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Forrester Issues Long-Range Forecast for European Mobile Industry

[London, ENGLAND] Vodafone may have added 13.2 million customers in the last three months, but all mobile operators in Europe will see their average revenue per user (ARPU) fall during the next four years, says research firm Forrester.

The not-unexpected reason for the decline is, of course, the huge cost incurred in acquiring 3G licenses. As a result of paying so much money to European governments, mobile operators could see a 36 percent decline in their traditional revenues.

"European mobile operators will consolidate or disappear, and UMTS will be remembered as the trigger that imploded Europe's mobile industry," said Lars Godell, telecoms analyst at Forrester's European headquarters in Amsterdam.

Godell said that Forrester expects consolidation will leave only five groups serving all mobile users in Europe by 2008.

Driving today's mobile operator revenues are voice, SMS messaging, and data connections for faxes and laptops -- but Forrester says that all three will decline rapidly because of tough competition.

So will mobile Internet usage come to the rescue? Not necessarily, says Forrester.

In fact, mobile Internet revenues from access, content, retail, advertising, location data, and other services will fall below expectations, according to the researchers. Internet services will total around EUR 106 (US $90) per user, making up only about 60 percent of the shortfall in traditional revenues.

The picture painted by Forrester is not all gloomy, as the survivors in the industry will prosper in the long-term. But operating profits will begin to shrink in 2003, turn negative in 2007, and recover only in 2013.

"Scale will become a key success factor as grim profitability prospects and huge capital requirements take their toll," said Godell.

The "certain winners," according to Forrester, will be Vodafone, T-Mobil, France Telecom/Orange, and BT Cellnet -- operators that already have a significant Pan-European presence with moderate exposure to business failure.

As for the rest, the "additional wild card group to survive" will come from KPN, Telefonica, Telecom Italia, or NTT DoCoMo -- not from the dominant players in smaller markets like Norway and Sweden. According to Forrester, the Scandinavians will have to affiliate with the larger groups by 2008.