The mobile industry has stagnated, although traffic is growing tremendously, revenue growth has come down significantly, illustrated by the fact that European mobile revenues dropped 3.5% y-o-y during Q309. On the back of the break through for mobile data, both regarding mobile apps in handsets and mobile broadband, operators are betting on that it should give a boost to mobile revenues in the long run.
Although TeliaSonera delivered a 4% y-o-y revenue growth during Q309, driven by non-voice services, we should have low expectations on mobile revenue growth going forward. This forces operators to continuously cut costs in order to deliver profitability growth, and improve cash flow to strengthen balance sheet and be able to pay a growing dividend to shareholders.
Altogether, this indicates that capex budgets are continuously trimmed why operators are benefitting from continuous price erosion on radio equipment. This lowers production cost, assuming that the existing macro networks, with towers and other civil engineering work are regarded as sunk cost. But in order to be able to manage a continued strong growth of traffic operators need access to more spectrum in order to avoid to be forced to invest in new sites.
Some industry experts argue that traffic and revenues are decoupled, implying that there is no revenue gap. But the case is rather that the general cost structure has to come down significantly in order to cope with the massive traffic growth as the end customers willingness to pay is not increasing.
