least 2002, since its purchase by Softbank the company has seen a return to growth. And devices like the smartphone and the tablet are, and will be, the linchpins in driving the success of companies like Vodafone Japan. Son said the company’s entire user base now consists of 3G/smartphone subscribers, while worldwide, smartphone users make up just 22 percent of all mobile users.
Edited by Stefania Viscusi