The European mobile broadband market is undergoing a major shift, triggered by multi-device ownership. Tablets are replacing laptops for Internet usage on the move, for which Wi-Fi and smartphone tethering have become favoured connectivity alternatives. This shift in consumer access behaviour led us to revise our forecast of mobile broadband connections downwards for the next five years. Nevertheless, the minority of tablets that are connected to cellular networks will still drive significant growth in the overall mobile broadband market.
The number of mid-screen connections will increase substantially from 10.1 million at the end of 2012 to 33.7 million at the end of 2018, while the number of large-screen connections will decline from 51.8 million to 41.6 million during the same period (see Figure 1). (For more information see our Viewpoint Europe mobile broadband market forecasts 2013–2018: interim update.) The shift from large-screen to mid-screen connections or smartphone tethering marks a change in access behaviour, but not in access demand. We believe that smartphone data usage will increase as a result, and that multi-device ownership will emphasise demand for higher-speed connectivity, such as LTE. The mobile broadband market may recover beyond the forecast period as wearable terminals, such as smart watches or Google Glass, eventually reach mass-market adoption.
Mobile broadband markets in Ireland, Spain and the UK show evidence of decline or stagnation
Subscriber numbers declined in several countries in Western Europe in the six months running up to March 2013, following market stagnation during the past couple of years.
Ireland: The Irish regulator ComReg reported that the mobile broadband market has stagnated (atabout 0.6 million subscribers) in the past few years. However, between the third quarter of 2012 and the first quarter of 2013, subscriber numbers declined by 13% to 0.5 million.
Spain: CMT, the Spanish regulator, reported that mobile broadband had 2.4 million subscribers at the end of March 2013, but that this figure had declined by 15% during the previous six months.
UK: According to Ofcom’s reporting, the mobile broadband subscriber base in the UK has stagnated at about 5 million during the past few years. In the six months to March 2013, the number of subscribers declined by 3% to 4.9 million.
Tablet sales brought new mobile broadband connections to the market throughout 2012, as a greater choice of tablets and less-expensive tablets became available. Flattening or declining total numbers of connections therefore indicate a strong decline in large-screen mobile broadband connections.
Mobile broadband usage will shift onto smartphones
According to Analysys Mason’s Connected Consumer Survey 2013, 37% of smartphone respondents in France, Germany, Poland, Spain, the UK and the USA have used smartphone tethering at least once. Tablet ownership can drive the use of tethering: 46% of tablet owners in Spain said they had used smartphone tethering at least once. Smartphone data is more expensive than mobile broadband data, and revenue from smartphone data will partially offset the decline in mobile broadband revenue. However, the increase in smartphone tethering shifts revenue from mobile broadband to handset connections.
Mobile broadband revenue in Europe reached EUR9.9 billion in 2012, and we expect it to grow to EUR10.5 billion by 2018 (at a CAGR of 1%), with a peak of EUR11.0 billion in 2015. Most of the growth between 2012 and 2015 will come from tablet connections and LTE services. LTE will slow the decline of mobile broadband ARPU in some countries, but its impact will be limited by the increasing share of LTE mobile broadband connections in countries where operators do not charge a premium for LTE. Operators are still experimenting with LTE pricing and the outlook for the impact of LTE on ARPU remains unclear.
Operators need to adapt to multi-device access trends
Some operators are more exposed to the mobile broadband market dynamics than others, such as Hutchison Europe, which focuses strongly on the mobile broadband market, and had 26% of its customer base on mobile broadband at the end of 2012. Operators can prepare and adapt to recent changes in a number of ways.
Operators should adapt their pricing strategies to multi-device ownership trends. According to our Connected Consumer Survey 2013, 30% of smartphone users in Western Europe have access to a smartphone, a tablet and a laptop. Operators should include tethering and multi-device tariffs in their mobile data pricing strategy. For example, Everything Everywhere (EE) in the UK uses a tethering allowance as part of its marketing proposition for its LTE smartphone tariffs.
Operators should improve substitutive mobile broadband offers. Large-screen mobile broadband connections will decline by 20% in the next 5 years. Higher data allowance and faster network speeds will help operators retain mobile broadband customers in the short–to-medium term. Supplying high-value substitutive mobile broadband users (those using mobile broadband as an alternative to a fixed broadband connection) with mobile hotspots addresses multi-device connectivity needs and gives an alternative to smartphone tethering.
Operators should ensure their tariff offerings reflect the growing importance of the mobile broadband business sector. The large-screen business segment will continue to grow until 2015 and mid-screen business subscriptions will also increase rapidly, at a CAGR of 45% between 2011 and 2018. Operators that do not offer mobile broadband business subscriptions should expand their portfolios to capture this segment.