Press release: Decision time for mobile operators faced with declining spend

May 2007 – Mobile operators may experience substantial decline in ARPU in developed countries, as voice prices decrease, non-voice services fail to capture consumers’ interest, and mobile phones lose their fashionable image, according to a forthcoming report, The Future of the Global Wireless Industry: scenarios for 2007–12, to be produced by Sound Partners.

“There is increasing uncertainty about the future of voice and non-voice services, the technologies that will be deployed and the extent to which growth will shift from developed to developing markets,” says co-author Dr Alastair Brydon. “These uncertainties could lead to radically different outcomes for mobile operators and equipment vendors.”

Sound Partners has defined three plausible scenarios for the evolution of the wireless industry during the next five years: ‘Emerging Markets Thrive,’ ‘Cellular Goes Indoors’ and ‘Low­cost Data Pipes.’ In the ‘Emerging Markets Thrive’ scenario, mobile penetration saturation, intense price competition for voice telephony and widespread failure to achieve robust non-voice revenue growth leads to significant consolidation in developed markets. Mobile operators embark on aggressive cost reduction initiatives, such as network sharing, and avoid significant further investment to maintain profitability levels. Operators, handset and infrastructure vendors and investors focus on growth opportunities in developing countries, for voice telephony and mobile Internet services.

“We are already seeing early signs of this scenario,” says Dr Mark Heath, co-author of the report. “Despite a 23% increase in voice usage per capita, the high level of fixed–mobile substitution in Finland has not increased ARPU. Furthermore, many mobile operators are finding it difficult to achieve non-voice ARPU of more than USD8 per month. By contrast, Nokia sold almost twice as many handsets in developing countries as it sold in Europe and North America combined in the first quarter of 2007.”

This new report examines a number of key trends within the wireless industry and assesses their potential effects by defining and evaluating three plausible scenarios for the industry’s evolution. The report identifies actions for mobile operators, and handset and infrastructure vendors.