Tellabs warns North American market to turn cash flow-negative in 2013.

Mobile operators risk going into the red within three years if they do not change the way they do business, according to a new study published on Thursday.

The first to be hit will be mobile carriers in North America, where the network costs associated with supporting growing mobile data volumes are predicted to exceed revenues by the fourth quarter of 2013, the Tellabs study, using Analysys Mason traffic and revenue forecasts, shows.

“In North America the business would turn cash flow-negative in 2013,” Ben McCahill, director of mobile business development EMEA, at Tellabs, told Total Telecom this week. “North America topped out first,” because a slightly different network architecture means operating expenses are proportionately slightly higher, he said.

Asia-Pacific will reach the same revenues/costs crossing point within six to nine months of North America, followed by Western Europe another three to six months after that, he added.

The study looks specifically at the mobile data segment, not including SMS. And McCahill insists the figures used to compile the study were “very conservative” in terms of both data volume increases and revenue decline.

The way things stand, the business model for mobile operators in developed markets “will go cash flow-negative within the next strategic investment cycle,” McCahill warned.

The answer, Tellabs says, is to move away from bandwidth-only services and concentrate on applications-based services to generate additional revenue streams.

And underpinning that will be a greater focus on policy management, thereby enabling telcos to manage their network traffic efficiently.

Operators need to understand where applications are and where the choke points in their networks are, McCahill explained. Applications do not all need the same kind of handling – they don’t need the same security, load balancing and optimisation, for example. Adding intelligence in the network means managing the traffic and at the same time maintaining the user experience.

“It’s a totally different ball game once you start to move into the applications delivery space,” McCahill said.

It is difficult to differentiate when all you have is bandwidth, he added. The applications space “gives you multiple opportunities to differentiate yourselves,” he urged mobile operators.

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