LTE subs soar -- too bad about revenue growth

Metaratings
19 Dec 2013
00:00
Article

More bad news for telcos on the revenue front. Strategy Analytics reported earlier this week that mobile operators’ revenue rose a paltry 2% in Q3 (on an annualized basis) – that’s down from 4% the previous year.

The decline was attributed mostly to Western Europe, which experienced a staggering 9% fall in annual revenues. But there was some good news for Asian operators as the results varied widely from region to region. South Korea led with 4% growth, the US was second with a 3% rise and Japan was up 1%.

The research firm benchmarks the performance of operators accounting for 78% of global mobile subs.

In a separate report Strategy Analytics predicts global LTE connections will expand from around 238 million this year to two billion in 2018, when almost half of mobile revenue will come from LTE services – up from less than 10% currently.

Japan, South Korea and the US – which accounted for some 90% of all LTE subs in Q2 – are forecast to see their share drop to 76% by the end of the year. Western Europe is the primary share winner.

The strong consumer uptake of 4G is looking increasingly like a mixed blessing for the mobile players.

LTE certainly has not provided much of a revenue boost in most markets.

“European operators struggle to identify revenue-enhancing growth stories and so resort to improving value for customers through lower prices,” said Phil Kendall, the firm’s director of wireless operator strategies service, and author of the first report.

The company said “the picture in Japan, South Korea and the US is more encouraging, where revenue growth has been maintained or improved through rapid migration of connection volumes to 4G and pricing successes in areas such as tiered and shared data plans.”

But after investing billions in LTE infrastructure, 1% to 4% revenue growth is hardly something for telcos to cheer about.

In a third report Strategy Analytics insists that “continued investment in technology infrastructure alone is not likely to improve the declining revenues and profitability facing the industry.”

The firm reminds us that telcos’ financial performance has deteriorated since 2007 with revenues flat and profitability in decline. ”This deteriorating performance may even be exacerbated by their massive investment in fiber technology and advanced LTE technology as operators compete in a ‘race to the bottom’.”

To avoid the commodity trap, not surprisingly, the firm recommends telcos become more consumer centric (haven’t they been trying that for five years?) and focus on “meeting specific functional needs as they compete for targeted consumer segments” (whatever that is).

In fairness, the firm explains that involves “innovative value propositions and meaningful brand differentiation” – but again, isn’t that what all telcos have been doing for years?

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