Exploding mobile Internet usage and subscriptions won’t make up for a 36% decline in traditional mobile operator revenues, leading average revenue per user (ARPU) to fall 15% in Europe by 2005, according to a new report by Forrester Research. The report asserts that mobile carriers’ operating profits will disappear in 2007 and take six years to return, leading to major operator business failures and massive industry consolidation.
“European mobile operators will consolidate or disappear, and UMTS [Universal Mobile Telecommunications System] will be remembered as the trigger that imploded Europe’s mobile industry,” said Lars Godell, telecoms analyst at Forrester. “We expect that consolidation will leave only five groups serving all mobile users in Europe by 2008.”
To assess operators’ prospects, Forrester created a model of average mobile operator revenues in the 17 markets of Western Europe. The analysis predicts that despite skyrocketing mobile Internet usage, the average annual revenue per European mobile subscriber will fall 15% between 2000 and 2005, from e490 to e419.
Currently, Voice, SMS messaging, and data connections for faxes and laptops increase operator revenues, but Forrester predict that prices for all three will decline rapidly in the face of increased competition. As new providers, resellers and entrants enter the market over the next five years they will use these elements to compete for business thus driving incumbant prioders prices down. Considering all these factors, Forrester predict that traditional mobile revenues per user will shrink by 36% between 2000 and 2005 to reach e313 per year.
“We expect that no new UMTS entrants – companies that are entering the market for the first time with new UMTS licenses – will survive after 2007,” Godell concluded. “Also, second-tier operators in high-license-cost countries like the UK and Germany will run out of funds before they can jump this hurdle as their ARPU drops more than their national competitors’. Finally, faced with ARPU drops of up to 43% by 2005, even dominant operators in hard-hit countries like the Nordics, Ireland, and Austria will have difficulty surviving.”
