By 2013 Ovum forecasts 5.63 billion connections, up 43 per cent from 2008. However, we do not feel that these are overly bullish projections given current market conditions. Global penetration in 2008 is estimated at 59 per cent and is predicted to rise to just 80 per cent by 2013. We expect prepaid connections to constitute 73 per cent of connections in 2013 (up from 70 per cent in 2008), so multiple SIM ownership will ensure that real population penetration will be lower.
Emerging markets are key to this continued growth. The China/India region (containing China and India, as well as Pakistan and Bangladesh) will continue to be the main connections growth engine, with a cumulative annual growth rate (CAGR) of 12 per cent up to 2013. Yet even here penetration is only forecast to rise from 40 per cent in 2008 to 67 per cent in 2013. Asia-Pacific and Africa are also expected to add to the staggering number of connections. We believe that adoption in rural areas will continue, but the penetration growth will naturally slow as fewer areas remain untouched by mobile.
As a result of the growing importance of emerging markets, a shift in the global balance of operator power is expected. An increasing share of customers in emerging markets will go to the new, rapidly expanding players such as Zain and Orascom. The result will be a raft of new, large-scale global players by 2013. Today’s European-based giants will face increasingly intense competition from equally large or larger competitors at both global and local levels. Efficiency and maximising synergies from their scale will be the critical success factor for both the old and new heavyweights.
Revenues: $1 trillion in operator service revenues in 2010
By 2013 the total service revenues to operators globally is forecast to reach $1.1 trillion, up 23 per cent from 2008. However, this is a significantly lower growth rate than the 43 per cent jump in connections.
The sheer volume of connections in emerging markets will be crucial in enabling operators to breach the $1 trillion service revenues threshold (expected in 2010). However, operators seeking connections growth must ensure that they can survive on very low average revenue per user (ARPU).
Voice will remain the most crucial revenue generator for operators, due to the increasing emphasis on emerging markets, and will contribute 73 per cent of global revenues in 2013. Furthermore, voice will continue to be the greatest cash generator in every region by 2013, including Europe and North America.
With all the excitement surrounding mobile data, it is easy to lose sight of the fact that communication is still the ‘killer app’ for the telecoms industry. Operators must not ‘kill the cash cow’ and should focus on offering voice services as cost-effectively as possible, while maintaining quality.
Data: this time it’s for real, but operators must focus on access not content
After years of false starts, 2008 finally saw data services take off. Data (including messaging) revenues are forecast to grow 79 per cent globally over the coming five years.
Developed markets will be key to this growth, accounting for 53 per cent of data revenues in 2013. Also significant is the shift in the make-up of the data revenues in these markets. SMS pricing is likely to be eroded in competitive markets, so access to the Internet will become increasingly important for operators. We do not believe that many operators will be successful in providing content. Players from the Internet domain will be better placed, so demand from the operator will be for access. However, these Internet players such as Google and Apple will not be able to destroy the mobile operators. They may take content revenues from the operators, but access will more than compensate. They also offer operators new service opportunities through partnerships. Operators will have more to fear from rival operators over the next five years than from external players.
Steven Hartley is senior analyst at Ovum.
