Home > Market Research > Networks & Infrastructure > The Acceleration of Fixed–Mobile Substitution in Western Europe: facts and figures

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Market Study
Published: July 2007
Pages: For full details, please email keithw@cmsinfo.com
Tables: 28
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Research from: Analysys Mason
Sector: Networks & Infrastructure

Voice traffic in Western Europe continued to migrate rapidly from fixed to mobile services in 2006, and it won’t be long before half of all voice minutes originate on mobile phones. This report presents all the latest facts and figures, as well as case studies of leading mobile operators that are making the most of fixed–mobile substitution, and fixed operators that are managing to resist this trend.

Voice telephony generates by far the greatest proportion of mobile operator revenue in Western Europe, so mobile voice telephony will strongly influence mobile operators’ revenue prospects for at least the next three years. Fixed–Mobile Substitution (FMS) encompasses traffic substitution, as voice calls migrate from fixed to mobile services, and line substitution, as households and businesses dispense with their fixed-line voice services.

The report examines the state of FMS in Western Europe, and considers the extent and effects of traffic and fixed-line substitution. It provides analysis of the latest data for Western Europe, as well as for individual countries and operators, to determine the overall extent of FMS and the degree to which operators can, and are, influencing the outcome. Case studies of leading mobile operators are presented to illustrate how they have managed to make the most of FMS, by driving usage growth without sacrificing pricing, to achieve the best outcome for mobile spend, despite strong competitive and regulatory pressures.

FMS continues to represent a critical threat to fixed operators. Fixed-line substitution is particularly damaging because it removes fixed operators' opportunity to generate revenue from either voice or broadband services. The report includes case studies of leading fixed network operators that are using effective tactics to maintain fixed voice spend and usage levels, and to resist fixed-line substitution.

The Acceleration of Fixed–Mobile Substitution in Western Europe: facts and figures answers your key questions:

- How is the proportion of voice traffic that originated on mobile phones changing? What are the differences between countries in the extent of, and speed of, traffic migration during 2006?
- How is the proportion of households that have a mobile phone, but no fixed-connection services, changing? What are the differences between countries in the extent of, and speed of, fixed-line substitution during 2006?
- What is happening to voice usage per capita, split between fixed and mobile? Are customers spending more on voice telephony services, or are they diverting their spend from fixed to mobile services?
- How much of customers’ spend on voice is accounted for by mobile services? Is this proportion still growing?
- What is happening to the average spend per minute of fixed and mobile services?
- Which operators are the most successful in maintaining or increasing voice usage and spend per subscriber? Which operators are the least successful?
- What are the leading mobile operators doing to maximise the opportunities from FMS? What tangible benefits is this providing?
- Which fixed operators are managing to sustain voice spend on fixed services? What are the leading fixed operators doing to achieve this?
- What actions should fixed and mobile operators take to address the opportunities and threats?

Who should read this report

- Mobile network operators: senior executives and product managers, to understand the state of FMS in their particular markets, to learn from other markets, and to understand the actions they can take to seize opportunities from FMS.
- Fixed network operators: senior executives and product managers, to understand the state of FMS in their particular markets, to learn from other markets, and to understand the tactics that they can adopt to address the threats from FMS.
- Analysts and investors: to understand the impact of FMS, which will dictate the revenue outlook for fixed and mobile operators, and the industry as a whole.

About the author

Dr Mark Heath and Dr Alastair Brydon are founders of Sound Partners Ltd and authors of more than 30 Analysys Research reports, including The Future of the Global Wireless Industry: scenarios for 2007–12, The World’s Top Ten Non-voice Services for Mobile Operators, Picocells and Femtocells: will indoor base stations transform the telecoms industry?, Mobile Operator Strategies for Fixed Broadband, Fixed–Mobile Substitution in Western Europe: causes and effects, Mobile Number Portability: strategies for operators and regulators, The Business Case for WiMAX, Forecasting the Commercial Impact of Wireless VoIP in the USA and Western Europe, Pricing Mobile Services for Success: towards a bundled future, Evaluating the Options for Mobile TV and Radio Broadcasting in Western Europe, and Prospects for the Evolution of 3G and 4G.

Mark is Director of Research at Sound Partners Ltd. He previously held a number of marketing and business development roles in Nokia, ultimately becoming responsible for strategy and business development across Europe. Before that, Mark was responsible for business planning at BT Cellnet in the UK, after spending six years at BT in wireless systems research and development. Mark holds BSc and PhD degrees from the University of Leeds, winning the University prize for his research in telecommunications. Mark also holds an MBA, graduating as top student from Henley Management College.

