A REFERENCE MODEL FOR ANALYZING MOBILE
NETWORK OPERATORS’ STRATEGIC POSITIONING
Antonio Ghezzi and Andrea Rangone
Politecnico di Milano, Department of Management, Economics and Industrial Engineering
Piazza Leonardo Da Vinci 32, 20133 Milan, Italy
Keywords: Mobile Telecommunications, Mobile Network Operators, Strategy, Reference Model, Multiple Case
Studies.
Abstract: The revolutionary changes the Mobile Telecommunications Industries is going through are forcing the
Mobile Network Operators (MNOs) to radically reshape their strategies, according to the newly emerged
market’s value drivers. The purpose of this study is to provide an original reference model for supporting
the analysis of MNOs’ strategic positioning. Employing the multiple exploratory case studies research
methodology, the study identifies five dimensions or classification variables - Content creation &
innovation management, Mobile Advertising integration, Communities and Social Networking focus,
Charging & billing systems leverage and Network infrastructure management – through which describing
and assessing an MNO’s strategic positioning; consequently the model is applied to the four Italian
operators, so to obtain a validation as well as a picture of the adopted strategic positioning. The findings
show two alternative and quite contradictory “strategic extremes” the operators are swinging between seem
to be emerging: the Pure Carrier positioning, and the Media Company positioning. In between, the Smart
Pipe positioning sees the operator making the most out of its assets, gaining the role of the third parties’
offer enabler.
1 INTRODUCTION
After many years of unquestioned market leadership
in the Mobile Telecommunications industry, mainly
due to the possession of inimitable assets and to the
unique relationship established with the end
customer, the Mobile Network Operators (MNOs)
are currently finding themselves in the midst of a
period of turbulent market transition, where the
different interacting dimensions of uncertainty make
an accurate prediction of the environment’s
development virtually impossible (Courtney et al.,
1997).
The decline of voice services revenues (Muller-
Veerse, 1999; Arthur D. Little, 2001;), the refocus
on the Mobile Content segment, the crisis of the
traditional “walled garden” approach that drove to
an higher openness to off portal, the rise of third
parties with the need of developing appropriate
agreements and revenue sharing models (Maitland et
all., 2002; Olla, Patel, 2002; Kuo, You, 2006;
Peppard, Rylander, 2006), and the imminent
revolution determined by the clash with the Internet
industry are only some of the challenges the
operators are now forced to face.
Therefore, in the short run, the key issue for
MNOs will definitely be the structural rethink of
their strategies and business approaches.
When confronting this strategic priority,
however, MNOs appear to be lacking a clear
direction, and the strategies they are adopting are far
from being unambiguous.
Though initially all operators showed a strong
interested in shifting from the “must carry” to the
“must offer” paradigm – the first seeing the
availability of the network infrastructure as the core
asset and source of competitive advantage, while the
second recognizing the role of the multimedia
content and services portfolio provisioned as the true
market essential facility, recently this trend seems to
be inverted, and some players are starting to
consider the option of withdrawing from the
downstream activities of the chain to refocus on the
core business, that is, the activities related to
network provisioning.
Given this gradual departure from the initial
50
Ghezzi A. and Rangone A. (2009).
A REFERENCE MODEL FOR ANALYZING MOBILE NETWORK OPERATORS’ STRATEGIC POSITIONING.
In Proceedings of the International Conference on e-Business, pages 50-56
DOI: 10.5220/0002223600500056
Copyright
c
SciTePress
generalized approach, it becomes increasingly
important to identify which are the main strategic
positioning alternatives the MNOs can now adopt, as
well as which core assets they will have to leverage
on to succeed in the unsettled Mobile Value
Network.
Nevertheless, the undergoing radical internal and
external changes make it more and more difficult to
understand which drivers or classification variables
will allow to discriminate from one strategic
positioning to another.
In the light of the portrayed situation, the
purpose of this paper is to develop a model capable
of supporting the strategic positioning analysis of
Mobile Network Operators: through the definition of
a set of relevant “strategic dimensions”, whose
combination gives rise to a specific strategic
positioning, the model will allow to infer how the
operators are reshaping their business configuration,
and what solutions are currently adopting.
