Last week, Vodafone announced its plan to launch an online mobile applications store, becoming the first carrier to compete with existing mobile apps stores from Apple, Nokia, Google, RIMM and other companies. This should mark the beginning of a new trend in the wireless space as we expect more carriers to jump on the bandwagon. Here are my thoughts:

1. Vodafone’s own mobile app store, a logical step for the carrier. It makes sense for Vodafone to have its own mobile app store as it can leverage its existing relationships with application developers and content providers. This would be a win-win situation for both application developers and the carrier. Application developers would receive 70% revenue share for each application sold, and would have access to Vodafone’s large customer base (~290 million subscribers globally and potentially close to a billion subscribers through its strategic partnerships). Vodafone’s decision to enable developers to use its direct billing capabilities rather than using credit card payment is set to become a key competitive advantage for Vodafone as direct billing is the most preferred payment option used by customers today and most efficient way to drive content sales. This is a key differentiator as competing vendors like Apple do not share any revenue with carriers, which is another incentive for carriers to develop their own mobile app store. Nokia, which plans to adopt direct carrier billing to gain the favors of carriers and fuel the adoption of its Ovi’s store, recently said that when the company starts locally with credit card billing and then move to operator billing, it sees a 70% lift in sales. Moreover, Vodafone’s plan to make available a set of network APIs, which will enable app developers to implement location aware and direct billing capabilities into their services, should be another driving force for the carrier. Ultimately, application developers could use the location information from Vodafone, which would help developers make significant savings.

2. More carriers likely to follow suit. After Apple, Google, Nokia, Palm and others, many carriers are likely to make inroads into the mobile app store space and follow the footsteps of Vodafone. Ultimately, mobile app stores could become a lucrative business for many carriers (30% for carriers Vs 70% for app developers), which is another incentive for them to have their own mobile app store. Granted, revenue from mobile app stores will probably represent a small portion of the carrier’s total data revenue in the hundreds of millions of dollars (Vs $3 billion in total wireless data revenue a quarter for AT&T and Verizon, for example) compared to messaging services (SMS especially). Of note, several reports suggest that Apple made $20-$45 million from its 1 billion apps. However, revenue from carriers’ own mobile app stores could help further drive carrier’s data revenue and offset the decline of their voice ARPU. As noted earlier, direct carrier billing is likely to become a “must have” for many app stores developed by carriers as it would allow carriers to keep control of the pipe and alleviate the adoption of their mobile app store.

3. Mobile app stores should help carriers move their customers away from off-deck portals. Many articles have been written about mobile app stores, but very few have actually addressed one important element: Off-deck Vs On-deck. With 30% of U.S. downloads sales coming from off-deck portals (Vs 70-80% in Europe) today, off-deck content/apps have experienced good traction in the past few years  as carriers continued to open up their walled garden and migrate towards an open-network environment in order to offer a larger variety and more affordable content. Many carriers are likely to create their own app store to move their customers away from off-deck portals, where carriers are bypassed and barely make any money.

Bottom line: Many leading carriers (e.g. Verizon, AT&T, T-Mobile, Orange, Sprint, Telefonica, O2, Hutchinson 3, etc.) are likely to follow suit as it would allow them to leverage their existing relationships with content providers and application developers, but most importantly move their customers away from off-deck portals, regain control of their “pipe”, and capture a large portion of this growing business. Carriers’ own mobile app stores could end up being an “heaven’s gift” for many carriers in a time where disruptive applications like Skype are threatening carriers’ voice ARPU and could make them become a dump pipe. That said, solving cross-mobile app store interoperability issues and content discovery issues (as more content becomes available) will become critical. The battle of power between carriers and companies like Apple, Google, RIMM, Nokia, Palm, and other mobile app providers, is set to intensify in the coming years as more carriers launch their own app stores. At the end of the day, while mobile app store could mean more money for carriers, this could also become a big “headache” for many of them.