Alastair is CEO of Sound Partners Ltd. Prior to joining Sound Partners, Alastair reported to Nokia’s European management team and worked with many of Nokia’s customers to implement market firsts ranging from the introduction of prepaid mobile tariffs to new mass-market content services. Previously, Alastair worked in a number of roles for the BT Group, focusing on the evolution of wireless services, networks and technologies. He also contributed to international research and standardisation of GSM, DECT and 3G. Alastair holds BSc and PhD degrees from UMIST, where he was awarded the IEE Prize for top student.

Rupert Wood (Principal Analyst) directs fixed telecoms research at Analysys Research. He specialises in wireline services, fixed–mobile competition and convergence in voice. He has written reports on broadband access, services, pricing and regulation, fixed–mobile substitution and VoIP, as well as reports taking a longer-range view of the structure of the telecoms industry. He manages the Analysys Research Market Share Monitor, directs the Analysys Research Fixed Networks and Services online market intelligence service and has a particular interest in the development of Eastern European/CIS telecoms markets. Before joining Analysys, Rupert was a Lecturer at the University of Cambridge.

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Table of Contents

0 Executive Summary
1 Introduction
2 FMS accelerated during 2006
3 Mobile operators exploiting FMS
4 Fixed network operators defending against FMS
5 Actions

Figures and tables

Figure 1: Mobile-originated voice traffic as a proportion of total voice traffic (including VoIP) in Western Europe, 1Q 2004–4Q 2006
Figure 2: Mobile-originated voice traffic as a proportion of total voice traffic (including VoIP) in Western Europe, by country, 4Q 2005–4Q 2006
Figure 3: Mobile-only households as a proportion of total households in Western Europe, by country, December 2005–December 2006
Figure 4: Mobile, fixed and VoIP usage per capita in Western Europe, 1Q 2004–4Q 2006
Figure 5: Fixed and mobile voice spend per capita in Western Europe, 2004–2006
Figure 6: Average spend per fixed voice connection on access charges and calls in Western Europe, 1Q 2004–4Q 2006
Figure 7: Fixed-to-mobile calls as a proportion of fixed voice calls in Western Europe, 1Q 2004–4Q 2006
Figure 8: Spend on mobile calls as a proportion of total spend on mobile and fixed voice calls in Western Europe, 1Q 2004–4Q 2006
Figure 9: Average spend per minute on mobile and fixed voice services in Western Europe, 1Q 2004–4Q 2006
Figure 10: Changes in mobile voice usage and spend per subscriber for pairs of operators in selected Western European countries, 4Q 2005–4Q 2006
Figure 11: Change in outgoing voice usage per subscriber for Vodafone in selected Western European countries, 4Q 2005–4Q 2006
Figure 12: Voice minutes per subscriber per month for mobile operators in Spain, 1Q 2004–4Q 2006
Figure 13: Voice spend per subscriber per month for mobile operators in Spain, 1Q 2004–4Q 2006
Figure 14: Mobile-originated voice traffic as a proportion of total voice traffic in Germany, 1Q 2004–4Q 2006
Figure 15: Voice minutes per subscriber per month for mobile operators in Germany, 1Q 2004–4Q 2006
Figure 16: Voice spend per subscriber per month for mobile operators in Germany, 1Q 2004–4Q 2006
Figure 17: Mobile-originated voice traffic as a proportion of total voice traffic in Finland, 4Q 2003–4Q 2006
Figure 18: Average spend per minute on mobile voice services in Finland, 1Q 2004–4Q 2006
Figure 19: Voice minutes per subscriber per month for mobile operators in Finland, 4Q 2005–4Q 2006
Figure 20: Voice spend per subscriber per month for mobile operators in Finland, 1Q 2004–4Q 2006
Figure 21: Decrease in the number of fixed connections, December 2005 to December 2006
Figure 22: Decrease in average fixed voice minutes per connection, 4Q 2005 to 4Q 2006
Figure 23: BT's ARPU from traditional voice services, 4Q 2004–1Q 2007
Figure 24: Number of subscribers to BT Together Option 2 and Option 3 fixed voice call packages, December 2004–December 2006
Figure 25: Average outgoing voice minutes and spend per capita per month in Belgium, 1Q 2004–4Q 2006
Table 1: Examples of mobile operators that are doing relatively well in maintaining or increasing voice usage and spend per subscriber in each Western European country
Table 2: Examples of mobile operators that are doing relatively badly in maintaining or increasing voice usage and spend per subscriber in each Western European country
Table 3: Changes in fixed voice usage and spend per capita in Western Europe, by country, 4Q 2005–4Q 2006

For full details, please email keithw@cmsinfo.com

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