Ka-ching, ka-ching. European wireless carriers are being told to expect 50 percent of the population to use their mobile handsets to access the broadband Internet by 2012. But most carriers won't be able to handle it alone.
An ongoing report series from Exane BNP Paribas and Arthur D. Little also says wireless service providers "have a job to do" in catching up with consumer expectations regarding mobile broadband, and part of that work will lead to greater fixed-mobile network integration. Carriers will experience huge growth in mobile broadband traffic - as is already seen in some advanced countries like Austria.
To accomplish this, mobile operators will be partnering with fixed-infrastructure providers, with Arthur D. Little and Exane BNP Paribas forecasting that 20 percent of mobile broadband traffic could be carried through fixed networks.
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"Wireless providers can expect to enjoy re-accelerating revenue growth (2.6 percent per year between 2007 and 2012), but the integration of fixed infrastructure into their networks will have a negative impact on their margins," the report says. "Revenue streams from products that converge fixed and mobile broadband will increasingly be the focus of new product development for both mobile operators and fixed broadband providers."
Last year, the authors predicted that "within the next two to three years, Internet players could compete with mobile operators." This year, however, they say telecom providers "are facing the tightening grip of fast-growing global Internet giants on Internet services and on the monetization of online advertising plus the increasing pressure from global hardware manufacturers who also want to develop revenue streams from Internet and content service. As such, operators will struggle with developing revenue streams from Internet services and advertising. The bulk of their revenues and profits will continue to come from connectivity."
"We believe that mobile broadband offers large opportunities for value creation at all levels of the value chain but, while telecom operators have traditionally occupied a prime spot in the value chain, they face fast-moving competition from sophisticated global giants coming from the Internet and hardware worlds," comments Jean-Luc Cyrot of Arthur D. Little's TIME Practice. As such, to create opportunities for growth in an "all-IP" environment, telecom carriers can't avoid collaboration with these global giants.
The report also notes domestic consolidation will continue this year, especially among fixed providers. As a result (and this is important), the number of fixed and mobile network operators in each of the European markets will fall progressively from seven to four - on average. "In particular, sub-scale broadband providers will be under mounting pressure as a result of the move to triple-play, fiber and mobile broadband competition," it adds.
Beyond local market consolidation, a wider-ranging pan-European consolidation could be on the cards. The report outlines two scenarios for the sector: the "Access Specialization" scenario that could benefit small, aggressive providers; and the "Pan-European Consolidation" scenario that has larger operators scooping up the smaller providers. According to Antoine Pradayrol, head of the telecom team at Exane BNP Paribas in London, "It is increasingly clear that larger multi-country operators have an advantage in negotiating with Internet giants and device manufacturers. This could become a very powerful rationale for pan-European consolidation of telecom operators."