Will Voice Drop to Third Among Top Telco Revenue Sources?
Virtually nobody would be surprised if told mobile data revenue will exceed voice revenue by 2018. Many might be surprised if told that will be the case globally.
In 2012, Japan became the first country where data revenues exceeded voice revenues. That happened in 2013 in Argentina.
In the United States, mobile data revenue surpassed voice revenue in the first quarter of 2014.
That likely will happen in the United Kingdom in 2014 as well.
Nor would many observers be shocked if told that many fixed networks providers likewise earn more money from Internet access than from voice services.
Right now, AT&T earns $33.6 billion annually from its “data” category, which includes all U-verse video revenues.
Voice services generate about $20.3 billion annually.
What might be more surprising, though, is that video might even surpass voice revenue, at least for some firms. AT&T provides a case in point. But European telcos including Vodafone and Telefonica are themselves growing the percentage of video revenue in their portfolios.
Assume video accounts generate $960 annually ($80 a month per video account), and that AT&T has 5.5 million such accounts. That implies annual revenue of about $5.3 billion in video revenue.
But DirecTV alone earned $31.8 billion in 2013.
In other words, should AT&T succeed in its bid for DirecTV, video entertainment would possibly reach $37.1 billion, eclipsing even data services--at about $28.3 billion in annual revenue--as drivers of AT&T fixed network segment revenues.
After a DirecTV acquisition, voice would be only the trailing third most important revenue source for the fixed network segment.
Of $89.7 billion in total revenues, voice would represent 22 percent of fixed segment revenues.
Video would represent 41 percent of total fixed network revenues. Internet access and other data services would represent 32 percent of total fixed network revenues.
The picture at Verizon might be different. Verizon had $30.8 billion in first quarter 2014 revenue. About $18 billion was generated by mobile services, and though
About half of Verizon’s fixed network segment revenue comes from enterprise or wholesale sources.
So $17.3 billion is earned from “mass markets,” including small business. Removing small business accounts, the consumer business generates about $14.7 billion annually.
Verizon has about 5.3 million FiOS video customers. Assuming the same $80 a month contribution from a video account, Verizon might earn $960 per account, or about $5.1 billion from video services.
So video would represent about 35 percent of consumer segment revenue.
Assuming only $480 in annual revenues from Internet access, Verizon might generate about $4.3 billion from consumer Internet access, or 29 percent of consumer fixed network revenues. Voice might contribute about 36 percent of total fixed network revenues earned from consumers.
So, at Verizon, video entertainment and voice might be about equal contributors of revenue, while Internet access provides less revenue, in the consumer segment.
But keep in mind that the whole consumer segment is only half of fixed network revenue. Overall, voice and data revenues are much more significant at Verizon, than at AT&T.
It is a sign of how much has changed in the telecom business that voice might soon be the third largest revenue contributor, not the biggest.