The study, focused on the MNOs operating in
the Italian Mobile Telecommunications market, is
structure as follows: at first, the research
methodology employed will be analyzed;
afterwards, the original MNOs’ strategic positioning
reference model developed will be presented, and
consequently applied to the four Italian MNOs; as a
conclusion, the study’s key implications will be
discussed, and some indications for future works
will be provided.
2 RESEARCH METHODOLOGY
The present research is based on case studies,
defined by Yin (2003) as “empirical inquiries that
investigates a contemporary phenomenon within its
real-life context, especially when the boundaries
between phenomenon and context are not clearly
evident; and in which multiple sources of evidence
are used”.
Qualitative research methodology was chosen as
particularly suitable for reaching the research
objectives, which aim at understanding the complex
phenomenon of strategic positioning within a given
industry – i.e. Mobile Telecommunications – and
with reference to a specific typology of players –
MNOs, and thus at building new theory – or
extending existing theories – on it.
To accomplish the previously identified research
propositions, from January to June, 2008, in-depth
exploratory case studies on the 4 companies
possessing a license for acting as a Mobile Network
Operator in Italy – TIM, Vodafone Italy, 3 Italy and
Wind – were performed. In addition to this, so to
obtain a better insight concerning MNOs’ strategies
and positioning, the 4 case studies, made of 16
interviews, were integrated by information collected
through a further set of 90 case studies on “third
party” firms involved in business activities with the
previously identified operators. These additional
case studies, performed in the same period of time,
were carried out within the wider 2008 Mobile
Content Observatory research (Bertelè et all., 2008).
As a whole, 138 interviews – both face-to-face and
phone interviews – were held with 110 persons
identified as key participants in the MNOs’ strategy
definition process at different levels, as well as
informants belonging to third party firms. The
population of informants included top and middle
managers – e.g. Presidents Chief Executive Officers,
Chief Information Officers, Chief Financial Officers,
Marketing & Sales Managers, Project Manager,
Software Engineers and Developers. The semi-
structured nature of the questionnaire made possible
to start from some key issues identified through the
literature, but also to let innovative issues emerge.
The choice of focusing the research on the
Italian Mobile Telecommunications context is
justified by its very characteristics: on the one hand,
the market is extremely mature (Informa Telecoms
& Media, 2008), but on the other it has always been
positioned at the forefront in industry innovation at a
global level (Bertelè et all., 2008).
Coherently to the research methodology
employed (Pettigrew, 1988), firms were not
randomly selected, but the theoretical sample was
made of firms that conformed to the main
requirement of the study, while representing both
similarities and differences considered relevant for
the data analysis.
A multiple case study approach reinforced the
generalizability of results (Meredith, 1998), and
allowed to perform a cross analysis on the variables
under scrutiny, to pinpoint differentials in terms of
strategic positioning – to see which variables
changed and which remained constant going from
one alternative to another, due to the presence of
extreme cases, polar types or niche situations within
the theoretical sample (Meredith, 1998).
Since the research needed to focus to different
subunits of analysis, the embedded (i.e. multiple unit
of analysis) case studies was adopted. The scheme of
analysis developed included the following main
units of analysis:
company profile;
business model components;
products and services performances;
A REFERENCE MODEL FOR ANALYZING MOBILE NETWORK OPERATORS' STRATEGIC POSITIONING
51
value network positioning;
strategy developed.
As the validity and reliability of case studies rest
heavily on the correctness of the information
provided by the interviewees and can be assured by
using multiple sources or “looking at data in
multiple ways” (Eisenhardt, 1989; Yin, 2003),
multiple sources of evidences or research methods
were employed: interviews – to be considered the
primary data source, analysis of internal documents,
study of secondary sources – research reports,
websites, newsletters, white papers, databases,
international conferences proceedings. This
combination of sources allowed to obtain “data
triangulation”, essential for assuring rigorous results
in qualitative research (Bonoma, 1985).
