MVNOs will erode growth in mobile market

26 Jan 2007

While Irish telecoms spend is set to reach up to €4.2bn in 2007 – up 4pc on last year – the onset of mobile virtual network operators (MVNOs) such as Tesco Mobile will erode market growth in the mobile segment, an analyst claimed yesterday.

IReach analyst Sinead Daly said that 2006 was a tipping point for mobile services in Ireland with a slow down in growth rates and a likely phase of market shrinkage in 2007 and 2008.

The Irish telecoms marketplace is set to reach almost €4.2bn in 2007 – split between mobile which is valued at €2bn with the balance in the hands of fixed line service providers.

Daly said the entry of MVNOs into the Irish market will further erode growth in the short term, until the main operators begin to gain traction with mobile data services.

Mobile data services will eventually kick-start underlying revenue growth.

“The shift by most providers to 12 or 18 month price plans hides the fact that the cost of mobile voice and text costs are already falling fast,” Daly said.

The other €2.2bn will be a culmination of fixed voice and fixed data spend. This represents an overall growth rate in telecom spend of 4pc from 2006 in Ireland.

According to iReach’s third annual survey of 250 IT executives across eight industry verticals, growth rates with telecoms vary substantially.

“Fixed voice and mobile voice services spend will remain flat in 2007,” Daly explained. “However, the most significant growth will come from fixed data. 2007 which will see a huge increase in spend on fixed data which will top €850 million this year. This represents a 21pc growth rate from 2006.

She said that this is one of the fastest growth rates in Europe, highlighting an acceleration of broadband across the consumer and business sectors in 2007.

“As well as increased speed of connectivity, lower cost models and the opportunity for better ‘broadband bundles’ will play a significant role in the growth of fixed data spend and will continue to have a very positive impact in driving revenue growth across the Irish telecom marketplace,” Daly said.

By John Kennedy