Global telecom services market to reach over €1,200 billion in 2015
“We have observed that, overall, telecom services are recovering more slowly than the economy as a whole,” reports Carole Manero, head of IDATE’s Telecom Players & Markets report.
Montpellier, 7 May 2013 - IDATE reveals the findings of its world telecom services watch. After a setback in 2009 and very slight growth in 2010, the global market has been inching back to a more solid recovery since 2011, growing by a modest 2.7% in 2012. This translates into telecom services revenue of €1,115 billion for the year.
Now in a recovery phase, telecom markets in advanced countries are proving somewhat resilient, whereas in fast developing markets the increase in volume is so steady that the ripple effect far outweighs any structural obstacles. This phenomenon is telling of a mature industry now driven more by demographics than economics. In Africa/the Middle East, for instance, the drop in regional GDP in 2009 (-6%) and its rebound in 2010 (+16%) had very little impact on telecom services growth rates which remained very high both years: 8% and 9%, respectively.
World telecom services market - 2012
Source : Digiworld by IDATE
Majority mobile access
According to IDATE, the number of mobile customers worldwide should top the 8 billion mark in 2017 (+28.0% in 5 years).
• The number of Internet subscribers will grow more strongly (+37.3 % between 2012 and 2017, +6.5% per year on average), reaching 1 billion by the end of 2017.
• Traditional landlines continue to loose ground in the face of VoIP and mobile.
The spread of broadband
According to IDATE, the number of fixed broadband subscribers is expected to reach 957 million worldwide by 2017, for a penetration rate of 14% of the population. The number of 4G mobile subscribers should experience strong growth.
Two major factors will play in favour of the spread of broadband:
• The success of bundled offers (fixed telephony, VoIP, TV, mobile telephony) and the appetite for video applications.
• The investment of telecom operators in the migration of their infrastructures to mobile or fixed broadband.
Revenues from telecom services
According to IDATE, the global revenues from telecom services will grow from 1,115 billion in 2012 to 1,286 billion in 2017, representing an average annual growth of 2.9% in 5 years.
• Revenues from mobile services will grow by 18.7% between 2012 and 2017 (+3.5 % per year on average), reaching 779 billion EUR in 2017.
• Revenues associated with data transmission and Internet will grow more strongly (+32.8% between 2012 and 2017, i.e. +5.8% per year on average), to reach 329 billion EUR in 2017
• The turnover of fixed telephony will continue to decline significantly (-15.9% between 2012 and 2017, i.e. a decline of 3.4% per year on average), to be at 177 billion EUR in 2017.
Scalability of operators in emerging countries, even if the global top three remains unchanged since 2007
• A single change in the ranking of European operators: Telefonica overtook Deutsche Telekom in 2011: now the leading European operator, the Spanish group ranks fourth in the world.
• Chinese operators regularly win places in the world rankings
• Vimpelcom gained fifteen places in 2011 : Owing to the acquisition of a large part of the shares of Orascom Telecom and Wind, VimpelCom moved from 34th place in 2010 to 19th in the world in 2011
• Several operators from industrial countries "drop out": The Dutch KPN and Canadian ECB fell back by five places in two and a half years and drop out of the top 20
Classement des principaux opérateurs télécoms
Source : Digiworld by IDATE
Five operators in the top twenty worldwide for over 50% of their turnover outside their domestic market:
• Among them, three European operators...
- Vodafone: global operator widely present in Europe, Asia and Africa
- Telefónica: with a widespread presence in Latin America and in some European countries (UK, Germany, Czech Republic, Slovakia)
- Deutsche Telekom: present in Central and Eastern Europe and in several Asian countries
•...and two operators from developing countries:
- America Móvil: present mainly in Latin America (plus participation in Europe acquired in 2012)
- Vimpelcom: already present in Central Asia, with a new presence in Africa and Europe (Italy) thanks to the deal with the Naguib Sawiris group
Chef de projet, IDATE
More information about World Telecom Services
Data: the growth engine for the telcos?
Over the past two decades, growth in the telecom services sector has essentially been carried by the explosion of mobile telephony. This explosion in particular has fostered the adoption of competition policy in Western countries and the take-off of telephony in emerging countries.
Since the market has now reached a certain level of penetration, revenue growth for mobile services is losing momentum. The impact of competition, regulation and the widespread use of VoIP on fixed networks (and much more gradually on mobile data networks) are overriding additional income from new subscribers, and revenues are falling.
This situation may prove even more severe when combined with the impact of the economic crisis, as seen in Southern Europe (or when a price war is added to the mix with the arrival of a new market entrant, as seen in France).
Does the story end here?
Maybe not. While the sector is certainly likely to grow more sensitive to macroeconomic influences and still be partly driven by low-cost players, we cannot forget that the sector is seeing a radical transformation with its rapid inclusion in the world of Internet.
