Timing is everything. As European wireless markets face saturation, the rollout of next-generation services becomes even more essential to the continued growth of the industry. “Ultimately, the potential is there, the question is, can the handset manufacturers come out with the handsets and can operators roll out infrastructure and get their acts together in the time they need to do so,” one Strategis Group analyst quipped while recapping its recent studies: “European Next Generation Wireless Revenue Streams” and “European Cellular Markets 2001.”
The analyses rested on the basic assertion that the phenomenal wireless subscriber growth Europe has seen over the past several years, topping off with 40 percent growth in 1998 and 1999, has led to near market saturation. In 2000, growth declined to 37.5 percent and is expected to slow to 23 percent at the end of 2001. In order for revenues to begin increasing, it is necessary manufacturers and operators to focus on timely and successfully meeting the expectations of next-generation services.
Everyone involved in wireless is, and has been, anxiously awaiting the arrival of third-generation technologies. Europe’s upgrade to 2.5-generation services has begun, and according to the Strategis Group, by 2003, the presence of wideband CDMA technology will be felt, demanding new handsets and services. The group believes the uptake of W-CDMA will be slow until 2006, by which time all Eastern European countries should have at least one network up and running. The group has predicted that by 2005 and into 2006, third-generation services will be widely available and by 2008, we will see an economic turn-around, resulting in a $522.7 annual average revenue per user in Western Europe that year, as opposed to the $387.1 annual APRU witnessed in 2000.
As Europe migrates to next-generation services, competition from advanced Japanese companies will pose a “substantial threat,” said one Strategis Group analyst. Today L.M. Ericsson and Nokia Corp. are the leading 2.5 and 3G infrastructure providers, holding 56 percent of all contracts for GPRS equipment. These companies, plus Siemens AG and Motorola Inc., make up the top European manufacturers, and an analyst cautioned that innovation will be essential in keeping them afloat as 3G approaches. Japanese manufacturers including Panasonic, Sony, NTT and Sharp, which are experienced in the development of advanced next-generation services, could easily slip into the European market.
Promises of many new advanced services, including voice, messaging, information, transaction and corporate services, come with the migration to next-generation technology. “Mobile phones are likely to become lifestyle tools. They will make our lives easier,” one analyst said. “Or so we hope.” The Strategis Group believes voice services will continue to dominate, but voice will see a decline in revenue and revenue growth from non-voice services will increase across the board.
An analyst pointed out that the popularity of messaging, which many consider the future “killer app,” has increased substantially throughout Europe over the past couple of years. The Strategis Group believes that revenues from SMS will continue to grow until 2002 and then begin to decline in 2003 as wireless e-mail takes over. The analyst group also expects SMS to naturally progress to multimedia services (MMS), which will make audio-visual content available wirelessly. MMS will come into its own by 2005 and 2006 when 3G services are widely available and screen resolution and data rates are more technologically advanced, the group predicts.
Universal standardization is another essential for many 3G services to succeed, according to the Strategis Group. Aforementioned European manufacturing giants Ericsson, Nokia and Siemens have already set up a universal mobile gaming platform. The analyst group expects to see partnerships develop among companies in the mobile gaming space and wireless operators and manufacturers.
