Media rich services to drive mobile market
26-06-2006
by Maxim Kelly

European Mobile phone penetration is close to saturation point and future growth is reliant on media rich services according to analysts.

The Western European Mobile Market: Trends and Forecasts study, published by Analysys, predicts yearly revenue growth of 6 percent until 2011. By 2011, the report authors estimate the mobile industry will be worth EUR198.4 billion, compared to EUR138.4 billion for 2005. Data services such as music and mobile TV will drive this growth.

Active mobile penetration in Western Europe was 96.2 percent at the end of 2005 and is forecast to grow to 108.8 percent by 2011, driven by operators' efforts to penetrate under-served customer segments (such as older demographics), as well as by increased ownership of multiple SIM cards and more machine-to-machine communications.

According to the report, 3G penetration stood at 6 percent at the end of 2005 (22.4 million subscribers) but this is expected to grow to 15 percent in 2006, and 29 percent in 2007. These figures include 3G broadband usage known as HSDPA (High-Speed Download Packet Access) technology.

The Analysys report also speculates that Average Revenue per User (ARPU) levels have now bottomed out and will continue to recover, rising by 20 percent from EUR31.30 per month in 2005 to EUR37.50 per month in 2011.

"Although voice ARPU has been adversely affected by falling termination rates and aggressive pricing strategies, this trend is forecast to reverse from 2007 as 3G adoption increases," said analyst Dr Windsor Holden.

"Operators are beginning to take advantage of 3G's greater capacity to offer lower-cost bundles, thereby accelerating fixed-mobile substitution."

"We are now seeing a rapid acceleration in the number of full-track downloads and in streamed TV usage," said Holden. "Subscribers are becoming more familiar and comfortable accessing both on and off-portal content, [and] as mobile broadband becomes more prevalent this growth is likely to continue."

Holden added that the longer term prospects for voice revenues were also encouraging.

The report concludes that fixed-mobile convergence has emerged as a key strategic challenge for mobile operators. "While it is likely to further encourage fixed-mobile substitution, fixed operators' moves towards converged technologies will also result in greater competition within the mobile market," explained Holden.