Most consumers will soon have smartphones. Well over 50% of Web users now access Facebook via their mobile devices. Data represents the largest share of traffic on mobile networks. Data traffic on mobile networks will have risen by 133% in 2011. Meanwhile, traffic generated by a smartphone rose to 155 MB/month on average (with 1% of smartphones representing around 25% of total traffic). According to Cisco, this could reach 2.6 GB/smartphone/month by 2016.
Yet, consumers have the feeling that operators’ solutions are essentially based on minutes of talk-time and that their interest in mobile Internet is likely to be expressed mainly in the choice of a smartphone.
This is particularly the sentiment in Europe. In the United States, which leads the market in LTE deployment, things are different. Operators have managed to ride the wave of the iPhone and other smartphones, generating substantial increases in their data revenues. According to ML-Bank of America, over a period of four years (from Q2 2008 to Q2 2012; in USD/subscriber/year), data ARPUs grew: from 11.60 to 20.46 for AT&T; from 5.50 to 7.72 for Deutsche Telekom (Europe); from 6.05 to 9.41 for France Telecom (Europe); from 12.18 to 23.69 for Verizon Wireless; and from 8.09 to 8.95 for Vodafone (Europe). This difference in performance seems to provide the main explanation  for the disparities observed on either side of the Atlantic: a decline in ARPU (voice and data) of around 30% in Europe over the past five years (reaching average ARPU of about 27 USD), and a stable ARPU in the United States (at around 51 USD).
Aggregate revenues for telcos in the markets of Europe and North America are moving in opposite directions, with a 9 point gap (stable over a year): -4.1%/year versus +4.9%.
Clearly behind this gap are the effects of differences in market structures (and intensity of competition). Many are starting to underline the concentration of the US market and, more specifically, the dominant positions acquired by AT&T and Verizon Wireless. The resources that Sprint will likely gain from Softbank (and to a lesser degree, the T-Mobile/MetroPCS merger) will help to shake up this virtual duopoly for post-paid subscriptions. Over the next few quarters we may see a significant fall in data tariffs, which are currently much higher in the United States than in Europe.
However, and without considering the relative effects of competitive intensity in Europe, it seems important again to highlight the lead American operators have taken in "tiered pricing". Since the summer, in particular, AT&T and Verizon have put solutions on the market that combine incentives for single-subscriptions shared by several mobile devices (smartphones, laptops, tablets, etc.) and caps that grant rights measured in GB. Naturally, these solutions are accompanied by an unlimited SMS and voice service, meaning that for 10 GB of data, users pay just a little more than a simple data option as an add-on to the voice subscription. 
Three concepts govern this type of pricing:
• encourage higher data consumption by including several devices in a single subscription;
• protect against competition from OTT communication services by abandoning solutions that bill for calls per-minute;
• and abandon unlimited data solutions that accompanied the launch of the first smartphones and USB sticks.
A shared subscription for several devices should also have a positive impact on churn.
The table below sets out the "Share Everything" solutions available from Verizon Wireless.
AT&T recently commended this approach, stating that in just five weeks it had signed up two million such contracts, with more than a third opting for the service up to 10 GB (i.e. 120 USD + 30 USD, for a single smartphone). Meanwhile, and without breaking its unlimited data contracts, the operator began applying a reduction in speed to these subscriptions (beyond 2 GB), fueling debate.
Another example of pricing innovation is Swisscom’s more radical approach of offering customers a choice of subscriptions that also include unlimited voice and SMS, as well as unlimited data. The only parameter is the access speed.
The ideas supporting such an audacious approach (although arguably founded on higher prices than in other European markets) are as follows:
• revenues from voice and SMS are likely to disappear,
• consumers are unable to measure megabytes and want no surprises on the bill,
• what they ultimately perceive is the connection speed.
Swisscom adds that this type of pricing is also the one that ultimately best reflects the predominance of fixed costs (opex & capex) for telcos. The company also recognizes, however, that this new pricing strategy could initially produce a slight erosion of revenues.
Pricing policies elsewhere in Europe are changing but the intensity of competition in some markets has, above all, forced telcos to defend their position by adopting a low-cost approach. Prices are generally much lower there. In France, unlimited voice and SMS solutions with 2GB or 3GB can be found for around 20 EUR.
In UK, The Everything Everywhere tariffs have just been published for the launch of its LTE service (1800 MHz), which is offered at a premium rate in relation to comparable 3G tariffs (typically GBP 30 for unlimited SMS & voice with 2GB.
The launch of 4G thus seems to offer an opportunity that European telcos cannot afford to miss. Not only does it provide a chance to introduce a new means of differentiation between competitors in terms of the quality of access offered, it also allows them to steer clear of the low-cost "corner". It is also a good time to implement a new segmented offer based on objective and explicit criteria for consumers, feeding their hunger for mobile Internet devices and applications. Then perhaps, telcos might hold out hope of stabilizing and boosting revenues?
Yves Gassot, CEO, DigiWorld by IDATE
 The sharp decline in call terminations should naturally be considered, affecting sales (but not at least margins), alongside a less severe decline in voice revenues.
 Verizon charged USD 80 for 10GB in its data option at end-2011.