Mobile network operator results
We regularly review mobile network operator results to identify important trends in the wireless industry. Here are some of our blog posts containing free analysis of recent results.
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Three UK highlights pent-up demand for mobile data
Contrary to the view from some analysts, recent results from Three UK show that there is little prospect of halting the tide of mobile data.
Since the heady days of early all-you-can-eat mobile data tariffs, in the last couple of years we have reported on a trend of UK mobile network operators limiting mobile data usage by increasing prices, introducing restrictive data caps and applying high charges for out-of-bundle usage. The motivation for this was to protect the limited capacity of their networks, as they realised the potential for mobile data services to consume this voraciously.
However, with a smaller number of customers than its competitors, a relatively large spectrum allocation and the early deployment of advanced 3G technology such as HSPA and HSPA+, Three UK has been able to buck the trend. Over the past year, it has re-introduced all-you-can-eat data plans for both contract and pay-as-you-go smartphone users:
- in December 2010 it introduced all-you-can-eat data to The One Plan contract, offering large bundles of voice minutes, text and all-you-can-eat data, at prices from GBP25 per month
- in March 2011 it introduced its All In One pay-as-you-go bundles, priced at GBP15 (with 300 voice minutes, 3000 texts and all-you-can-eat data) and GBP25 (with 500 voice minutes, 3000 texts and all-you-can-eat data) for a 30-day period
- in October 2011 it enabled all new and existing contract smartphone users to benefit from all-you-can-eat data for an additional cost of GBP3 per month on their contracts.
Three highlights the importance of giving “peace of mind” and “eliminating data fear”, to encourage its customers to make the most of the data capabilities of their smartphones. It clearly recognises the attraction of unlimited use of smartphone services and apps, and it is exploiting its advantage in data capacity to make the most of this. In September 2011, Three reported that The One Plan was its most popular contract tariff and its all-you-can-eat data bundle was its most popular pay as you go option.
The consequences of this approach are apparent in the mobile data usage figures for the New Year period at the end of 2011/start of 2012. This week Three UK reported that its smartphone users consumed a combined total of 154 terrabytes of data on New Year’s Eve and New Year’s Day, compared with just 28 terrabytes the year before – an increase of 450%. It expects smartphones to become even more significant over the coming months, with ownership approaching 100% of its customer base during 2012.
Three’s experience demonstrates the pent-up demand that exists for mobile data, and this will become ever stronger as the benefits of smartphones and their apps become apparent to users and developers. It will be increasingly difficult for operators in a market to resist this demand if they have competitors like Three offering all-you-can-eat data. While it may not be palatable for their investors, substantial investment in new technologies such as LTE and LTE Advanced will be the only option to satisfy demand and remain competitive.
Social networks to displace SMS text messaging?
In May 2011, I wrote my article ‘Will Mobile Messaging Revenues Decline?’, in which I discussed declining messaging revenues experienced by Vodafone Spain. As I reported, in the year to March 2011, there was a 13.8% decline in mobile messaging revenue compared with the previous year, from GBP400 million to GBP345 million. The publication by Ofcom of its ‘International Communications Market Report 2011’ on the 14th December 2011, which contains interesting market research on the adoption of social media, has prompted me to revisit this important topic as we near the end of 2011.
Mobile industry concern about the possible negative effects of social media on SMS revenues has increased during the year. Back in April 2011, KPN in the Netherlands attributed a 10% annual decline in SMS revenues to changing consumer behaviour, where mobile applications and data services provide an alternative to traditional voice and SMS. KPN’s recent results for the quarter ending September 2011 show a further decrease of voice and SMS service revenues in the Netherlands. Among KPN’s mobile consumer customers, the number of mobile-originating SMS messages per subscriber fell substantially to 50 in the quarter ending September 2011, compared with 55 in the previous quarter.
Messaging revenues for Vodafone Spain also declined significantly to GBP77 million for the quarter ending September 2011, compared with GBP88 million for the previous quarter.
The uptake of social media has been impressive. In Ofcom research undertaken during October 2011, 79% of UK consumers claimed to have visited a social networking website. Among the 18-24 year age group, the proportion was 92%.
Of those consumers with a social networking profile, the most popular site was Facebook. 71% of people with a social networking profile in the UK stated that they visited a social networking website at least once a day. 32% of 18 to 24 year olds in the UK claimed to visit a social networking website five times a day or more.
The increasing penetration of smartphones is encouraging access to social networking sites via mobile phones. The Ofcom survey during October 2011 revealed that smartphone penetration has already reached 50% in the UK and Germany, with Italy (48%) and France (44%) just behind. According to Ofcom, 43% of UK consumers access their social networking profile page via an app or the web browser in their mobile phone.
