Data on demand: Seeking higher revenues, mobile operators invest in data services

Over the course of the past decade mobile telecommunications uptake in Mongolia has increased rapidly. Since 2003 the number of mobile subscribers in the country has expanded nearly 10-fold, from 319,000 in 2003 to 3.38m as of the end of 2012, according to data from the Communications Regulatory Commission of Mongolia (CRC). This represents a jump in mobile penetration from around 13% in 2003 to more than 106% as of 2012. This rapid growth has been a boon for the nation’s four mobile operators, namely MobiCom, Unitel, Skytel and G-Mobile. As the market has matured in recent years, however, the mobile operators have reported falling average revenue per user (ARPU) figures, which can be attributed primarily to steadily increasing price competition in the market. According to a recent report issued by Frontier, a Mongolian financial services and research company, as of the end of 2012 ARPU was at less than $10, down by more than half from around $20 in 2007, for example.

With the need to boost profitability on a per subscriber basis in mind, Mongolian operators are currently investing heavily in mobile data services. With voice and SMS services fully or oversubscribed in a number of countries, margins in the mobile segment have taken a major hit around the world in recent years. Investing in 3G and 4G mobile data networks is widely considered to be a logical solution. Data subscriptions, which allow users to access the internet via a tablet, smartphone or other device, can be sold at a premium, thereby boosting ARPUs substantially.

Currently On Offer

In recent years Mongolia’s operators have worked to increase their data offerings. In December 2012, MobiCom, the country’s largest operator, became the first local telecoms service provider to offer nationwide 3G services, covering all of Mongolia’s 21 aimags (provinces). The other three operators have also worked to expand their 3G coverage: according to recent reports from each individual company, Unitel’s 3G network covers around 85% of the country, Skytel offers 3G services in all provincial centres, and G-Mobile, which is generally considered to be the lowest-cost operator, currently offers 3G services in around half of Mongolia’s aimags. High-speed 4G long-term evolution (LTE) services have yet to be rolled out on a large scale. That said, as of mid-2013 both MobiCom and Skytel had announced plans to introduce 4G services in the coming years. Initially, both firms are expected to launch LTE data services on a regional basis, most likely in and around Ulaanbaatar.

A Complex Market

A number of hurdles currently stand in the way of more widespread adoption of mobile data services in Mongolia. According to Frontier’s research, smartphone penetration in the country was at around 10-15% by the end of 2012. While this figure is widely expected to expand for the foreseeable future – potentially reaching 25% by 2015, according to Frontier’s forecasts – it is representative of the relatively low level of demand for data-capable handsets in Mongolia at the moment.

As of the end of 2012 more than two-thirds of the population remained largely unaware of the basic functions of so-called smart devices. With this in mind, many local players are currently working to boost awareness of the many capabilities a data-enabled phone can offer, particularly for local users, many of whom do not speak English. Mongol Content, a digital content company that was established by MobiCom in October 2005, is at the forefront of this effort.

The company has set up a number of content portals providing Mongolian-language services from weather news to currency exchange rates, many of which have proven to be quite popular among local smartphone subscribers. A number of locally developed mobile finance apps have also sprung up in recent years. Finally, some operators are also increasingly including basic data services as part of voice and SMS bundle subscriptions to allow new users to experience mobile data for themselves without having to subscribe to a separate package. Mongolia is expected to see rapidly expanding data uptake over the course of the coming decade.