Technology

Saturday 12 July 2014

Internet services erode operator revenues

ANALYSIS

Adrian Weckler

Published 07/02/2014|02:30

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Another quarter, another slide in user revenue. Vodafone Ireland's 11pc fall in so-called average revenue per user (ARPU) tallies almost precisely with the overall Irish industry average. In other words, mobile operators are making less and less from mobile tariffs and bills. Looked at over a period to time, it amounts to a slump. Eight years ago, Vodafone's ARPU stood at €50. That has shrunk to €28, a 44pc fall. Other operators have fared similarly. Why is this? There are three main reasons.

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1. Customer behaviour

The onset of instant messaging and free internet calls is crushing some traditional revenue sources for mobile operators in Ireland. According to recent figures from Ipsos MRBI, 1.3million Irish adults use Facebook Messenger as a messaging service, while the same number of people use Viber as a free internet phone service. Around 700,000 Irish adults use the messaging service Whatsapp. Use of SMS text messages is falling over 10pc per year in Ireland.

2. Regulatory impact

While Ireland's telecoms regulator would be keen to accept some of the credit for lower bills, it is the European Commission that may have impacted most on phone costs. Over successive years, it has imposed price caps on roaming charges for calls and texts within EU countries, which operators used as a cash cow. Now it is cracking down on data roaming charges, with a new ceiling of 55c per megabyte. Some operators had charged up to €10 a megabyte.

3. Competition

Ireland, with just four million people, has four full network carriers. Vodafone and O2, which used to make massive profits here, have seen margins eroded by rivals Meteor and 3 Ireland. So-called 'virtual' operators have had an impact, with budget carrier Tesco Mobile capturing a sizeable 3.5pc of the market.

So where are operators going to make money? All four continue to pump tens of millions into their networks on an annual basis. 3 Ireland has bid €700m to buy O2 Ireland, a company that is now barely profitable. The coming months will likely see at least one operator announce a new fixed line broadband rollout. But will it be enough?

Irish Independent

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