analysys mason western europe forecasts jun2013 rddf0 toc

© Analysys Mason Limited 2013

The Western European Telecoms Market: trends and forecasts 2013–2018

Research Forecast Report

Western European telecoms market: trends and

forecasts 2013–2018

June 2013

Hilary Bailey, William Hare, Pablo Iacopino and Rupert Wood



Contents

8. Executive summary

9. Telecoms operators in Western Europe face a period of steady decline

during the next five years

10. Retail telecoms revenue in Western Europe is set to decline at a CAGR

of –1.2% between 2012 and 2018

11. Key implications

12. Key implications – mobile operators

13. Key implications – fixed operators

14. Forecasts: drivers, inhibitors and trends

15. Five key drivers of decline in Western European telecoms revenue [1]

16. Five key drivers of decline in Western European telecoms revenue [2]

17. Significant changes since our previous forecast (fixed and mobile)

18. LTE will account for 55% of total non-M2M mobile connections by 2018

19. By 2018, 57% of fixed broadband lines will be superfast

20. Migration to voice over broadband (VoBB) will be slow, and larger telcos

do not favour this approach

21. Spend per connection will continue to decline in both mobile and fixed

markets

22. Handset data ARPU will grow strongly with the increase in smartphones

and 4G…

23. … but overall handset ARPU will continue to decline in all segments

24. The need for large-screen mobile broadband connections will diminish,

but ARPU will remain steady, and the net effect on revenue is neutral

2

25. Fixed broadband revenue will increase as ASPU remains relatively

stable, largely because of a higher share for next-generation access

26. The macroeconomic environment continues to be the main factor

affecting business revenue

27. Country comparisons

28. Retail revenue will be lower in 2018 than in 2012 in all countries

29. Mobile handset ARPU will decline in all countries, but higher

smartphone penetration will yield higher handset data ARPU

30. Disposable income will drive LTE handset take-up in the long term

31. Fixed broadband penetration will continue to increase across all

Western European countries

32. Quadruple play can cause immediate declines in revenue and profit, and

mobile voice has much further to fall than fixed voice

33. FTTH take-up can be stronger in poorer economies

34. An average of 43% of Western European households will have an NGA

connection by 2018, but there will be great variation between countries

35. Individual country forecasts

36. France: Revenue will stabilise after a period of severe market upheaval,

but no further growth is expected

37. France: Summary of forecast drivers

38. France: Smartphones already dominate the handset market, and 4G

adoption will be swift

39. France: Fixed broadband penetration will continue to grow, and

inexpensive VoBB minimises the decline in voice penetration

Slide no. Slide no.



Contents

40. France: Mobile revenue will continue to decline at a slower rate after the

turmoil of the past two years

41. France: Fixed revenue remains very stable, as strong VoBB secures

voice revenue, and fixed broadband continues to grow

42. Germany: Retail revenue will decline after 2013 as voice revenue

contracts in fixed and mobile markets

43. Germany: Summary of forecast drivers

44. Germany: The device base will shift towards contract smartphones, and

network enhancements will advance apace

45. Germany: Fixed voice penetration is set to decline, while fixed

broadband take-up continues to grow

46. Germany: Growth in mobile revenue is not sustainable, because OTT

services are threatening traditional services

47. Germany: Fixed revenue will continue to decline

48. Italy: Telecoms revenue will continue to decline because of the tough

economic environment and strong price competition

49. Italy: Summary of forecast drivers

50. Italy: M2M will be the major source of new SIMs in the mobile market,

but the nature of the handset base will change significantly

51. Italy: Residential fixed broadband penetration will increase, but Italy will

continue to lag behind the rest of Western Europe

52. Italy: Mobile service revenue will continue to be under pressure as voice

prices fall and OTT services threaten messaging volumes

53. Italy: Fixed revenue will continue to decline because broadband

penetration remains low and mobile prices are more attractive

3

54. Spain: Telecoms revenue will continue to decline because of budget

constrains and increasing price-driven competition

55. Spain: Summary of forecast drivers

56. Spain: The mobile device ecosystem will continue to evolve, as the

number of smartphones, M2M and 4G connections increases

57. Spain: Fixed broadband connections will continue to increase, and users

will increasingly demand high-speed fibre connectivity

58. Spain: Mobile service revenue will decline in 2013 and 2014 because

voice prices are still high and eroded by competition

59. Spain: Fixed revenue will decline further, but the rate of decline will fall

as broadband and business network services return to growth

60. Sweden: Data services will overtake traditional voice and messaging

services in 2016

61. Sweden: Summary of forecast drivers

62. Sweden: High take-up of mobile devices reflects the country’s advanced

network

63. Sweden: Fixed broadband connections have scope for a little more

growth, but fixed voice penetration will decline slowly

64. Sweden: Mobile revenue increased in 2012, but growth will not be

sustained because of the decline in traditional services

65. Sweden: Fixed service revenue will steadily decline to less than

SEK30 billion by 2017

66. UK: Growth in data revenue will not be sufficient to offset the decline in

traditional voice and messaging services

Slide no. Slide no.



