Dutch mobile service revenues fall 6.6% in 2014, smaller drop expected in 2015

Dutch mobile service revenues fall 6.6% in 2014, smaller drop expected in 2015

The Dutch mobile service market contracted again in 2014, albeit at a slower rate of 6.6 percent versus a fall of 7.1 percent in 2013. The mobile operators realised service revenues of EUR 5.0 billion in 2014, according to Telecompaper’s latest quarterly market monitor. About a third of the annual decline was due to the impact of regulatory price cuts (MTR, roaming). Excluding the regulatory impact, Telecompaper estimates the annual service revenue drop was only 4.6 percent.

The rest of the lost revenue in 2014 was due to tough competition, lower out-of-bundle revenues and changes in customer behaviour, as the growing use of messaging and VoIP apps led to a continued decline in voice and SMS revenues. Data revenues showed only modest growth, despite a near doubling in mobile data traffic, driven by the growing number of 4G users.
In the fourth quarter, the annual drop in service revenues slowed to 2.7 percent. Compared to the third quarter, which is seasonally stronger, service revenues were down 0.5 percent in Q4 2014 to EUR 1.26 billion.

In 2014, the operators continued to focus on selling postpaid plans with data subscriptions, taking postpaid to almost two-thirds of all mobile SIMs on the market. However, this strategy could not halt the drop in voice and SMS revenue. In 2014, voice revenues fell 12.6 percent year-on-year, and SMS revenue showed an even stronger double-digit drop. While data services are still growing, the fall-off in SMS in favour of IP applications meant non-voice service revenue grew only 1.9 percent in 2014. As voice revenue declines, the share of non-voice in total service revenue rose to 45 percent in 2014.

Including Tele2, Ziggo and the rest of the MVNOs, the Dutch market counted 20.6 million SIMs at the end of 2014, a small increase of 0.3 percent during the year. The growth came mainly from more postpaid customers (particularly at Vodafone and KPN). Mobile penetration was relatively stable at around 122 percent. Telecompaper expects the market to grow by around 1 million SIMs in the coming five years, to around 21.6 million in 2019 (excluding M2M).

Based on the latest quarterly results and the current market conditions, Telecompaper has updated and extended its five-year outlook for the Dutch mobile industry. For 2015, we expect the Dutch market to show a smaller decline than last year, of around 4.4 percent to EUR 4.8 billion in service revenue. For the period 2014-2019, the Dutch market is expected to show a negative CAGR of 1.6 percent, reaching around EUR 4.6 billion in revenues in 2019.

The market forecast is based on the expectation that competition will further intensify and that growth in data revenues will not compensate fully for the drop in voice. Other negative factors include the impact of the continued weak economy and the increasing use of OTT and Wi-Fi services.

“Although growth in mobile data traffic is accelerating with the expansion of 4G services, operators are struggling to translate this demand into higher prices and revenues, as consumers remain cautious about their spending,” said Alejandra van de Roer, Research Analyst and author of Telecompaper’s Dutch Mobile Operators report. “Tele2 will soon start to migrate it customers to its own network, and we expect this will lead to a change in its prices that could shake up the market. New competition is also coming from ‘freemium’ MVNOs such as Choozze or FreedomPop, and the merger of UPC and Ziggo may give them a stronger position to stage a possible attack on the mobile market.”

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