Press release: Half of all voice traffic may originate on mobile phones
by 2008, but mobile operators will not all benefit
April 2007: As the pace of fixed–mobile substitution (FMS) accelerates, not all
mobile operators are benefiting, according to a recent report, Fixed–Mobile
Substitution in Western Europe: causes and effects, from Sound Partners,
published by Analysys Research.
“FMS is generally seen as a threat for fixed operators and an opportunity for
mobile operators. However, while fixed operators’ voice call revenue is falling
substantially due to FMS, not all mobile operators are seeing revenue gains as a
result,” says Dr Alastair Brydon, co-author of the report. “To avoid declines in
voice ARPU, mobile operators need to achieve significant increases in usage to
compensate for price cuts, and some operators are doing much better than
others.”
Key findings from the report include:
- Fixed–mobile substitution is accelerating. If this increasing pace continues,
50% of all voice traffic will originate on mobile phones by 2008 in Western
Europe. In principle, this should be good for mobile operators.
- Mobile operators must be wary of using price cuts as the primary means of
encouraging FMS. Drastic cuts in mobile pricing can destroy the potential
benefits of FMS for mobile operators. Mobile operators in Finland and Portugal
have achieved significantly higher levels of FMS than in other countries but
have sacrificed revenue to do so. In Finland the proportion of voice traffic
originating on mobile phones rose from 55% in 2004 to 70% in 2006. The average
spend per mobile minute dropped by 34% to EUR0.10, but mobile usage per capita
increased by only 23%, resulting in a net fall in ARPU.
- Mobile operators must be smarter in designing their tariffs and avoid
sacrificing the price premium of mobile voice over fixed voice. In Austria,
France and Spain, operators have succeeded in capturing a large proportion of
voice traffic without substantial price cuts. In Spain operators were able to
achieve a 58% increase in mobile voice usage per capita in the period 2004–6,
with a decline in voice spend per minute of only 7%.
“Home-zone pricing – low prices for calls made in the home but substantially
higher prices for calls made elsewhere – has been successful in Germany, where
the price premium of mobile over fixed was 351% in 2006,” says Dr Mark Heath,
co-author of the report. “Eventually, the widespread introduction of femtocells
will allow mobile operators to offer smart tariffs, while also boosting the
quality of in-building coverage.”
Fixed–Mobile Substitution in Western Europe: causes and effects quantifies the
true scale of FMS in Western Europe, in terms of fixed-line substitution and the
migration of voice minutes from fixed to mobile networks. The report considers a
wide range of key metrics, such as the proportion of households that are
mobile-only; the proportion of voice traffic originating on a mobile network;
voice usage per capita; voice spend per capita; fixed and mobile voice spend per
minute; and the price premium of mobile voice over fixed voice. The report
assesses how these metrics have changed over a two-year period, to provide
insight into the rate of FMS and its effects.