For wireless network operators, the only certainty is uncertainty: Will a subscriber who sends 100 text messages a month be interested in a video chat service? What bundle or promotion will the competition launch next? And what’s it going to take to find new growth opportunities?

All of those questions are major influences on what mobile service providers are looking for from their OSS and billing systems, according to the latest Unstrung Insider report, Unsexy Beast: How to Profit From Converged Mobile Billing.

It was the introduction of wireless data technologies in the early 2000s that made sophisticated back office systems a key requirement. With the ability to offer a wider range of services, operators demanded greater capability from their billing systems, which now had to track more than just the number of minutes. They also had to get information about what user sessions contained – An MMS message? A ringtone? Website content? – and correlate this with other data, such as the customer's balance or whether they should trigger a royalty to a business partner.

Now, wireless carriers are evaluating next-generation OSS and billing platforms that act as highly flexible marketing tools and provide the capability to rapidly create service bundles in response to fast-changing market conditions. Such platforms are increasingly critical to operator competitiveness, argues the report.

From a product perspective, key functions include:

Already, service providers are seeing some success with sophisticated, billing-enabled services, while many others are in the experimentation and trial phases.

One recent example is Sprint Corp. (NYSE: S)'s Pivot joint venture with several cable operators that identifies calls between a wireless carrier and its cable partner’s VOIP phones and exempt them from airtime charges. FTS (London: FTS) and MDS Global are among the vendors targeting the convergence/quadruple-play space.

Another example discussed in the report is the Beeline/VimpelCom Ltd. (NYSE: VIP), loyalty program that tracks the customer's use of certain services to create a tally of points that she can redeem for exclusive items such as carrier-branded jackets. This service is enabled by Comverse Inc. (Nasdaq: CNSI)’s products. Other vendors targeting carrier interest in loyalty programs include Acision BV and Mind CTI Ltd. (Nasdaq: MNDO).

There's also growing interest in family tariffs. One example is Vodafone UK's family plan, which provides unlimited calls among four people, regardless of whether they’re pre-paid or post-paid customers. Often referred to as “hybrid” accounts, these offerings are a potential fit for both the consumer and enterprise markets, creating opportunities for vendors – such as Amdocs Ltd. (NYSE: DOX) – whose products already support converged pre-paid/post-paid billing. Other vendors targeting pre-paid/post-paid convergence include Comptel Corp. (Nasdaq, Helsinki: CTL1V) and Telcordia Technologies Inc.

These examples are all from the real world, rather than from vendors' marketing collateral. They show how billing systems can help carriers reduce churn, increase net adds, and increase average revenue per user (ARPU) – metrics that investors monitor like hawks. These billing-enabled strategies also help the bottom line by reducing the need to compete on price alone.

New and more stringent requirements are reshaping the OSS/BSS space, resulting in a spate of mergers over the past two years, including Ericsson AB (Nasdaq: ERIC)'s June 2007 bid for complink 8165|LHS Group} and Comverse's 2005 acquisition of CSG Systems International Inc. (Nasdaq: CSGS)'s GSS division. Those won't be the last, according to vendors briefed for this report. As one put it: "I expect to see more mergers and acquisitions happen. The trend is towards the big players in the OSS/BSS market being able to provide a full suite of solutions."

The Ericsson-LHS merger is a case in point: The combined company can leverage Ericsson's pre-paid strengths and LHS's post-paid strengths, thereby positioning it to capitalize on carriers' growing preference for billing systems that can handle both types of service. That trend is worldwide and well underway, creating major opportunities for vendors that offer a single platform for pre-paid, post-paid, and hybrid pre-paid/post-paid billing.

The bottom line: Billing might not be as sexy a topic as mobile WiMax or 4G, but there's a lot of money flowing in this sector, in terms of merger dollars and revenue enabled.

— Tim Kridel, Contributing Analyst, Unstrung Insider

The report, Unsexy Beast: How to Profit From Converged Mobile Billing, is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.unstrung.com/insider.