Short term slow down for mobile revenue growth

Operator service revenues will breach $1 trillion in 2011
Ovum previously predicted that global mobile services revenues would breach $1 trillion in 2010. Due to macro-economic conditions Ovum now expects this barrier to be broken in 2011. The greatest impact of recessionary forces is seen in the short term. Ovum has revised its revenue forecasts for 2009 down by 9% compared to its previously published figures, yet by 2013 the difference is just 1.7% lower.

“However, the recessionary impact will be relatively muted compared to other industries, and mobile is expected to recover strongly from 2011”, says Steven Hartley, senior analyst at Ovum and author of this study. “By 2014 Ovum expects total operator service revenues to reach $1,114 billion.”

Voice will continue to be the largest revenue generator worldwide, accounting for 69% of revenues on a global basis and for no less than 60% in any region in 2014. As a result, voice will continue to be mobile’s ‘killer app’. Operators must not ignore this fact in the race for data revenues.

Emerging markets to continue their inexorable connections growth
By the end of 2014 Ovum forecasts 6.42 billion connections, up 59% from 2008, and a CAGR of 8%. However, potential for growth will remain as global penetration will be 89% in 2014, with 69% in Africa and 78% in Asia-Pacific. Elsewhere mobile penetration will reach almost 100% or more, but further growth will still be possible from multiple SIM ownership in heavily prepaid markets or through uptake of data-centric devices. As such, population penetration is ceasing to be a useful indicator.

China and India will dominate connections and will account for 30% of total worldwide connections by 2014. However, the countries’ penetration rates will be just 76% and 69% respectively by 2014. Massive population growth will continue to fuel mobile demand as new, unconnected users join the market.

The enormous growth in connections has financial implications for mobile operators as they are expected to grow by 59% from 2008 to 2014, while revenues grow by 33%. Furthermore, mobile outgoing minutes of usage are set to rise 109% between 2008 and 2014, but voice revenues will rise just 15%. “Both comparisons highlight the influx of ever-lower ARPU customers from emerging markets and price erosion in mature markets, even for data services. Therefore, efficient networks, enabling competitive pricing, will be critical in both highly saturated mature markets and low-ARPU emerging markets”, explains Hartley.

LTE to dominate 4G migration as the window closes on mobile WiMAX
By 2014 LTE will have 109 million connections worldwide. In comparison, mobile WiMAX will have almost 55 million connections. This is in stark contrast to 2013, when parity between the two technologies is expected. The level of operator support and the rapidly burgeoning ecosystem will ensure that mobile WiMAX becomes increasingly marginalised.

“Although data services are now here to stay, operators will generally only succeed in generating income from web access, and here competition will ensure that prices erode rapidly, just as traffic increases. Therefore, the aforementioned need for improved network efficiency partly points towards the need for next-generation access networks.”

However, connections growth for LTE and mobile WiMAX should be put into context. “Both technologies combined will account for just 2.6% of global connections by 2014. In comparison, HSPA will contribute 11 times that number. Therefore, we believe that the migration to 4G will be neither easy nor overnight”, says Hartley. Ovum forthcoming series of reports focusing on the LTE business case, have found that the availability of spectrum and devices, as well as existing infrastructure requirements and market competition, will have a major bearing on the timelines for LTE deployments.