Mobile broadband in Europe continued to grow strongly in 2009, fuelled mainly by consumer segments. As revenue from traditional mobile voice and messaging services declines or stagnates, mobile broadband will be one of the primary revenue drivers for European operators in the next five years. Mobile broadband will contribute almost 10% of total mobile service revenue by 2015 (see Figure 1). We forecast that total mobile broadband revenue in Europe will increase from EUR6 billion in 2009 to EUR17 billion in 2015, at a CAGR of 18.7%. Total mobile broadband connections will increase in number from 32 million in 2009 to almost 120 million in 2015, at a CAGR of 24.8% in 2009–2015.
Figure 1: Mobile revenue by services in Europe, 2007–2015 [Source: Analysys Mason, 2010]
In the next five years, one of the fundamental changes to the market dynamics will be the rapid rise of prepaid consumer segment. According to Ofcom, sales of prepaid mobile broadband overtook those of contract in May 2009 in the UK.1 Because most customers regard mobile broadband as a secondary Internet connection for occasional use, demand for prepaid solutions, which offer flexibility and minimise data costs, is very high. Telcos have developed various packages with which to tap into this segment of potential light users. For example, many telcos now offer daily, weekly and monthly prepaid solutions.
The majority of users will use mobile broadband services as a complement to their fixed services: the rising number of prepaid users are unlikely to abandon their fixed broadband services, most business users of mobile broadband will retain their fixed broadband for reliability and speed in the office environment, and integrated operators are encouraging the adoption of fixed and mobile broadband bundling. There is still a substitutive threat for fixed telcos, as mobile-only households in Europe will rise to 7.3% of total broadband households by 2015. Some markets, such as Sweden, have experienced strong growth in mobile broadband, while fixed broadband penetration has stagnated. The ongoing roll-out of LTE in Europe will improve the user experience, increasing the appeal of mobile broadband.
As the market shifts to low-spending prepaid and complementary consumer segments, one of the key challenges for telcos will be how to maximise revenue opportunities in this rapidly commoditised market. This issue is of particular importance to telcos because the huge growth in wireless data traffic in Europe, primarily driven by mobile broadband, has far outpaced growth in revenue. This undermines the profitability of mobile broadband. Telcos should actively seek new ways to differentiate their mobile broadband services in order to earn more revenue from their user bases.
Analysys Mason has recently published a report entitled Mobile broadband in Europe: forecasts and analysis 2010–2015, which quantifies the market opportunity, providing granular data on connections, ARPU and revenue for six market segments on a country-by-country basis for 30 markets in Europe.
1 Ofcom (London, UK, 2009), The Communications Market 2009 (August). Available at http://www.ofcom.org.uk/research/cm/cmr09/.
