© 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
© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
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.
© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
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.
© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
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
4
Slide no.
© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
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
Western Europe, 2010–2018
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,
Western Europe, 2011–2018
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
© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
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
Figure 42: Mobile device connections by technology generation, and mobile
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
6
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
Figure 50: Mobile device connections by technology generation, and mobile
penetration rate, Italy, 2010–2018
Figure 51: Fixed voice and fixed broadband residential penetration of
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
Figure 58: Mobile device connections by technology generation, and mobile
penetration rate, Spain, 2010–2018
Figure 59: Fixed voice and fixed broadband residential penetration of
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
© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
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
Figure 66: Mobile device connections by technology generation, and mobile
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
Figure 74: Mobile device connections by technology generation, and mobile
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
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© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
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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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.
© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
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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© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
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
© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
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
© Analysys Mason Limited 2013
The Western European Telecoms Market: trends and forecasts 2013–2018
About Analysys Mason
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The Western European Telecoms Market: trends and forecasts 2013–2018
Research from Analysys Mason
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The Western European Telecoms Market: trends and forecasts 2013–2018
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The Western European Telecoms Market: trends and forecasts 2013–2018
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