Saturday, February 22, 2014

Lower EU Roaming Charges Will Boost Demand: What is Net Revenue Impact?

Lower prices for a product consumers want should, and does, increase usage. That should occur within the European Union as roaming tariffs are sliced in 2014, as they have been for each of the past seven straight years, as part of mandatory wholesale price reductions mandated by the European Commision.


The issue is whether higher usage will compensate for lower revenue per unit of use.


The latest round of EU-mandated wholesale roaming price cuts will cut wholesale data roaming to 28 percent of 2012 levels. International outbound wholesale voice roaming will fall to about 66 percent of 2012 levels. International text messaging will decline to about 67 percent of 2012 levels.


And there have been proposals to set rates to zero.


European Union mobile service providers have been pointing to the mandatory price cuts as responsible, in part, for declining revenue over the past couple of years.


For example, combined revenues from voice, messaging and data services in the EU5 economies (UK, France, Germany, Spain and Italy) will drop by nearly 20 billion Euros, or four percent per year, between 2012 and 2017, according to STL Partners, and by 30 billion Euros by 2020.


Roaming charges account for between five percent and 12 percent of European mobile service provider revenue, according to brokerage Oddo Securities. If the EU succeeds in scrapping roaming completely, carrier revenue for voice, text and data could fall by over 20 percent in 2016, consultancy Juniper Research forecasts.


Whether EU roaming users now will boost consumption is not much of a question: they will, in aggregate. The issue is whether revenue gained from the higher usage will offset the lower tariffs.


                                          EU Mobile Revenue Forecast


 source

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