Contents

67. UK: Summary of forecast drivers

68. UK: Usage patterns and device take-up will govern the evolution of the

SIM market

69. UK: Broadband is sustaining the fixed voice market, and will grow

steadily, both overall and at superfast speeds

70. UK: Mobile service revenue will decline, and handset data will be the

most important growth area

71. UK: Fixed retail revenue will decline only modestly, as subscriber growth

remains healthy and ARPU is maintained

72. Market definition

73. This report provides forecasts for fixed and mobile telecoms services in

16 individual markets

74. Our forecasts build on Telecoms Market Matrix, a comprehensive

source of trusted quarterly market data

75. Our comprehensive forecast model is supported by a sound knowledge

of markets

76. Forecast model outline

77. About the authors and Analysys Mason

78. About the authors [1]

79. About the authors [2]

80. About Analysys Mason

81. Research from Analysys Mason

82. Consulting from Analysys Mason

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Slide no.



List of figures

Figure 1: Revenue by retail and wholesale and as a proportion of GDP,

Western Europe, 2010–2018

Figure 2: Retail revenue by service type, Western Europe, 2010–2018

Figure 3: Growth rates of retail revenue by individual service types in


Figure 4: Mobile connections by service type and technology, Western

Europe, 2010–2018

Figure 5: 2G, 3G and 4G share of active handsets, Western Europe, 2010–

2018

Figure 6: 3G and 4G share of active SIMs for mobile broadband, Western

Europe, 2010–2018

Figure 7: Fixed broadband connections by technology, Western Europe,

2010–2018

Figure 8: Fixed voice channels by service type, Western Europe, 2010–

2018

Figure 9: Mobile handset ARPU by service type, mobile broadband and

blended mobile ARPU, Western Europe, 2011–2018

Figure 10: Average spend per active residential fixed connection, Western

Europe, 2011–2018

Figure 11: Handset data ARPU and price per megabyte, Western Europe,

2011–2018

Figure 12: Smartphone and 4G share of total handsets, Western Europe,

2011–2018

Figure 13: Handset ARPU by service category, and share of elements,


Figure 14: Handset data ARPU by market segment, Western Europe, 2011–

2018

5

Figure 15: Figure 15: Mobile broadband connections and ARPU by device

type, Western Europe, 2011–2018

Figure 16: Fixed broadband revenue by service type, Western Europe,

2010–2018

Figure 17: Figure 17: Fixed broadband ASPU by connection type, Western

Europe, 2011–2018

Figure 18: Business retail spend by service type, Western Europe, 2010–

2018

Figure 19: Annual change in nominal retail revenue (local currency), 2011

and 2012

Figure 20: Index of nominal retail revenue (local currency), 2012–2018,

northern Europe

Figure 21: Index of nominal retail revenue (local currency), 2012–2018,

central and southern Europe

Figure 22: Mobile handset ARPU, 2012 and 2018, handset data ARPU, 2018

and smartphone share of handsets, 2018

Figure 23: Handsets with active 4G SIMs as percentage of handsets with

active SIMs, 2012 and 2018, and GDP per capita 2012

Figure 24: Fixed broadband household penetration by country, northern

Europe, 2011–2018

Figure 25: Fixed broadband household penetration by country, central and

southern Europe, 2011–2018

Figure 26: Revenue and EBITDA, four integrated French operators, 1H

2011–2H 2012

Figure 27: Forecast fixed broadband subscribers taking a bundled mobile

handset service, 2017, and CAGR in voice ASPU 2010–2017,

selected countries



List of figures

Figure 28: FTTH take-up (subscribers/premises passed) in major

deployments, Europe, against income and geotype targeted

Figure 29: NGA penetration by country, northern Europe, 2010–2018

Figure 30: NGA penetration by country, central and southern Europe, 2010–

2018

Figure 31: Retail revenue by service type, France, 2010–2018

Figure 32: Growth rate of retail revenue by service type, France, 2012 and

2018

Figure 33: Mobile device connections by type, France, 2010–2018

Figure 34: Mobile device connections by technology generation, and mobile

penetration rate, France, 2010–2018

Figure 35: Fixed voice and fixed broadband residential penetration of

households, France, 2010–2018

Figure 36: Fixed broadband connections by technology, France, 2010–2018

Figure 37: Mobile service revenue by type, ARPU and ASPU, France, 2010–

2018

Figure 38: Fixed service revenue by type, France, 2010–2018

Figure 39: Retail revenue by service type, Germany, 2010–2018

Figure 40: Growth rate of retail revenue by service type, Germany, 2012 and

2018

Figure 41: Mobile device connections by type, Germany, 2010–2018


penetration rate, Germany, 2010–2018

Figure 43: Fixed voice and fixed broadband penetration of households,

Germany, 2010–2018

Figure 44: Fixed broadband connections by technology, Germany, 2010–2018

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Figure 45: Mobile service revenue by type, ARPU and ASPU, Germany,

