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Friday, 5 January, 2001, 18:04 GMT
Mobile groups to pay hefty price
Children using mobile phones
Forrester: Average revenue per user will fall
Europe's mobile phone networks will be controlled by five dominant players by 2015, according to new research

Forrester Research says mergers and takeovers will be needed because third-generation mobile phone services will not move into profit before 2013.

It also says that the current generation of mobile phones is nearing saturation point in major markets.

With fewer new consumers to share around, there will be vicious price wars to come.

As this happens, operating profits will slide - just at the time when huge sums are needed to build and market next generation services.

Forrester says the companies emerging successful will include the UK's Vodafone Group, Deutsche Telekom's T-Mobil, France Telecom's Orange and British Telecommunications' BT Cellnet.

The fifth big player might be either Royal KPN of the Netherlands, Spain's Telefonica, Telecom Italia or NTT DoCoMo of Japan, Forrester said.

New entrants

Forrester drew its conclusions after its research suggested European mobile network operators would face operating losses from 2007.

"Scale will become a key success factor as grim profitability prospects and huge capital requirements take their toll," the research group said in a report published on Friday.

"As a result, winning operators will consolidate into five groups.

"Dominant players in smaller markets like Norway and Sweden will have to affiliate with these larger groups by 2008 - leaving no truly independent operators."

New entrants to the market - some of whom last year acquired licences at great expense to operate third generation mobile phone networks - will not survive beyond 2007 either.

Revenue question

Forrester said average revenue per user would fall 15% in 2000-2005, to 416 euros (265; $396) a year..

The decline would be steepest in voice and messaging services, where revenue will drop 36% to 313 euros a year.

Any increase in data services revenue would not be enough to make up the shortfall. Forrester predicts average revenue per user from mobile internet services of 106 euros a year in 2005.

Some other analysts agree, saying many mobile phones are now in the hands of people, such as children, who will not use the phones enough to justify the companies continuing to subsidise the price of the handsets.

However, a survey conducted by Siemens Ireland - whose German parent makes mobile phones - offered a different prognosis.

It suggested Irish mobile phone users would be prepared to pay as much as 63% more for third generation services including high-speed internet connections.

This might indicate a brighter future for the revenue streams of operators offering third generation services than has previously been widely assumed.

Saturation point nearing

An additional factor in favour of consolidation among operators is that markets are nearing saturation point.

In the UK, for example, almost three in four of the available population now have a mobile phone.

Forrester predicts operators will be unable to increase penetration levels much beyond 80% in most markets.

According to the research group's 15-year projections, operators can expect operating profit to start falling from 2003 and move into loss from 2007.

Any recovery would be unlikely before 2013.

Forrester's research was based on interviews with representatives from 26 European mobile operators.


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