Is European Mobile Revenue Slide Near a Turning Point?

Will the European mobile market reach a turning point, and return to growth in 2014, or continue a long downward slide?

Vodafone argues, almost paradoxically, that the full onset of new revenue-reducing roaming rates will soon be fully in place.

Over the last three years, for example, those mandatory rate reductions have accounted for about 75 percent of the revenue decline at Vodafone. At the very least, that means the lower roaming rates will cease to put pressure on overall revenues.

But Vodafone also notes a number of positive trends, ranging from improving economic growth to new retail plans that put a floor on voice and messaging revenue, to growth in new markets, plus investment to drive new revenues, an easier regulatory environment, as well as ability to create economies of scale, all will help Vodafone begin to grow revenue.

Between 2012 and 2018, researchers at Ovum have forecast that mobile connections in Western Europe will grow by a less than one percent compound annual growth rate, while revenues will decline at a 1.48 percent CAGR.

In a switch, Analysys Mason also forecasts that mobile revenues will while fixed revenues climb, a reversal of the pattern that has had mobile services leading overall telecom industry growth.

Also, researchers at STL Partners predict that Western European service providers will lose four percent of their revenue per year, for about five years.

So if Vodafone is correct, and a turnaround is at hand, there might be reason to suggest at least a few other tier one service providers might likewise be able to reverse the current trend of declining revenue, and return to growth. That would be a very big deal.

Vodafone originally had planned to spend about £12 billion in capital investment over a three year period starting in 2014. But Vodafone now says it will spend an additional £7 billion over just two years, in support of its “return to growth” program.

The £12 billion program will increase fourth generation Long Term Evolution sites from 12,000 in 2013 to 89,000 by the end of 2015.

Of £3 billion allocated under Project Spring for Vodafone’s European markets, investment also will be used to add new 2G, 3G, small cell and Wi-Fi sites.

Markets in Africa, Middle East and Asia Pacific will get investment of £1.5 billion, including £1 billion for fixed networks in Europe (Italy, Portugal) and India.

Investment in machine-to-machine services will be extended to 75 markets, while the Vodafone IP-VPN expands to  11 new markets (£500 million worth of investment).

Also, £1 billion is set aside for redesigning 6,500 retail outlets.