3 THE STRATEGIC
POSITIONING ANALYSIS
REFERENCE MODEL
The research carried out through the multiple case
studies allowed to shed light on the key dimensions
or classification variables that make it possible to
discriminate from different strategic positioning
alternatives, thus making inferences on the main
configurations the Italian MNOs are adopting.
The findings are synthesized in the “MNO
strategic positioning reference model” below
provided, which identifies five macro-dimensions:
1. Content creation & innovation management: it
expresses the operator’s presidium of the
upstream activities related to content creation,
aggregation and publishing, as well as the
overall process of content & services portfolio
innovation, typically performed by third parties
– Content Providers (CP) or Mobile Content &
Service Providers (MCSP). A high level of
involvement in the control and management of
third parties’ offers published “on deck”, i.e. on
the operator’s mobile portal, indicates that
concentrating in the Mobile Content segment
represent a strategic priority for the MNO.
2. Mobile Advertising integration: it refers to the
integration of Mobile Advertising within the
operator’s overall business model. An high
diffusion of Advertising-based models
promoted by the operator expresses its vocation
to act as a “Media Agency”, consequently
extending its core business towards neighboring
and complementary areas.
3. Communities and Social Networking focus: it
expresses the operator’s approach towards
Social Networking and Community value added
services. Such services clearly represent the
new differentiation driver of the Mobile Content
offer, the only element capable of increasing the
end customer’s “stickiness”. Thanks to the
concept of interaction Social Networking relies
on, which constitutes the true value of mobile
communications, this service category shall
become the package all other services like
Infotainment, Mobile Games, Music and Video,
are bundled in: by placing the content in the
middle of users interactions, the operator can
exploit all the offer portfolio synergies at his
hand, thus creating a unique user experience.
Therefore, the choices related to the role the
MNO decides to take on regarding Social
Networking – also with reference to the
possibility of integration with the Web Instant
Messaging communities – will strongly affects
its positioning, reflecting its resolution of either
actively covering the downstream activities of
the Mobile Content value network, or to
relegate itself to data traffic transferring. In fact,
should the operator give up the control of Social
Networking, and grant its customer base an
access to the Internet Instant Messaging
communities, it would attract a large number of
potentially new users, benefiting from revenues
from data traffic; on the other side of the coin,
however, it would risk to cannibalize its
traditional messaging services – like Sms and
Mms, losing the related sources of revenues.
4. Charging & billing systems leverage: it
concerns the exploitation of the operator’s
charging and billing proprietary systems and the
provision of such core asset to third parties, to
enable the mobile transactions between them
and the end users. Being the operator the only
actor within the Value Network qualified to
charge and consequently bill the content and
services cost to the end users’ credit, third
parties’ offer shall inescapably pass through the
establishment of an agreement with the MNO to
rely on its unique systems. The higher the
leverage on this asset, and the wider the number
of partners with a granted access to these
system, the more open the operator towards
third parties: in such scenario, the MNO is
configured as a facilitator and enabler of other
player’s business.
5. Network infrastructure management: it indicates
the extent to which an operator focuses on the
ICE-B 2009 - International Conference on E-business
52
provisioning of network infrastructure
functionalities to third parties, like
interconnection, connectivity, data transfer and
network operations management. An high rank
on the network infrastructure management
dimension shows the MNO’s willingness to
concentrate on the role of “bit pipe” provider.
While variables 4 and 5 are mentioned in
literature – for instance, see Kuo, Yu (2006) and
Peppard, Rylander (2006), the other three are
originally identified through the case studies, thus
representing an extension to existing theory.
Content
Content
Creation
Creation
&
&
Innovation
Innovation
Management
Management
Network
Network
Infrastructure
Infrastructure
Management
Management
Charging
Charging
&
&
Billing
Billing
Systems
Systems
Leverage
Leverage
Mobile
Mobile
Advertising
Advertising
Integration
Integration
Communities
Communities
&
&
Social
Social
Networking
Networking
Focus
Focus
MEDIA
MEDIA
COMPANY
COMPANY
PURE
PURE
CARRIER
CARRIER
SMART
SMART
PIPE
PIPE
Figure 1: The MNO Strategic Positioning Pentagon
Model.