The most popular function on social networking sites is communication with friends and family. 85% of those interviewed in the UK with a social networking profile use it to communicate with existing friends and family. 49% of those with a social networking profile in the UK agreed that social networking had significantly changed the way they communicate with people.
The challenge for mobile operators during 2012 is now to minimise any net loss of revenue from the migration of messaging traffic from SMS to social media sites.
To all our regular readers, I hope you have a restful Christmas, ready for the challenges in 2012! Thank you all for your continued support.
About the author:
Mark Heath is co-founder of telecom strategy and telecommunication consultancy company Unwired Insight. He provides regular in-depth analysis on LTE and 4G, and has co-authored over 40 research reports on the biggest issues in the telecom industry.
Will mobile operators turn around declining revenues?
Faced with intense pressure on voice revenues, mobile network operators need to achieve significant growth in the revenue from mobile data services and mobile messaging. However, following years of disappointing revenue growth, some operators in Western Europe will have to do much better with mobile data services if they are to achieve significant increases in overall mobile revenue.
In a previous post, Mark Heath discussed the downward trend in the voice revenues of mobile network operators, caused by a combination of intense competition and price regulation. For mobile network operators to stabilise or, ideally, increase overall mobile revenues, they need to boost mobile data revenues, while maintaining significant mobile messaging revenues. In this endeavour, the success of mobile network operators in Western Europe is patchy, as demonstrated by recent results published by Vodafone.
I’m often asked by investors and analysts if, and when, we see a significant turnaround in the revenues of mobile network operators. Currently, it’s difficult to see any clear indications of such a turnaround. While there are positive signs of mobile data revenue growth in some markets, such as the UK, results in other markets are variable. Meanwhile, the downward pressure on voice revenues counteracts the gains from non-voice services. We need to be able to see a clear upward trend across multiple markets. It’s also essential that mobile operators are able to maintain their mobile message revenues.
Let’s look at the positive signs. Vodafone UK has experienced significant growth in mobile data revenue over the past five years, as shown in the figure below, alongside year-on-year increases in mobile messaging revenue. The relatively strong revenue performance of mobile messaging and mobile data services has finally enabled Vodafone to reverse a relatively strong decline in overall mobile revenue per customer, caused by a significant fall in voice revenue. In the year to March 2011, mobile messaging and mobile data services accounted for annual revenue per customer of about GBP100. This was 18% higher than the previous year. In the five year period to March 2011, revenue per customer for the combination of mobile messaging and mobile data increased by 71% (which is equivalent to a 14% annual increase on average). While mobile data has been the dominant driver to this (with revenue increasing by 151% in the five years to March 2011), mobile messaging revenues increased by 41% during the same period.
Breakdown of mobile revenue per customer in the UK
In comparison to the UK’s solid performance on non-voice services, Vodafone’s operations in Germany, Italy and Spain have performed less well, as shown in the figure below.
- There has been a significant gulf between the UK and the other Western European countries in terms of absolute mobile data and mobile messaging revenue. For example, the annual revenue per customer in Spain from mobile data and mobile messaging services was only GBP51.9, compared with GBP100.1 in the UK.
- While the UK experienced significant growth in revenue in the year to March 2011, with a clear uplift evident in the chart, Italy and Spain experienced no such improvement, and the situation was essentially static.
Annual mobile messaging and mobile data revenue per customer in selected European countries
Spain and Italy achieved significant increases in mobile data revenues, of 9% and 16%, respectively, in the year to March 2011, compared with the previous year. However, these increases were offset by declines in mobile messaging revenues. Without a solid foundation of stable mobile messaging revenues, increasing mobile data revenues will have limited impact on overall mobile revenues.
Breakdown of mobile revenue per customer in Spain
Breakdown of mobile revenue per customer in Italy
So, it seems that mobile operators have more to worry about than declining voice revenues. In the case of Vodafone, there are positive signs from the UK market, but more worrying trends in Spain and Italy. The prospect of a combined decline in both mobile voice revenues and mobile messaging revenues is bleak indeed. However, the Vodafone UK experience suggests that this may not be inevitable. At the very least, these substantial differences provide a great opportunity for benchmarking and learning, so that successful services, techniques and pricing models can be identified and replicated in other markets.
About the author:
Alastair Brydon is co-founder of telecom analysis and telecom consultancy company Unwired Insight. He provides regular in-depth analysis on LTE and 4G. He has written over 40 reports on the biggest issues in the wireless industry.
