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Bleak Picture Painted for Mobile Operator Revenue

By Craig Galbraith
October 10, 2013 - News

Mobile operators around the world will face a decline in revenue for the first time in industry history by 2018.

That grim prediction come from the researchers at Ovum, who say the "golden age" of telecom growth and prosperity is waning. New research from the analyst firm says global connections will grow at a compound annual growth rate of less than 4 percent between 2012 and 2018. Revenue will grow at less than half that rate.

As growth slows and average revenue per user (ARPU) continues to decline, operators will need to find new ways to serve customers more profitably, not just focus on increasing subscriber numbers, Ovum said.

Ovum believes global mobile connections will grow from 6.5 billion in 2012 to reach 8.1 billion by 2018; however, global service revenues will contract in 2018 for the first time in the history of the mobile industry, declining from 2017 levels by 1 percent, or US$7.8bn. Over the next five years, innovation in services, tariffs, business models, network operations and partnerships will be key strategies to generate revenue.

“Growth will continue to slow in most markets around the world," said Sara Kaufman, analyst for industry, communications and broadband at Ovum, and author of the report. "When you compare connection and revenue CAGRs, it is clear that mobile operators are facing a new reality: They must do much more with much less. Consolidation will help to alleviate some market pressures and is inevitable in many markets. But the need for revenue stabilization is becoming paramount for a sustainable future."

Kaufman says operators in developed markets will be hit the hardest. Connections in Western Europe will grow by a CAGR of less than 1 percent, while revenue will decline at a CAGR of almost 1.5 percent. Several other developed markets will see year-on-year revenue declines in 2018, including the U.S., which will begin to show signs of its maturity.

Much of the revenue decline will be driven by falling ARPU, which will continue to decline across all markets by a 2.7 percent global CAGR between 2012 and 2018. The greatest decline will be in the Middle East, where ARPU will fall by a 2.5 percent CAGR.

 “ARPU cannot fall indefinitely, [however]. In markets with very low ARPU, it will reach a floor and then stabilize," Kaufman noted.

Some growth opportunities still exist, the report says, particularly in Africa, where revenues are expected to grow at a CAGR of 4.2 percent through 2018. No other region in the world will see revenue growth at a CAGR above 3 percent during the forecast period. Select markets in Asia Pacific, and South and Central America will also drive growth over the next five years.

Follow senior online managing editor @Craig_Galbraith on Twitter.

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