Connections growth in emerging markets hides recessionary pressures
Our estimate for global connections in 2009 (4.56 billion) is 1.2% lower than previously forecast. However, by 2014 our forecast of 6.49 billion connections is 1.1% higher than our previous estimate.
The upgrade in our 2014 outlook is driven by Asia-Pacific. Containing China and India, the region will remain the connections growth engine, accounting for 63% of global net additions between 2009 and 2014. As a result of this increased focus on emerging markets, global prepaid connections will grow from 3.3 billion in 2009 to 4.79 billion in 2014.
Conversely, developed market connections have borne the brunt of the recession. Therefore, we have dampened our expectations in most developed markets. There is still growth - a CAGR of 2% from 2009 to 2014 in Western Europe, for example - but operator strategies in mature markets must reflect the shift in emphasis to maintaining profit levels rather than top-line growth.
Recession and ‘emerging maturity' slows short-term revenue growth
Pressure on developed market players is reinforced in our revenue forecasts. Currency fluctuations make comparisons with earlier numbers difficult, but our revenue estimate for 2009 ($873.96 billion) is 1.6% lower than before. By 2014 we expect the 2014 figure to be $1,036 billion, 7% lower than previously forecast.
However, we still expect a CAGR of 3% over the forecast period, with over $1,000 billion dollars in revenues in 2013. Much of this revenue growth comes from the extraordinary connections growth in emerging markets - North America and Western Europe's contribution to global revenues will fall from 44% in 2009 to 40% in 2014.
Yet the proportional contribution to global revenues from emerging markets will be lower than for connections, as ARPU continues to decline due to increased competition and saturation. Such ‘emerging maturity' will be a key feature of many previously high-growth markets to 2014.
Data to continue its mercurial rise, but voice to remain the ‘killer app'
Mobile data services are set to grow in prominence, particularly in developed markets. In 2009, estimated mobile data revenues were $203.19 billion, growing at a CAGR of 11% to $340.31 billion in 2014. This will mean that, on average, 33% of operators' revenues will be derived from data in 2014, compared to 23% in 2009. Increased data usage will mean greater focus on spectrum during this period, as well as other capacity-increasing mechanisms such as traffic management solutions.
However, it is vital that operators do not forget more traditional services. Messaging will still contribute 45% of data revenues in 2014, despite the rapid price erosion currently being seen. Voice will also continue to be the ‘killer app', contributing 67% of operator revenues globally in 2014 and no less than 60% in each region. However, voice margins will be difficult to maintain in the face of intense price pressure.
LTE heralds the all-IP world
LTE has rapidly become the de facto standard for the long-term data transport optimisation solution. Therefore, we expect there to be 116.8 million LTE connections worldwide by 2014. However, it is important to note that there is still life in HSPA, which by 2014 will constitute 75% of high-speed mobile data connections (those using WCDMA, HSPA, CDMA EV-DO, LTE or mobile WiMAX).
This migration to an all-IP world will have an enormous impact on operator business models and strategies. SMART and LEAN players, set out in our series of Telecoms 2020 reports, will increasingly move into focus towards the end of the forecast period. Operators will also need to consider their roles as fixed, mobile or integrated players. All options are possible, but have important investment and revenue implications. LTE may solve data transport issues, but it brings with it new and significant challenges.