Wireless carriers are in for a tumble over the next several years, as the subscriber and average revenue per user growth trend that have historically characterized the industry starts to wane, according to a new report from Ovum.
According to the research firm, the total number of global subscriber connections will grow by a compound annual growth rate (CAGR) of less than 4 percent between 2012 and 2018, while global revenues will increase at less than half that rate. Ovum warns that carriers will need to find new ways to serve customers more profitably, not just add subscribers.
The report predicts that global mobile connections will grow from 6.5 billion in 2012 to 8.1 billion by 2018, while annual mobile service revenues will jump from $968 billion to $1.1 trillion during that time. However, Ovum also expects global service revenues will fall in 2018 for the first time in the history of the mobile industry, declining from 2017 levels by 1 percent or $7.8 billion. The research firm said operators will need to focus on innovation in services, pricing, business models, network operations and partnerships to generate new revenue.
Ovum thinks the falloff will hit developed markets particularly hard, with connections in Western Europe growing by a CAGR of less than 1 percent, and revenues declining at a CAGR of 1.48 percent. The research firm said several other developed markets will see year-on-year revenue declines in 2018, including the U.S. market, which the firm predicts will begin to show signs of its maturity. Much of the revenue decline will be driven by falling ARPU, which Ovum expects to continue to decline across all markets by a 2.7 percent global CAGR between 2012 and 2018.
The somber forecast from Ovum stands in contrast to the giddiness with which carriers are touting their LTE deployments, and the traffic--and revenue--they expect to generate from the proliferation of high-speed data services, particularly from video. Additionally, Ovum seems to be focused in its forecast on individual subscribers and less on the "Internet of Things" and machine-machine connections carriers are looking to for growth.
Indeed, both Ericsson (NASDAQ:ERIC) and Cisco have predicted that by 2020 there will be 50 billion connected devices worldwide. Since M2M and the Internet of Things are still emerging categories, it's difficult to predict how much revenue and ARPU they will generate for carriers, which are nonetheless pushing to get connectivity into more devices, appliances and vehicles.
For more:
- see this release
- see this CNET article
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