The original “MNO Strategic Positioning
Pentagon” model shows the combined coverage of
the five dimensions, drawing a perimeter that
delimitates the current MNO’s business scope.
Different combinations of the previously
identified dimensions can give rise to three main
strategic positioning an MNO could adopt:
1. the Media Company positioning;
2. the Pure Carrier positioning;
3. the Smart Pipe positioning
The Media Company positioning sees the MNO
strongly involved in the end-to-end activities related
to the creation, management and delivery of mobile
digital content. The operator exerts a strong control
on the content published on the mobile portal and on
the related revenues, typically establishing revenue
sharing models where limited margins are paid off to
third parties. At the same time, the MNO is
interested in acquiring a significant share of the
revenues related to Mobile Advertising, and tries to
operate as a Media Agency as well.
Therefore, an operator positioned as a Media
Company will be characterized by an unbalance
towards “Content creation and innovation
management” and “Mobile Advertising integration”
The Pure Carrier positioning, on the contrary, is
based on the refocus on the original core business,
that is, the activities related to the network
infrastructure and the provisioning of its
functionalities – e.g. interconnection, access,
connectivity, bandwidth. The logic underlying such
reorientation, similar to the trend that took place in
the Internet market involving the Internet Service
Providers, is that the MNO has gone too far in
extending its reach on the value network activities,
abandoning its core and entering new areas it does
not have the right resources and competences to
cover. Therefore, by giving up the direct control of
some downstream activities, by granting access to its
customer base to new entrants – like the Web
Companies – and by concentrating on data transfer,
the MNO would significantly increase the network’s
traffic, benefiting from higher revenues from
network provisioning. The risk related to this option
is to experience a depletion of the operator’s role:
after having undertaken heavy investment to install
the infrastructure and acquire 3G licenses, it would
not be able to retain an adequate share of the
revenues it is enabling.
Within the model, this positioning is expressed
by the prevalence of “Network Infrastructure
management” and, to some extent, of “Charging &
billing systems leverage” dimensions over the
others.
In between these two “strategic extremes”, a
continuum of alternative solutions are available. The
most significant that is worth mentioning is the
emerging Smart Pipe strategic positioning.
In such configuration, the MNO leverages on the
overall range of its core assets, i.e. the network
infrastructure, the 3G licenses, the charging &
billing systems, the proprietary distribution
channels, the strong brand awareness, the direct
access and deep knowledge of its customer base – in
terms of users profiles and behavior – to propose a
portfolio of enabling and facilitating business
services to the market’s third parties – e.g. MCSPs,
CPs, Advertisers. Therefore, the MNO takes on the
role of enabler and facilitator of its partners’ offer:
on the one hand, withdrawing from some
downstream activities more related to the market
making of content and services; but on the other,
enhancing its undercurrent position of foundation of
the whole value system.
The “Smart Pipe” concept stresses the fairly new
combination of a “bit pipe” role, where the MNO
mainly acts as a carrier, with a more far-seeing
thorough management of its assets. According to
this vision, the network, from being the operators’
A REFERENCE MODEL FOR ANALYZING MOBILE NETWORK OPERATORS' STRATEGIC POSITIONING
53
core business, becomes “core to their business”
(Nordmann, 2006).
The revenues streams the operator benefits from
are mainly related to data transfer, charging &
billing fees, advertising fees and a further fee for the
provision of data and information concerning the
end user – track history, profiles and preferences,
usage data etc.
A Smart Pipe positioning is characterized by a
focus on the Charging & billing systems leverage
and the integration of Mobile Advertising modes, as
well as by a heavy control over Social Networking,
seen as the “umbrella service” under which all
others are bundled.
After having described the original model’s
constitutive variables, in the next section it will be
applied to the four Italian MNOs, so to test the
framework validity and get a valuable insight on the
actual “state of the art” concerning the operators
strategic positioning.
