Mobile operators risk turning unprofitable over the next few
years as data revenue declines and data traffic costs rise,
U.S.-based telecom equipment vendor Tellabs Inc. (TLAB) said in a
research report Thursday.
Because of increasing competition in the sector, revenue per
gigabyte of data is likely to fall, while rising data traffic makes
the networks more expensive to operate, the company said.
To be sure, even though every single gigabyte of data may become
less profitable, operators' total data revenue is growing
sharply.
U.K.-based operator Vodafone Group PLC (VOD) earlier Thursday
said third-quarter sales rose sharply as data revenue surged 27%
from a year earlier, driven by strong smartphone and mobile
connectivity sales.
The spread of smartphones such as Apple Inc's (AAPL) iPhone and
handsets based on Google Inc's (GOOG) Android platform, and more
recently Internet-connected tablets, has boosted data traffic over
the past few years.
Global smartphone sales almost doubled in the third quarter 2010
from a year earlier to 81 million units according to research firm
Gartner's latest figures.
Still, unless mobile carriers offset the falling profitability
trend, by 2013-2015 their data revenue in the U.S., Asia Pacific
and Western Europe, may fall below what it costs to handle the data
traffic, Tellabs said.
The competitive U.S. market is likely to see the quickest
decline while operators in Western Europe, where operating expenses
tend to be lower, should stay profitable a little longer, Tellabs'
director of mobile strategy, Ben McCahill, said.
Although the introduction of variable data price rates and new
more efficient network technology such as Long Term Evolution can
help operators to some extent, this won't be enough in itself to
keep them profitable, McCahill said.
Rather than just providing bandwidth, operators would benefit
from offering additional content to boost revenue, such as
location-based services, he said.
Operators need to make their networks smarter by using
technology to support applications and app stores, track and manage
the devices in the networks, and optimize traffic for varying radio
spectrum conditions, Tellabs said.
-By Gustav Sandstrom, Dow Jones Newswires; +46-8-5451-3099;
gustav.sandstrom@dowjones.com