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Has the Mobile Phone market reached saturation?

The most recent snapshot of the global telecoms industry has dialled up some bad numbers for managers at Vodafone and other mobile phone operators. Figures compiled by Informa Telecoms & Media, a London-based telecoms industry consultancy, show that the number of net new mobile phone subscribers in the world fell sharply in the fourth quarter of 2008 and the growth of mobile data revenues stalled for the first time.

The report provides further evidence of the impact of the global economic slump on the mobile telecoms sector.

The steep drop in data revenues is particularly worrying for the industry because most network operators, especially those in the more mature developed markets such as Western Europe and North America, are counting on expanding revenues from data services such as internet browsing and multimedia downloads to offset flat or falling revenues from traditional voice traffic.
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The figures from Informa Telecoms show that the total of new subscribers to a mobile phone service fell 15% to 162 million in the final quarter of 2008.

Traditionally the fourth quarter is the year’s strongest, but in 2008 it was the weakest.

In spite of this, by the end of 2008, there were just under four billion active mobile subscriptions globally. This amounts to a penetration rate of 58%.

The region that suffered most during the fourth quarter was Asia-Pacific, with 68.7 million net additions, compared with 87.6 million previously – a fall of 21%. This represented the lowest quarterly growth in the region for seven quarters.

Some of the world’s fastest-growing mobile markets – Indonesia, Pakistan, Bangladesh and the Philippines – were hit particularly hard, while growth also slowed markedly in Europe, North America and Latin America. The Middle East and Africa, where the percentage of the population with mobile phones is still only 38%, proved relatively resilient.

The global recession is the main factor in the slowdown, but market saturation also contributed. The recent restructuring of the Chinese mobile market has also led to a slowdown in growth, according to Informa’s research.

Nick Jotischky, Informa’s principal analyst, said: “We do have to take into account the impact of market saturation and the recent restructuring of the world’s largest mobile market – China – which led to a temporary slowdown in growth.”

According to the consultant’s figures, which form part of the firm’s quarterly World Cellular Data Metrics report, non-voice revenue spending dipped by 0.1% between the third and fourth quarters to $48.9bn (£33bn).

By contrast, data revenues grew by 5% during the third quarter.

The data suggest that many operators in Germany, UK and Italy are experiencing a slowdown in non-voice revenue growth while in parts of Asia-Pacific, network operators are reporting consumers spending proportionately less on data than voice calls.

Vodafone Group’s chief executive, Vittorio Colao, recently told a German newspaper that while emerging markets were not unscathed by the global economic crisis, they still offered opportunities to mobile phone operators.

“I’m assuming that growth will slow down in emerging markets, but they still offer us vast potential,” Colao told Welt am Sonntag.

However, some City analysts and traders don’t see it that way. Investors marked down Vodafone’s shares after the Informa report came out.

Two-thirds of the world’s cell phone subscriptions are in developing nations, with the highest growth rate in Africa, a United Nations agency said last month.

Other companies that have invested heavily in emerging markets include India’s Bharti Airtel, Norway’s Telenor, South Africa’s MTN and Egypt’s Orascom Telecom.

Colao also told Welt am Sonntag it was definitely time for consolidation among mobile phone operators, but would not say whether and how Vodafone would participate in the process.

Despite the current economic downturn, Vodafone is still looking to expand through acquisitions when opportunities arise.

It is girding itself for a battle with Spanish arch rival Telefonica over German internet provider HanseNet, which has 2.3 million customers.

The German firm has been put on the block by its owner Telecom Italia, which has decided to sell non-core assets to reduce its debt. HanseNet, which trades under the Alice brand, grew rapidly earlier this decade and is an attractive asset for a major telecoms company. Bidders have until Friday to submit non-binding offers.

Vodafone already offers internet services in Germany through Arcor, now rebranded as Vodafone, which it acquired when it bought Mannesmann in 2000 after a long takeover battle.

Telefonica, which owns a 10% stake in Telecom Italia, already has an alliance with HanseNet, which uses its network for mobile services. Other rumoured bidders include United Internet and Turkcell.

HanseNet could be worth £1bn but bids could be substantially lower because of the current climate, in which financing is difficult to obtain and a lack of appetite for large deals among investors. The protracted sale of Tiscali in Britain provides evidence that buyers are unwilling to buy assets unless they are available at bargain-basement prices.

Originally posted 2009-04-21 14:41:10.