European mobile operators need more than just fibre
European mobile operators are doing more work for less pay, as they fall into the age-old trap of mass market commoditisation of their product, according to a top analyst.
Worldwide telecoms revenues from mobile and fixed broadband services are on target to grow 14% between 2022 and 2027, according to according to the latest research from analyst firm Omdia. However the good news that total revenue will reach €1.2 trillion must be tempered by the fact that ARPU (Average Revenue Per User) is falling, said the report. The combined ARPU across both mobile and fixed broadband will fall by 4.2% from €7.48 in 2022 to €7.16 in 2027. If ARPU can be taken as an indicator of the value added to the product, then the figures suggest that mobile network operators are defaulting into their role of passive connection providers while Youtube makes the big money.
“People don’t buy technology,” said Omdia Research Director Ronan de Renesse, “they buy fun exciting new experiences.” In mobile markets it is now evident that 5G will not be sufficient to offset ARPU decline as customers are unwilling to pay more for it, said a statement issued by Omdia. Unlimited data and video streaming services bundled exclusively on 5G contracts have had some success, but this only gives the industry the illusion of a 5G ARPU uplift.
However, de Renesse excused mobile operators for their lack of creativity. They should show a bit more imagination in their choice of partners otherwise they will hand over their latest golden opportunity to their Big Tech ‘frenemies’. “It is not just up to operators to solve the ARPU growth challenge but rather the rest of the digital services ecosystem. There is a misconception that operators should be reselling the technology they buy directly to customers, and it doesn’t work. The network is the bedrock on which innovation and creativity can flourish like 4G and mobile apps.”
In fixed broadband markets, the transition to fibre has had a net positive impact in most cases as the technology offers a much-needed step-change in home broadband quality of service on the back of the pandemic. However, markets with high fibre penetration are seeing a significant drop in ARPU such as France, Spain and China as competition intensifies and there isn’t a clear money making path for fibre customers once they have made the transition.
Omdia forecasts 5G will account for 5.9 billion subscriptions in 2027 equivalent to a population penetration of 70.9%. Consumer residential fixed broadband subscriptions delivered via fibre to the home will exceed 1 billion subscriptions by 2027 equivalent to a household penetration of 41.9%.
If Europe’s mobile operators want to make more money from the events taking place on their network, they need to be more pro-active hosts, rather than the security guards. Ronan de Renesse’s Omdia analysts have promised disclose more at Network X in Amsterdam in late October, or via a virtual briefing