Mobile operators have successfully managed to reduce costs over the last 12 months to cope with declining revenues caused by the global economic slowdown and other market pressures, according to new research from Wireless Intelligence.
In a report published this week, Wireless Intelligence found that operator operating expenditure (opex) accounted for 60% of revenues in 3Q09, compared to 63% a year ago, at the start of the economic crisis. Capital expenditure (capex) also declined over the period, accounting for 10% of operator revenue in the third-quarter, compared to around 14% a year ago.
The study found that total revenues from mobile operators in the 30 OECD (Organisation for Economic Co-operation and Development) countries are forecast to decline from 411 billion to 408 billion between 2008 and 2009. However, the significant reduction in opex helped keep EBITDA stable at 33% of total revenues. Further savings have been made by reducing structural costs, rationalising handset portfolios and subsidies, and cutting back on advertising and marketing expenditure. Finally, the further reduction in capex triggered an increase in operating cash flows to 22% of total revenues, up from 20% a year ago.
The report warn, however, that the trend towards operators preserving cash flow by reducing opex and capex could affect next-generation network rollout.
The industry is facing a dilemma, as it must invest in 3G network expansion and service improvements to meet consumer expectation as well as generate substantial profits to offset falling voice revenues, yet at the same time it is cutting marketing budgets and squeezing capital expenditure,” says Joss Gillet, Senior Analys at Wireless Intelligence.
The effects of the financial crisis such as unfavourable currency fluctuations and a slowdown in private consumption negatively affected both mobile operators and vendors over the last year. However, Gillet notes that user saturation in developed markets, regulatory pressures, on-going voice-centric price wars and the slow take up of data consumption had a greater impact on operator performance. The financial crisis has just exacerbated already existing difficult market conditions.
The European mobile industry was deemed to be hardest hit by the economic downturn. Total operator revenues in Europe are forecast to fall by 4.3% this year to reach 36.5 billion, with declines of 5% expected in key markets such as the UK, Spain, Portugal, Ireland, Greece and Austria. Countries such as Poland and the Czech Republic, which reported double-digit revenue growth in 2008, are forecast to report double-digit declines this year. By contrast, operator revenues in North America (USA/Canada) are proving resilient, and are forecast to grow by 4.3% this year to reach 135 billion. Large mobile operators in the US, including Verizon Wireless, AT&T and T-Mobile USA, are all expected to report double-digit revenue growth in 2009.
The report, The Cellular Telecom Crunchonomics: One Year On is available on request. The study uses data from mobile operators in the 30 OECD member countries.