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.

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