New Roads Lead to Roam
Finally, mobile operators are chipping away at roaming fees -- the last high-margin, low-volume telecom service left.
They are cutting prices to boost mobile data usage to entice the "silent roamers" to turn their phones on when they travel abroad.
Norway's Telenor Group (Nasdaq: TELN) is one of the most active. The company says some 25% of customers switch off their phones when traveling and 90% curtail their use of apps such as email. It is promising lower-priced roaming services to its European and Asian customers over the next two years, with the aim of weaning users away from WiFi and lifting the number of active roamers in the EU to 80%.
So far only its Swedish subsidiary has launched packages at new prices, offering 100MB a day for EUR3.1 ($3.57) -- roughly one sixth of the EU roaming data cap.
In South East Asia, where Telenor runs several operators, rival Singapore Telecommunications Ltd. (SingTel) (OTC: SGTJY) is also putting its toes in the water. Its roaming service to Malaysia and Australia provides 1GB for S$10 ($7.14) and is valid for one month.
In a report last year, Juniper Research predicted that roaming revenues would rise by a hefty 58% over 2014 to 2018. By the end of that period, operators are expected to be generating $90 million annually in roaming revenues, which will account for 8% of total billed revenues, according to the market research company.
Nitin Bhas, the head of research at Juniper, believes there is a lot of price elasticity in developed countries in the Asia Pacific, such as Singapore and Australia. Bhas also reckons the increase in global airline travel -- driven by Chinese travelers, in particular -- will shore up revenues.
But the fat margins in roaming are also an irresistible target for non-traditional operators.
Some of the new Chinese MVNOs are targeting the more than 100 million Chinese tourists who venture abroad each year. (See Snail Sets Pace for China's MVNOs.)
Roaming is a big part of Google (Nasdaq: GOOG)'s game plan with Project Fi, a WiFi-MVNO play that charges customers $10 per GB from anywhere in the world. Fi is still in development phase and for the time being works only with the Nexus 6 phone. It also roams only on 3G networks outside the US market. (See Google's WiFi-First Mobile Service 'Fi' Is Here.)
Then there are the innovators, like Taiwan's Taisys. A long-time supplier of SIMs for mobile banking, it is building a global roaming business on the back of its "slim SIM" technology. Taisys is not the only company selling a roaming SIM, but its SIM is actually a transparent sticker that wraps around the existing SIM, which means users can fit two SIMs in the one slot and avoid the awkward process of swapping out SIMs.
The service is sold through Taisys's GreenRoam subsidiary. It has already signed up Chunghwa Telecom Co. Ltd. (NYSE: CHT), China Mobile HK and StarHub as partners, allowing the company to sell local prepaid SIMs direct to customers.
Business development manager Jennifer Chang says it is expecting to sign an agreement with a major operator in the EU and has further deals in the pipeline with mobile carriers in Canada, Australia and Russia.
"We definitely expect the same kind of growth as international travel continues to grow," she says. "The silent roamers that avoid expensive roaming charges will opt for local prepaid packages or alternative mobile connectivity."
Finally, a Canadian startup called Piece has raised C$298,000 ($224,000) for a Bluetooth-based device that supports a second SIM card.
Juniper's Bhas believes the growth in the travel market will drive the demand for roaming data services, but says the key, both for operators and newcomers, will be "simple and clear roaming tariffs."
— Robert Clark, contributing editor, special to Light Reading