Ovum’s latest mobile forecasts predict that connections will grow far faster than revenues during the next five years. Additionally, the effects of emerging market growth and intense competition worldwide will force a marked change in the behavior of mobile operators looking to thrive in 2015. This will result in operators becoming increasingly cost-focused.
Connections: emerging markets continue to drive growth, but emerging maturity is becoming more apparent
Global mobile connections are expected to reach 7.4 billion in 2015 according to our latest mobile forecasts, discussed in our report “Global mobile market outlook: 2010–15”. This reflects a CAGR of 8% from 2009 to 2015.
The drivers for continued connections growth are the “big three” Asia-Pacific markets of China, India, and Indonesia. Combined, they will contribute 2.8 billion connections by 2015, or 38% of the global total.
However, even these markets are not immune from the growing trend of “emerging maturity”. Connection growth rates will decline rapidly towards the end of the forecast period, even in previously fast-growing emerging markets.
Developed markets will see even more conservative connections growth. In such markets, only multiple data connections will stimulate connections growth.
Revenues: global economic crisis and maturity makes an impact
There is no denying that the global economic crisis has impacted revenues.
Every region has shown a marked slowdown in revenue growth between 2008 and 2009. The result is that we now expect global revenues to reach $1,000 billion in 2015, compared to 2014 in our previous forecasts.
This downwards revision to our revenue forecasts is exacerbated by our 9% increase in connections for 2014 compared to previously. The result is aggressive ARPU erosion during the next five years. Globally, overall ARPU is forecast to be just $138 per annum in 2015. This partly reflects the growing influence of emerging markets on the global market. As urban markets become saturated and competition intensifies, operators are being forced to move into poorer rural areas, increasing costs and lowering ARPU. In developed markets competition will continue to drive down ARPU.
Services: data growth continues, but voice to remain mobile’s key service
Total global data revenues are expected to reach $392.9 billion in 2015, a CAGR of 11% from 2009 to 2015. North America and Western Europe will drive data revenue growth. Nonetheless, Asia-Pacific will be the largest contributor of data revenues, due to its sheer volume of connections and the presence of significant data markets.
Yet voice will remain the single greatest contributor to mobile operator revenues, with only North America seeing voice contribute less than 50% of total revenues in 2015. This is despite continued immense pressure on voice. Total global voice revenues will fall at a CAGR of -1.4% to $607.9 billion in 2015.
Strategy: saturation and competition creates the world of SMART and LEAN
The growing maturity and competition of the mobile sector reflected in our latest forecasts will move the industry towards our 2020 vision of SMART (services, management, applications, relationships, and technology) and LEAN (low-cost enablers of agnostic networks) players. Mobile operators are likely to chase the SMART role during the next five years, although we believe that very few will succeed. Most operators will need to evolve to become LEAN players in the longer term.
The first signs of this evolution will become apparent during the coming five years. Cost and traffic volume pressures will combine to make networks the focus of attention. Macro and backhaul network upgrades, along with the use of Wi-Fi and femtocells to offload traffic, will become commonplace. At the same time, network sharing and outsourcing will be used to reduce costs.
All of the above points are signs of a rapidly maturing market. The days of high growth are ending and operators will need to adapt, and by doing so fulfill a network-centric role.