Mobile Communications

Mobile communications services account for the second largest share (37 percent in 2003) of total telecoms services revenue. Given the current pace of growth, they look set to overtake fixed telephone revenue soon. Mobile services revenue grew quickly from USD19 billion in 1991 to over USD414 billion in 2003. In countries such as Japan, Korea, Austria, and the Czech Republic, these services have outpaced fixed-line services and now account for more than 50 percent of total telecoms revenue.        

Mobile communications services enjoy a price premium over fixed-line services although this has been decreasing. Consumers are willing to pay extra for the convenience of mobile connectivity.  One of the notable trends in mobile services is the sharp fall in telecom market prices in just a few years.  The following factors account for such a fall:

Emergence of digital technology:The drop in mobile prices is due to the technological switch to digital systems which has led to a substantial increase in service capacity through better use of the radio spectrum.

Rising number of operators: In many countries licensing has been simplified, making entry simpler than it was in the past. As a result, an increasing number of operators are jumping on to the telecom industry wagon and putting pressure on market prices. This has led to an increase in the size of the market itself. The increasing number of prepaid subscribers is also pushing prices down with prepaid subscribers now constituting the largest segment of the market. Generally, the average price of mobile telephony services has fallen over the years.

Competition in telecoms equipment drives price-competitiveness:Increasing competition between equipment vendors is driving prices downwards. The basic equipment (handset, switching, and transmission equipment) is electronic and thus is subject to the fall in prices common to all electronic devices.

Increasing affordability drives penetration levels:Competition has resulted in price wars, driving prices down. Lower prices have brought mobile communication services within the reach of a greater number of potential users. In spite of prices continuing to fall, and a drop in the ARPU and minutes of use (MoU), the operating profits of a lot of the major players are growing at a faster rate than the growth of subscribers.

Increasing penetration helps in distributing fixed costs: The drop in the cost of mobile communications services has made mobiles a mass-market product in the communications industry. Subscription levels have increased, enabling operators to spread the fixed costs of a mobile network over a greater number of users.
Among leading players, NTT of Japan has the highest revenue followed by Deutsche Telekom and Verizon. Several leading players are the incumbent operators in their respective countries. However, deregulation is making these markets highly competitive and forcing players to invest in value added services.

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