4 THE MODEL APPLICATION
TO THE ITALIAN MNO
The application of the model to the 4 Italian MNOs
allows to gain a significant insight on the main
strategic positioning alternatives these actors are
currently adopting, as well as to obtain a first model
validation.
According to the both qualitative and
quantitative information collected through the case
studies, an Interval or “Likert-like” scale was
employed to evaluate the coverage of each
dimension: a 0 to 5 ranking was then associated by
the authors to each classification variable for every
MNO. The rationale followed implies that the higher
the ranking on a given variable is, the more the
operator focuses on such dimension in shaping its
strategic positioning.
The operator Wind seems prone to adopt a Pure
Carrier positioning: its recent investments are
mainly directed towards the enhancement of the
network infrastructure management, as well as
towards the proper leverage on charging & billing.
The i-mode business model adopted – licensed
from the Japanese operator NTT DoCoMo – and the
related revenue sharing agreements, characterized by
high shares granted to content and service providers,
leave wide discretion to third parties, without a strict
control over their activity; the access to the
operator’s billing platforms is also granted with little
constraint to a plethora of partners.
The MNO focuses its Mobile Content offer on
Infotainment browsing rather than innovative and
Content
Content
Creation
Creation
&
&
Innovation
Innovation
Management
Management
Network
Network
Infrastructure
Infrastructure
Management
Management
Charging
Charging
&
&
Billing
Billing
Systems
Systems
Leverage
Leverage
Mobile
Mobile
Advertising
Advertising
Integration
Integration
Communities
Communities
&
&
Social
Social
Networking
Networking
Focus
Focus
PURE
PURE
CARRIER
CARRIER
Figure 2: Wind Strategic Positioning.
multimedia services; moreover, the integration of
Mobile Advertising is only at an embryonic stage.
The operator Vodafone Italy appears to be
moving towards the renewal of its role, through a
significant trend of openness to third parties – a
survey performed within the research showed that
the number of content providers on “hybrid” or
“friendly off-net” mobile sites, i.e. partners’ external
sites with a link on the operator’s portal, was
characterized by an annual growth rate of 400%
from 2007 to 2008; at the same time, a new pricing
policy eliminating the navigation costs for the users
on hybrid sites was introduced, paralleled by a
strengthened control over the key assets of Social
Networking services – reflected by the acquisition of
the Web 2.0-oriented company Zyb, and the launch
of the mobile social network platform “Vodafone
Friends” – and of charging and billing systems. In
addition to this, a strong effort has been put on the
development of Mobile Advertising.
In the light of these consideration, it is possible
to claim that the MNO is currently positioned as a
Smart Pipe.
Content
Content
Creation
Creation
&
&
Innovation
Innovation
Management
Management
Network
Network
Infrastructure
Infrastructure
Management
Management
Charging
Charging
&
&
Billing
Billing
Systems
Systems
Leverage
Leverage
Mobile
Mobile
Advertising
Advertising
Integration
Integration
Communities
Communities
&
&
Social
Social
Networking
Networking
Focus
Focus
SMART
SMART
PIPE
PIPE
Figure 3: Vodafone Italy Strategic Positioning.
ICE-B 2009 - International Conference on E-business
54
Concerning the operator 3 Italy, last entrant in
the market, the model confirms its effort in
positioning itself as a Media Company, because of
the high innovation of the services offered – also
confirmed by the significant investments in Mobile
Tv and on the DVB-H standard, and the heavy
reliance on Advertising-based models,
counterbalanced by some limitations and criticalities
in the network-related performances.
Content
Content
Creation
Creation
&
&
Innovation
Innovation
Management
Management
Network
Network
Infrastructure
Infrastructure
Management
Management
Charging
Charging
&
&
Billing
Billing
Systems
Systems
Leverage
Leverage
Mobile
Mobile
Advertising
Advertising
Integration
Integration
Communities
Communities
&
&
Social
Social
Networking
Networking
Focus
Focus
MEDIA
MEDIA
COMPANY
COMPANY
Figure 4: 3 Italy Strategic Positioning.
