Strategy Analytics: LTE's boost to carrier revenues will be short-lived

LTE networks are more efficient than legacy 3G networks, and generally produce more data usage, which carriers can monetize. However, according to a new report from research firm Strategy Analytics, the infusion of revenue that LTE is bringing to carriers is not likely going to last that long.

According to the report, global mobile service revenue growth will accelerate in 2014, but after passing the $1 trillion mark in 2015, total service revenues will struggle to grow any further. The firm expects total global mobile service revenues to fall every year from 2016 to 2020. Essentially, although LTE has its benefits, carriers should not look to it to be a golden goose forever and must diversify their revenue strategies, the firm found. Indeed, in many markets, carriers do not charge extra for LTE service compared to 3G service, with some markets in Europe being an exception.

However, Strategy Analytics found that Europe remains a drag on global mobile service revenue growth, with 2014 revenue forecast at 17 percent below its 2008 peak. Carriers there are facing intense competitive pressures, with France being the most noticeable example. European operators have also reluctantly started to accept European Union-mandated cuts to consumer roaming rates; roaming costs were cut from €0.45 ($0.61) per MB to €0.20 on July 1.

"With limited revenue growth potential, subsidy strategies and consolidation opportunities will remain part of the cost containment picture for mobile operators," Strategy Analytics analyst Susan Welsh de Grimaldo said in a statement. "At the same time, more operators will follow the example of those in Asia, where the quest for revenue growth has focused on services beyond connectivity, such as finance, content and digital lifestyle services."

The report also found that 3G service revenues have started to decline as LTE growth has accelerated. The firm noted that LTE connections will account for 9 percent of global service revenue in 2014 and more than half of the 2018 total.

Despite the dim view that Strategy Analytics has on LTE's impact on service revenue growth, LTE is booming in North America. Trade group 4G Americas reported that, according to research firm Ovum, there were 127 million LTE connections in North America at the end of the second quarter, representing 33 percent market share of the 391 total million connections in the region.

4G Americas said that figure represented the largest market share for LTE of any country or region in the world, which is not that surprising since the U.S. and Canada have enthusiastically embraced LTE. Globally, there were 280 million LTE subscriptions at the end of the second quarter, representing 4 percent of the world's 7 billion mobile connections, 4G Americas said. North America currently has 45 percent of all LTE connections worldwide, compared to Asia Pacific with 36 percent and Western Europe with more than 13 percent.

The report also noted that LTE Advanced is now commercial on 20 networks in 15 countries, including AT&T Mobility (NYSE: T) and Sprint (NYSE: S) in the U.S. North America is expected to be most aggressive market in terms of adopting LTE Advanced techniques, followed by Asia-Pacific and Western Europe, 4G Americas said.

For more:
- see this Strategy Analytics release
- see this 4G Americas release

Related Articles:
Report: LTE subscribers more likely to watch mobile video than 3G users
Mallinson: LTE Advanced is bringing more than just carrier aggregation in 3GPP Release 12
ABI Research: LTE and LTE Advanced subscriptions to exceed 430M by end 2014
Juniper Research: Active LTE connections to exceed 1B in 2017
Ericsson: North America to dominate LTE subscriptions through 2019

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