2010–2018

Figure 46: Fixed service revenue by type, Germany, 2010–2018

Figure 47: Retail revenue by service type, Italy, 2010–2018

Figure 48: Growth rate of retail revenue by service type, Italy, 2012 and 2018

Figure 49: Mobile device connections by type, Italy, 2010–2018


penetration rate, Italy, 2010–2018


households, Italy, 2010–2018

Figure 52: Fixed broadband connections by technology, Italy, 2010–2018

Figure 53: Mobile service revenue by type, ARPU and ASPU, Italy, 2010–

2018

Figure 54: Fixed service revenue by type, Italy, 2010–2018

Figure 55: Retail revenue by service type, Spain, 2010–2018

Figure 56: Growth rate of retail revenue by service type, Spain, 2012 and

2018

Figure 57: Mobile device connections by type, Spain, 2010–2018


penetration rate, Spain, 2010–2018


households, Spain, 2010–2018

Figure 60: Fixed broadband connections by technology, Spain, 2010–2018

Figure 61: Mobile service revenue by type, ARPU and ASPU, Spain,

2010–2018



List of figures

Figure 62: Fixed service revenue by type, Spain, 2010–2018

Figure 63: Retail revenue by service type, Sweden, 2010–2018

Figure 64: Growth rate of retail revenue by service type, Sweden, 2012 and

2018

Figure 65: Mobile device connections by type, Sweden, 2010–2018


penetration rate, Sweden, 2010–2018

Figure 67: Fixed voice and fixed broadband penetration of households,

Sweden, 2010–2018

Figure 68: Fixed broadband connections by technology, Sweden, 2010–2018

Figure 69: Mobile service revenue by type, ARPU and ASPU, Sweden,

2010–2018

Figure 70: Fixed service revenue by type, Sweden, 2010–2018

Figure 71: Retail revenue by service type, UK, 2010–2018

Figure 72: Growth rate of retail revenue by service type, UK, 2012 and 2018

Figure 73: Mobile device connections by type, UK, 2010–2018


penetration rate, UK, 2010–2018

Figure 75: Fixed voice and fixed broadband penetration of households, UK,

2010–2018

Figure 76: Fixed broadband connections by technology, UK, 2010–2018

Figure 77: Mobile service revenue by type, ARPU and ASPU, UK, 2010–

2018

Figure 78: Fixed service revenue by type, UK, 2010–2018

Figure 79: Countries covered individually for this report

Figure 80: Key factors influencing forecast assumptions

7



By 2018, 57% of fixed broadband lines will be superfast

By 2018 the majority of fixed broadband lines (57%) will be

one form or another of NGA (FTTB/H, cable, VDSL), up from

28% in 2012.1

NGA demand is picking up after a very slow start, driven by

what is now a real demand for more bandwidth (replacing the

nebulous demand for future-proofing) and by the decline in

retail prices to little above the levels of ADSL. Several factors

are driving this demand:

OTT video on TVs and multiple tablets is the main driver.

A further driver is the far-better upstream speeds available

on VDSL and FTTH (although this is not yet the case on

cable). Demand for upstream bandwidth is itself driven by

cloud, homeworking and videocomms.

We expect some telcos to start phasing out ADSL in NGA

areas during the forecast period.

FTTH (FTTB/LAN is rare in WE) will have a limited share of

the total. The speed of roll-out of FTTH depends critically on

access to physical infrastructure (particularly ducts) and has

been slow except in Portugal and, more arguably, in Spain.

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Other

Cable modem

FTTH

VDSL

ADSL/SDSL

Figure 7: Fixed broadband connections by technology, Western Europe,

2010–2018 [Source: Analysys Mason, 2013]

1. For the purposes of this report we count all cable as NGA: By 2012 almost all cable networks

had been upgraded to DOCSIS3.0.

FTTC/VDSL will be the norm in Germany, Italy and the UK,

and a number of smaller countries, and it could start to gain

share in France.

The depth of competition in the European market has meant

that many telcos need a quicker response to threats from

cable than FTTH can provide. However, copper-based xDSL

technologies have also become more capable, and they

remain far less-expensive short-term options than a pure

fibre approach.



Disposable income will drive LTE handset take-up in the long term

The availability and affordability of devices will mainly drive

LTE take-up in the medium term, and take-up is therefore

broadly related to levels of disposable income.

