December 19, 2001 Reports
In this note we summarise the available evidence on trends in ARPU among European mobile operators. We demonstrate the increasing trend towards stable or increasing revenue per subscriber in key markets. The end to the long downward trend in voice ARPU is clearly in sight. This new stability is derived from increasingly firm call charges and slow growth in minutes of use. Local competitive conditions may disrupt this pattern in individual countries and we demonstrate the countervailing trend in Finland but, overall, the pattern is clear and will probably become more so in the next few months. More important, perhaps, the current economics look acceptable both for BT's Wholesale and Openworld divisions - this note includes some detailed financial analysis. But even at the lower price levels, we remain unconvinced whether subscriber numbers will grow as rapidly as BT predicts. (BT is now saying that ADSL subscribers will be more numerous in 2005 than unmetered customers are today!)
In this note we summarise the available evidence on trends in ARPU among European mobile operators. We demonstrate the increasing t [...]
December 10, 2001 Reports
Nokia's recent guidance suggested a modest recovery in handset sales in 2002, followed by a strong resurgence thereafter. We think the position will be different and look for unit sales of about 450m next year, with only 3-7% growth in the years 2003-2005.
Nokia's recent guidance suggested a modest recovery in handset sales in 2002, followed by a strong resurgence thereafter. We think [...]
November 29, 2001 Reports
In this short note, we look at trends in mobile design and features. We show that the steady decline in size and weight is now over, and manufacturers are focusing on adding new functions, such as digital cameras, and even, in one case, a thermometer.
In this short note, we look at trends in mobile design and features. We show that the steady decline in size and weight is now over [...]
October 10, 2001 Reports
Since the research for our report on Vodafone was carried out, the UK mobile operators have made a number of changes in tariffs. We think the net impact of these changes has been to increase average call charges. This may be the first time that the UK has seen any upward trend in prices. If these price changes stick, the impact on voice ARPU is clearly positive. Looking ahead, the costs of buying a PC and funding a connection will act as barriers to Internet expansion. Such expenditures weigh more heavily on households in less prosperous households, where the Internet have-nots are concentrated. Although the Internet-enabled mobile phone and digital TV subscription would eliminate PC ownership as a barrier to Internet access, we do not think these will be (for the foreseeable future) access platforms of more than marginal significance.
Since the research for our report on Vodafone was carried out, the UK mobile operators have made a number of changes in tariffs. We [...]
October 7, 2001 Reports
Nokia's quarterly results statement included an estimate for worldwide global handset shipments of about 390 million. Global shipments so far this year have been:
Nokia's quarterly results statement included an estimate for worldwide global handset shipments of about 390 million. Global shipme [...]
August 16, 2001 Reports
The UK mobile operators have made much of their honesty in ceasing to record subscribers that have not made calls within six months. This will help analysts make a clearer judgment of how many people actually use mobiles, and what the correct figure is for ARPU. But pleasure at the apparent increase in openness should be tempered somewhat. Operators are starting to make active efforts to stop subscribers becoming 'inactive'. In the last few weeks all the UK operators appear to have adopted similar policies. These policies state that the operator will take back a subscriber's telephone number unless one call is made or one SMS is sent from the phone during each six-month period. As important, the mobile operators are keeping a much tighter rein on inventories, effectively shifting stock risk to retailers such as Carphone Warehouse. Inventory levels throughout the supply chain will be lower. Retail price levels will be more robust improving operator margins. But we expect total sales over the Christmas period to be lower than expected because of the higher prices in the retail chain.
The UK mobile operators have made much of their honesty in ceasing to record subscribers that have not made calls within six months [...]
August 11, 2001 Reports
This report provides our model for global handset sales in 2001 to 2005. We continue to forecast 375 million units shipped in 2001. The forecast for 2002 is 470 million units. Key constraints on the level of shipments in Europe: At current pricing levels, we see pay-TV penetration struggling to exceed 60% by 2010. And the rapid continued price inflation in the pay-TV offerings of Sky, the cable companies and ITV Digital will make even this target difficult to achieve. As our recent note on household expenditure (Time and Money) indicated, the poorest 40% of the population have very little surplus cash. Increasing prices means that pay-TV is moving even further beyond the reach of this group.
This report provides our model for global handset sales in 2001 to 2005. We continue to forecast 375 million units shipped in 2001. [...]
June 18, 2001 Reports
Estimates of the cost of building 3G networks in large European countries have tended to cluster around $5 billion per operator. This, in addition to the embarrassing large licence fees paid to governments, is acting as a drag on stock market performance. This figure is exactly what we would have predicted based on our modelling of 3G costs contained in our June report. Sweden is nearly twice the size of the UK, and the regulator's coverage requirements are probably the strictest in Europe - in theory the whole of population has to be covered. But costs are reduced because Europolitan will share its network with the Hutchison 3G venture in all areas of the country outside the four biggest cities.
