While the telecoms market worldwide is posting steady growth, the headline figure conceals considerable regional disparities. The European market is showing a slight downward trend, while market growth in China is slowing down.
In its latest DigiWorld Yearbook, European digital economy think tank IDATE provided key figures on the telecoms sector and recommended a change of business model for telecoms operators, whose businesses are now being threatened by Over-the-Top (OTT) services suppliers. In 2013, revenue generated by Internet services in OTT mode reached €221.3 billion worldwide and by 2018 should be growing at an annual rate of 16%, reckons IDATE. In comparison, the basic telecoms business continues to generate high levels of revenue – €1,186 billion in 2013 – but here annual growth is running at only 2.5%, driven by China (+8.5%) and the North American market (+2.7%). However the trend in Europe is decidedly negative, with European operators seeing a 4.3% drop in revenue in 2013. The gap is looking particularly alarming in the mobile segment and in broadband. The United States is trying to catch up on its mediocre 3G network of the 2000s and has embarked on 4G technology in a more determined manner, with wider-ranging offerings covering data and LTE (Long Term Evolution, the standard for wireless communication of high-speed data for mobile phones and data terminals).
Disparities in the global telecoms market
Didier Pouillot, who heads up the Telecoms Strategy department at IDATE, explains that the gap in growth between the European and North American markets – mainly the United States – is not only due to differing habits but also the fact that competition is fiercer in North America. In the United States “people are attracted by the new services and Americans are already used to paying for television, cable, Video on Demand (VOD), and so on,” he points out. Verizon and AT&T, the two telecoms operators, together own 64% of the mobile network, which gives them greater influence on their clientele than in Europe, where there is a far bigger number of operators. Although still expanding, the Chinese market, which numbers around 1.3 billion mobile customers, is now experiencing a slower rate of growth than the new emerging markets – such as Vietnam, the Philippines and Sub-Saharan Africa – which are seeing a more dynamic surge.
High-speed Internet and mobile forge ahead
Globally, the annual rate of revenue growth due to the Internet and data transmission is running at 4%, which demonstrates how Internet services and OTT are forging ahead, leaving fixed line telephony in their wake. The fixed line business continues to decline, the latest figures projecting a 15% decrease between 2013 and 2018, while OTT services will be posting growth of 15 to 20%, depending on the continent. Applications offered by OTT players are in direct competition with those provided by the incumbent operators and it may be that in 5 or 10 years the two camps will be facing off in the same market, even though their business models are radically different, suggests Didier Pouillot. Meanwhile broadband will continue to grow, reaching €400 billion in 2017. This increase can be explained by operators bundling their offerings, i.e. offering a package comprising an Internet subscription, fixed line telephony, plus mobile. Meanwhile the number of mobile customers is set to continue upwards and might even pass the milestone of 8 billion by end-2018, which would mean an increase of 21% over five years.