In the shorter term, take-up is clearly related to the timeline of

auctions (and related coverage conditions), roll-out and

launches. This has a longer-term effect on countries that had

very early launches such as Sweden, where coverage will be

higher.

We believe that in general operators will not be able to

maintain a price premium for 4G for longer than 18 months,

and less time if there are multiple simultaneous launches.

4G take-up will be exceptionally high in Finland, a function of

a country where consumers are already heavily invested in

mobile as their main network for all services.

Outcomes will be very different in the two poorest countries

in the region, Greece and Portugal. This is because

Portuguese operators were historically financially stronger,

and despite – or arguably because of – the economic crisis,

invested heavily in networks in anticipation of an eventual

upturn. Greek operators have not been in a financial position

to do so. We therefore expect much higher take-up in

Portugal than Greece.

30

Figure 23: Handsets with active 4G SIMs as percentage of handsets with

active SIMs, 2012 and 2018, and GDP per capita 2012 [Source: Analysys

Mason, 2013]

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About the authors [1]

Hilary Bailey (Senior Analyst) has worked for Analysys Mason for more than 20 years. She specialises in

quantitative forecast modelling and is a key contributor to Analysys Mason’s Core Forecasts and Country Reports

research programmes. Hilary helped to develop and implement our new converged core forecast methodology. She

manages and is one of the key contributors to Analysys Mason’s Telecoms Market Matrix, which tracks and

compares telecoms metrics and market shares for all the major fixed and mobile operators in Europe. She has

previously specialised in telecoms price comparison studies encompassing fixed, mobile and the converged

fixed/mobile markets. Hilary has a degree in Economics from the University of Bristol, and an MPhil in Economics

from the University of Cambridge.

Rupert Wood (Principal Analyst) is the lead analyst for Analysys Mason’s Fixed Networks research programme. His

primary areas of specialisation include next-generation networks, long-term industry strategy and forecasting the

dynamics of convergence and substitution across fixed and mobile platforms. Rupert regularly contributes to the

international press on a wide range of telecoms subjects and has been quoted by The Times, The Economist,

Business Week, La Tribune and Kommersant. Rupert has a PhD from the University of Cambridge, where he was a

Lecturer before joining Analysys Mason.

78



About the authors [2]

Pablo Iacopino (Analyst) focuses on forecasting and analysing telecoms markets in Europe and Latin America. He

is co-leader of the Analysys Mason’s Global Telecoms Forecasts programme and a key contributor to the Telecoms

Market Matrix. Pablo joined Analysys Mason in 2012, after 8 years in the telecoms industry. He worked for 5 years

in Strategy and Investor Relations at Telecom Italia, where he was responsible for European telecoms

benchmarking, followed by 3 years in investment banking as a senior equity research analyst covering telecoms

stocks. Pablo specialises in industry analysis, benchmarking, modelling, forecasts and valuation. He holds a

Master’s degree in business administration and a postgraduate Master’s degree in statistics and economics from

Università degli Studi di Roma ‘La Sapienza’.

William Hare (Analyst) joined Analysys Mason’s Consulting division in 2007, before transferring to the Research

division in 2010. He works primarily on Analysys Mason’s consumer service research, as well as contributing to the

modelling behind the Telecoms Market Matrix, wireless traffic forecasting and the Connected Consumer survey. His

primary specialisations include business and market modelling and data analysis, for both the mobile and fixed

telecoms markets. He read mathematics at the University of Cambridge.

79



About Analysys Mason

Knowing what’s going on is one thing. Understanding how to take advantage of events is quite another. Our ability to understand the

complex workings of telecoms, media and technology (TMT) industries and draw practical conclusions, based on the specialist

knowledge of our people, is what sets Analysys Mason apart. We deliver our key services via two channels: consulting and research.

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Consulting

Our focus is exclusively on TMT.

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and advise on operational performance, business planning and strategy.

We have developed rigorous methodologies that deliver tangible

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For more information, please visit www.analysysmason.com/consulting.

Research

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Research clients benefit from regular and timely intelligence in

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Our dedicated Custom Research team undertakes specialised and

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For more information, please visit www.analysysmason.com/research.



Research from Analysys Mason

81

We provide dedicated coverage of developments in the telecoms, media and technology (TMT) sectors,

through a range of research programmes that focus on different services and regions of the world.

Alongside our standardised suite of research programmes, our Custom Research team undertakes specialised, bespoke research

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To find out more, please visit www.analysysmason.com/research.



Consulting from Analysys Mason

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been bringing the benefits of applied intelligence

to enable clients around the world to make

the most of their opportunities.

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Our clients in the telecoms, media and technology (TMT)

sectors operate in dynamic markets where change is

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that, we have developed rigorous methodologies that

deliver real results for clients around the world.

Our focus is exclusively on TMT. We advise clients on

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