The 20-year bonanza enjoyed by cellphone carriers is nearing its end, with revenues failing to keep pace with the number of new connections, according to research to be published on Tuesday.
Much of the companies’ new business will come from the developing world, where they are unable to charge the same level of fees as they do in Western markets.
In addition, voice traffic is likely to decline as free internet services increase, with rising data traffic unable to make up the difference.
Over the next five years, says telecoms analyst Ovum, the number of mobile connections will grow by 30%, from just under six billion this year to 7.8-billion in 2016, but total revenues will rise by just under 10% to $1.047-trillion. In Western Europe, revenues will actually fall, from $193-billion to $186-billion in 2016.
“Any delusions that this industry will continue to grow astronomically have to be thrown out of the window now,” said the report’s author, Emeka Obiodu. “We can safely say that the telecoms industry is now mature, and what we have here is a utility sector. It is all about paying healthy dividends to your shareholders and defending your turf.”
Two decades of expansion have seen the sector produce six of the world’s 100 largest companies, by market capitalisation. But expansion by dominant Western players Vodafone, Telefónica and AT&T into developing markets in Africa, the Middle East and Asia will not produce a second wave of staggering profits.
The growth in global connections will be driven by Africa, and the big three Asia Pacific markets — China, India and Indonesia. These markets accounted for 44% of global connections last year, and that proportion will increase to 51% by 2016.
In Africa, the number of customers will grow by more than 9% a year, with 991-million connections in Africa in 2016, nearly one eighth of the world’s total. But revenues in the region will rise at only half the speed, by 5% a year.
Western Europe is predicted to be the worst performing region and the only one to experience revenue decline. It remains important, generating 18% of global sales from just 7% of the world’s customers. The US will have the fastest growth rate of any mature market, and North America will increase revenues from $194-billion to $220-billion.
Data fees to overtake voice revenues
The mobile internet will not do much to increase takings. Instead, the fees charged for carrying data will start to replace those charged for making voice calls. Voice revenues will move from 69% to 60% of income in 2016, falling from $658-billion today to $628-billion in five years.
Cash from non-voice services will rise to $419-billion by 2016, moving from 31% of income today to 40% in 2016.
Customers will precipitate the change, as more people make voice calls over the mobile internet, using services such as Skype or Viber. According to the report, VoIP (voice over internet protocol) “replaces existing voice revenues and threatens the high margins operators earn from these services by showing that mobile voice can be offered for free”.
Microsoft, which this year acquired Skype, will be hoping along with Google and Apple to “undermine the telcos’ grip”. Until recently, most operators would not allow customers to use Skype on their networks but Ovum expects Microsoft’s marketing muscle to make it increasingly popular with customers.
“It is time for operators to embrace the fact that their data revenues are going to replace their voice revenues,” said Obiodu. This will mean scrapping unlimited data tariffs and introducing clear data price bands.
He believes mobile carriers will maintain their lavish marketing budgets. “You either compete on price, on having a good brand, or on quality. With telcos, the quality of networks doesn’t vary much, and you don’t want to compete on price, so you have to compete on brand. There is an imperative for operators to continuously invest in building and maintaining a strong brand.” – guardian.co.uk