Newly released mobile broadband forecasts by global advisory and consulting firm Ovum show that users accessing the Internet via mobile broadband enabled notebooks and handsets will generate revenues of US$137 billion globally in 2014, over 450% more than in 2008. However, operators will need to content themselves with the fact that user growth will be far faster than revenue growth, meaning more users and more data traffic, but declining average revenues per user (ARPUs).
Ovum estimates users of mobile broadband services (3G and 3G+ technologies) will grow from 181 million in 2008 to over two billion in 2014, growth of 1024%. Among the total, about 258 million users worldwide will access mobile broadband services through notebooks via USB modems, datacards or embedded mobile modules, representing growth of 1022% growth from 2008, explained Steven Hartley, senior analyst at Ovum.
Operators can also expect a similar growth rate for handset users of mobile broadband services, but starting from a much larger existing base, added Michele Mackenzie, principal analyst at Ovum. The market research firm forecasts handset users will grow from a base of 158 million in 2008 to almost 1.8 billion in 2014.
Where will all these users come from?
The most aggressive growth will come from emerging markets, where the unavailability of fixed broadband offers a major opportunity to mobile broadband players. For example, 40% of total mobile broadband notebook users will come from Asia Pacific in 2014. The advent of 3G in markets such as China and India, the sheer number of mobile users and poor fixed line penetration in these markets means that broadband access to a very large number of people will be purely 'mobile'. For many though, Internet access will be through the handset. In China, there will be 52.5 million notebook users compared with 325 million handset users, a ratio of 6:1.
However, even in mature markets such as Western Europe – the slowest growing region between 2008 and 2014 – user growth in notebook access over the next five years is set to reach 747%, and 918% in handset access. Such recession-busting growth will be music to the ears of operators. The ubiquity of the Internet and the desire to be connected on the move are key drivers for this, as will the increasing adoption of prepaid tariffs, which support the complementary nature of mobile broadband in such regions with high fixed broadband penetration said Hartley.
Revenues grow slower than user growth
On a global level, revenues will grow at just 44% of the rate of users. A signpost as to the reason can be seen in the fact that, as with most mobile services the vast growth in mobile broadband user numbers in emerging markets does not provide corresponding revenue growth. Therefore, the contribution of each region remains broadly the same across the forecast period. In 2008 Middle East, Africa and South & Central America contribute 3% to total global revenues and this share will only rise to 9% by 2014.
Several factors help explain the corresponding ARPU erosion, including the fact that the adoption of mobile broadband notebook access will occur in increasingly less wealthy segments of emerging markets; the introduction of prepaid tariffs driving adoption in mature mobile and fixed broadband markets boosts users but dilutes ARPU; and increasing competition for mobile broadband access will drive prices lower.
The net result will be a ARPU decline both in terms of number of users and most likely the amount of data consumed per user. This will mean that ever more data per user will need to be carried on mobile operators' networks for less revenue.
Several operators have touted the idea of plugging the ARPU decline with value added services, yet we have yet to see anything sufficiently compelling in either the handset or handset space, pointed out Mackenzie. Evidence from other broadband markets suggests that banking on such revenues to make business cases fly can be extremely dangerous. The only alternative is to employ ever more ruthless network efficiency to reduce opex sufficiently in order to defend margins, concluded Hartley. The dilemma is that by 2014 network quality will have become an increasingly important service differentiator.
Therefore in Ovum's view, balancing both sides of the equation will need to become an essential skill for mobile operators if they want to enjoy a share of the mobile broadband spoils.
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