Estimates of the cost of building 3G networks in large European countries have tended to cluster around $5 billion per operator. Th [...]
June 14, 2001 Reports
Despite the bad news it offered the markets last week, Nokia still wields massive power in the handset market. Its market share goal of 40% is well within reach. This makes mobile phones a very unusual business; with the exception of handheld electronic games, we can think of no other major hardware market that is dominated by one manufacturer to the same extent. Moreover, even though mobile phone manufacture is a huge global business, only a handful of firms can actually design and build a new handset. Sendo is a new UK company trying to break into this brutal business. Its business strategy is compellingly different; it focuses entirely on own-brand manufacturing for operators. It already has impressive technical achievements. Will it succeed? Who knows. But we think its business strategy is worth exploring. UK regional newspapers are better positioned than most media to withstand a downturn given the existence of multiple streams of revenue (advertising, circulation) and the unique nature of local franchises. However, the underlying trends are poor and likely to get worse, particularly in recruitment advertising, with greater consolidation inevitable over the medium term.
Despite the bad news it offered the markets last week, Nokia still wields massive power in the handset market. Its market share goa [...]
June 5, 2001 Reports
This note examines the US 'spectrum shortage' campaign. We think that US 3G services will be forced to use existing spectrum, rather than move to greenfield frequencies. This is highly relevant to Europe because the lack of dedicated 3G spectrum in the US strongly favours CDMA2000 over Europe's preferred WCDMA. We see signs that several US operators will have CDMA2000 based 3G systems in place, with fully-functioning handsets, long before Europe. The onward march of GSM and its successors into the US may not be the foregone conclusion that some expect. Deutsche Telecom's bridgehead, VoiceStream, is not, for example, as well positioned as Sprint PCS. Furthermore, Vodafone's attempt to get Verizon Wireless to use WCDMA looks ill-conceived to us. In our forthcoming report BT Restructured Into Pieces' we detail our views on BT's prospects as a separated entity, and consider the mooted spinning out of BT Wholesale in light of Oftel's current regulatory tone. In the report we argue that Oftel is likely to be favour the separation of Wholesale from Retail since Oftel has been disappointed with the rate at which effective competition has developed in the telecoms market, particularly in the residential market. In no small part, one of the barriers to the development of effective competition has been the vertical integration of BT. There is no incentive for BT Wholesale to hasten the process of cutting access costs to the network, or to unbundle the local loop. Each of these activities would harm BT's retailing activities, and BT Retail generates extremely high returns on capital (184%pa).
This note examines the US 'spectrum shortage' campaign. We think that US 3G services will be forced to use existing spectrum, rathe [...]
May 18, 2001 Reports
Our view is that mobile operator marketing strategy was the key determinant of the rate of apparent growth in mobile penetration across Europe in 2000. We use this report to show that operator 'push' was responsible for the increase in apparent subscribers. We examine the evidence on actual rates of ownership and usage in the three of the largest markets and show that underlying mobile penetration is probably around 60% of adults in these markets. Will the reduction in estimated levels of penetration, which the operators also acknowledge, mean continuing high growth rates in future? We think it unlikely. First of all, of course, operator 'push' is reducing. Second, ownership in key demographics, such as 15-24 year olds is already close to saturation. Third, those that do not own a mobile, particularly in the older age groups, appear relatively uninterested in the product. Our pessimism derives from our view, firstly, that subscriber growth in NTL's UK cable franchises has all but ceased and, secondly, that further price rises will inevitably cause loss of subscribers as NTL's telephony and television offerings have already become uncompetitive. Broadband is important but will not generate significant amounts of extra revenue.
Our view is that mobile operator marketing strategy was the key determinant of the rate of apparent growth in mobile penetration ac [...]
May 11, 2001 Reports
At the current CSFB tech conference in Barcelona Ericsson stated that the expected handset market for 2001 will now be at lower end of its previously stated range of 430-480m; both it & Nokia said the reason was cuts to handset subsidies in Europe. Whilst we are relieved that our early emphasis on the impact of changes in operator strategies on the handset market in Europe has been proved right, we are in the process of revising upwards our own forecast of 300-350 million units based on growth in China (this forecast and spreadsheet will shortly be available). For the future, we expect data traffic to slow given strong signs of a plateau in demand among businesses and changing residential payment models. However, we forecast a gradual evolution towards profitable ISP business models based on unsubsidised pricing for all forms of access. Indeed, we expect overall pure Internet access revenues to continue to grow until the latter part of the decade. This is plainly contrary to all those who predicted access would be free for all and a loss-leader for other forms of revenue, such as online advertising, e-commerce commissions and eCRM (direct marketing).
At the current CSFB tech conference in Barcelona Ericsson stated that the expected handset market for 2001 will now be at lower end [...]