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The
value of mobile business in Europe
A new report by consultants Andersen
and J.P. Morgan challenges previous estimates of the future value
of mobile business in western Europe. The report, Wireless Data, predicts
that the market in the leading western European countries will rise
to $156bn over the next 10 years. But while revenues from new data-based
services will be worth over $82bn, total voice revenue will start
to decline from 2003.
According to the report, the western European mobile market grew by
over 68 percent ($84bn) between July 1999 and July 2000. This mainly
comprised revenues from voice transmission ($76bn) and text messaging
($3.7bn). However, the report predicts that as mobile penetration
reaches a ceiling at 85 percent, and competition increases, voice
revenues will decline. By 2010 the majority of revenues (53 percent)
will come from data applications including transactions ($26bn), information
services and surfing ($15bn), multimedia ($13bn), machine to machine
($8bn), advertising ($6bn), business data ($6bn), e-mail ($5bn), and
SMS ($3bn). Forty seven percent of mobile revenues will come from
voice ($74bn).
"Operators are underestimating the significant rise of wireless data
applications, and so face a big challenge to emerge as winners in
the new market," says Alistair McGrath, mBusiness Manager at Andersen. "Revenues will increase through deepening penetration and
there will be a reversal in declining revenues per customer through
innovative new services, such as direct one-to-one location specific
advertising and commissions on mCommerce transactions."
In Europe, a number of countries are gaining on the market lead taken
by the Scandinavians in the late 1990s. The report forecasts that
by 2010 Germany will have the largest share of the market (23 percent),
followed by the UK and France (17 percent each). Forecasts for the
rest of western Europe are: Italy (14 percent), Spain (10 percent),
Scandinavia (7 percent), Netherlands (5 percent), Belgium (3 percent),
Greece (2 percent), and Portugal (2 percent). 
Pan-European strategies
"The strategy of many mobile operators is to develop pan-European
operations. UMTS licenses represent a unique opportunity to develop
infrastructures in countries in which an operator is currently not
present," says Alistair McGrath. "Established players feel 'forced'
to deploy a UMTS network to compete with the new entrants and to avoid
saturation by gaining additional spectrum. However, the high cost
of some UMTS licenses is enabling a new service provision business
that is not tied to the owners of networks."
The report predicts that payback on UMTS investment will be in the
range of seven years for those operators whose licences were provided
for free, and 15 years for those who obtained licences through auction.
New UMTS entrants - especially those who paid high licence fees -
will face a challenge to break even.
The report also estimates the probability that some of Europe's leading
mobile operators will succeed in the wireless data arena. Sonera (Finland)
is identified as a clear leader. After Sonera, those ranked in the
'first division' include BT Cellnet (UK), TIM (Italy), Orange (UK),
Telia Mobile (Sweden), Vodafone (UK) and T-mobil (Germany).
"No single network operator in Europe has all the experience and skills
necessary to provide a complete end-to-end wireless data solution.
The strategy of a traditional operator will have to change," says
Iain Johnston of J.P. Morgan. "Value will reside in ownership of the
customer relationship and in content and service provision. Traditional
wireless operators will need to work hard to extract maximum value
for shareholders in this environment, with higher customer retention
costs the price to pay for ownership of the relationship with the
end-user."
Copies of the full report can be ordered from the Andersen
publications department on |
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