Amid all the talk of partnerships and ‘smart pipes’, figures released this week suggest that mobile operators could add millions of Euros to their bottom line by partnering with a music streaming service rather than going it alone.

Many of the music download services which operators launched over the last five years have had little impact on business metrics. Yet rapid smartphone uptake combined with the recent rise of music streaming services have for the first time enabled music to make a substantial impact on operator’s market share, ARPU and churn.

According to the findings of a research project between Informa Telecoms & Media and Spotify, operators which partner exclusively with an existing player rather than building their own service can realise these gains quickly while shutting out competitors.

Informa’s research is based on real data from Swedish carrier Telia and Spotify and estimates that an operator in Western Europe with 20 million customers could generate revenues of €77.7m in 2011 alone by partnering with a streaming service. If the leading player in each Western European market did so, they would collectively generate €1.1bn in 2011.

“Our research shows a large Western European operator could generate millions of Euros of revenue a year by partnering with a third-party music service – significantly more than they would gain from offering their own service. Add in other benefits, such as network efficiency, brand awareness and increased lifetime customer value, and the potential for such a partnership becomes very clear,” said Giles Cottle, senior analyst at Informa.

“Streaming services have proved an effective way to differentiate from the competition and win new customers. They have also been used to upsell high-ARPU devices and reduce churn. Over half of Spotify / Telia customers said they were more likely to stick with Telia as a result of the Spotify partnership”, said Adrian Blair, director of European business development at Spotify.

But churn reductions and potential gains in market share and ARPU resulting from mobile music streaming will not materialize without a clear strategy and focused execution. A high-quality streaming product and the right offer – for both operator and consumer – needs to be combined with effective marketing, a motivated sales force and deep billing integration.

“Simply offering a popular free service, with little thought put into the way the offer is packaged and marketed, will not yield the kind of results the operator will be hoping for. Yet if they get it right, the rewards are potentially lucrative,” said Cottle.