The 20-year bonanza enjoyed by mobile phone carriers is nearing its end, with revenues failing to keep pace with the number of new connections, according to research to be published today.
Much of the mobile companies’ new business will come from the developing world, where they are unable to charge the same 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 connections will grow by 30 percent, from just under 6 billion this year to 7.8 billion in 2016, but revenues will rise by less than 10 percent to US$1.047 trillion. In western Europe, revenues will fall, from US$193 billion to US$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. “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.”
In two decades of expansion, the sector has produced six of the world’s 100 largest companies by market capitalization. However, expansion by dominant Western players Vodafone, Telefonica and AT&T into developing markets will not produce a second wave of staggering profits.
The growth in global connections will be driven by Africa, China, India and Indonesia. These markets accounted for 44 percent of global connections last year, and that will increase to 51 percent by 2016.
In Africa, the number of customers will grow by more than 9 percent a year, with 991 million connections in Africa in 2016, nearly one-eighth of the world’s total. However, revenues in the region will rise at only 5 percent a year.
Western Europe is predicted to be the only region to experience revenue decline. It remains important, generating 18 percent of global sales from 7 percent of the world’s customers. The US will have the fastest growth rate of any mature market, and North America will increase revenues from US$194 billion to US$220 billion.
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 percent to 60 percent of income in 2016, falling from US$658 billion today to US$628 billion in five years.
Cash from non-voice services will rise to US$419 billion by 2016, moving from 31 percent of income today to 40 percent 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, 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, 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,” Obiodu said.
This will mean scrapping unlimited data tariffs and introducing clear data price bands.
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