As regards to TIM, the market leader in terms of
customer base, what emerges from the model’s
application is a “fuzzy” positioning, laying between
the Media Company and the Smart Pipe solutions. In
fact, on the one hand the operator has a strong focus
on the network infrastructure and the charging &
billing platform assets – inherited by its mother
company, the ex-monopolist for fixed telephony
Telecom Italia; on the other, however, it shows a
remarkable interest in developing Social Networking
services – a vivid example of this approach is
represented by the “TIM Tribe”, as well as Mobile
Advertising models. The control of content
published on portal is also high.
Content
Content
Creation
Creation
&
&
Innovation
Innovation
Management
Management
Network
Network
Infrastructure
Infrastructure
Management
Management
Charging
Charging
&
&
Billing
Billing
Systems
Systems
Leverage
Leverage
Mobile
Mobile
Advertising
Advertising
Integration
Integration
Communities
Communities
&
&
Social
Social
Networking
Networking
Focus
Focus
MEDIA
MEDIA
COMPANY
COMPANY
PURE
PURE
CARRIER
CARRIER
SMART
SMART
PIPE
PIPE
Figure 5: TIM Strategic Positioning.
As a whole, it is possible to argue that the
strategic positioning alternatives emerging through
the model’s application are significantly diverse. To
tackle the “wind of change” blowing on the Mobile
Industry, the players seem to be taking different
directions, trying to exploit the current market’s
fluidity to reposition themselves and lay the
foundations for future sustainable competitive
advantages over the competitors, both incumbents
and new entrants.
It is hard to predict which model will prevail in
the medium-long run: however, as soon as the
market situation will consolidate, and as the
positioning adopted will crystallize, the choices
made today will strongly impact on the operators’
performances and chances of success.
5 CONCLUSIONS AND FUTURE
WORKS
The research provides an original reference model
for supporting the strategic positioning analysis of
Mobile Network Operators.
The findings show that the analysis of the
reshaped operators’ positioning goes through the
definition of new key strategic dimensions.
In fact, the model identifies an original set of 5
variables – Content creation & innovation
management, Mobile Advertising integration,
Communities and Social Networking focus,
Charging & billing systems leverage and Network
infrastructure management, where the first three are
newly defined and were inferred from the case
studies performed.
Concerning the variables combinations, two
alternative and quite contradictory “strategic
extremes” the operators are swinging between seem
to be emerging: the Pure Carrier positioning, and the
Media Company positioning. In between, the Smart
Pipe positioning sees the operator making the most
out of its assets, gaining the role of the third parties’
offer enabler.
The rigor of the qualitative research method
employed and the theoretical sample’s significance
grant, reliability and, to some extent, the
generalizabilty of the model’s results. The number
of case studies, and the fact that the model’s
variables are drawn from a wide sample of cases,
while the model is then applied only to a subset of
the analyzed firms – that is, the 4 MNOs, also
contribute in limiting the issue of tautological
validity the model may be burdened with.
A REFERENCE MODEL FOR ANALYZING MOBILE NETWORK OPERATORS' STRATEGIC POSITIONING
55
The paper’s value for researchers can be brought
back to the extension of Strategic Analysis theories
with reference to the Mobile Telecommunications
Industry, thanks to the creation of a model capable
of identifying newly emerged strategic dimensions
and positioning alternatives.
The value for practitioners lies in the
provisioning of a tool for mapping existing and
future strategic positioning adopted by MNOs, thus
gaining a valuable insight on these player’s moves,
as well as on the market’s competitive configuration.
The paper represent a noteworthy attempt of
developing an ad hoc model for supporting strategic
analysis on the Mobile Industry. However, it does
not shed light on the different performances
acquirable through the adoption of a given
positioning. Future works will have to concentrate
on making the relation between positioning and
performances explicit, and on carrying out a
benchmarking analysis of the different alternatives
available.
In addition to this, concerning methodological
soundness, the model shall be applied to a different
sample of MNOs, in order to test its validity outside
the first sample which originated it, so to solve the
issue of tautological validity.
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