It is 44 years since the world’s first mobile phone call was made – and since then mobile telecoms have come a long way. But as technology improves are the mobile operators keeping up? Can they survive the future? Dave Millett of independent telecoms brokerage Equinox believes their future isn’t as rosy as it used to be:
A report by Deloitte in late 2016 reported that 31 per cent of smartphone users make no traditional voice calls in a given week. This contrasts with a quarter in 2015, and just 4 per cent in 2012. This reflects the growth of consumer apps such as Facetime and Whatsapp, which reflected growth in interest of video calls, and a desire to avoid roaming charges.
Similarly, in the business sector the growth of VoIP and phone system apps allowing people to have their office landline number on their mobile has seen traffic move away from the mobile networks.
There has been a long-standing battle over whether it is better to have a mobile or landline number if you want to choose just one number to promote. It appears the landline is winning.
For example, for the small business owner, the benefit of having a work number they can turn off at weekends and being able to keep their mobile number private is helping to keep the landline alive.
The first text was sent in 1992. Since then SMS has grown in popularity in Britain peaking in 2011, but in the last six years it has fallen by almost half and has been over-taken by instant messaging applications.
WhatsApp passed a billion active users in 2016 and research found that the main reason 42 per cent of Brits used a mobile phone was to access messaging apps. Younger age groups now see SMS as old and unfashionable.
The implication for the mobile networks is that of lost revenue as SMS was always a key part of their income stream. So, with SMS declining, the loss of roaming charges in the EU, and potential that, as we negotiate trade deals elsewhere in the world post-Brexit, other regions may also drop roaming charges – the mobile networks could see their profits dropping and their future looking a little less rosy than it has been.
For example, O2 recently announced its results and although revenues in 2016 grew 1.2 per cent year-on-year, the rise was due to higher subscription revenues and out of bundle charges. In other words, rising prices and charging people for excess usage including roaming. This will now be harder to do, and it will affect their profits.
Is the hope for the future of the mobile networks a growth in data usage through the Internet of Things and increasing use of data-based apps? Whilst there are people with high usage due to video and music streaming, the average usage per device is still quite low. Research by Cisco showed that average monthly smartphone data traffic in the UK during 2015 was 1.2 GB – an increase from the average of 849MB per month in 2014. Even if that rate of growth was replicated again in the last 12 months, it still makes the average less than 2GB.
Although there are over 50 million 4G connections in the UK, the lack of coverage (the UK ranks 54th in the world) means that the applications and technologies that would drive data usage struggle to work all the time. That is where 5G, whenever we finally get it, may help the networks as it is likely to prompt surge in data usage. However, the networks face a new challenge in the growth of wifi hotspots – which reduces customer data usage.
Ultimately, this creates a challenge; the mobile operators need to make a profit to fund investment – especially in the next generation of 5G networks. The UK’s mobile and data telecoms plans are already five years behind countries such as Japan and South Korea. But if users continue to communicate via apps (both messaging and voice) and use wifi wherever it is available then that can only lead to standard package prices going up to generate the revenues the operators need. Either that or the Government is going to have to fund more of the infrastructure – something that is already happening in many countries.