What does the Future Hold for the Mobile Operators?

It is 44 years since the world’s first mobile phone call was made on April 3, 1973, when Martin Cooper, a senior engineer at Motorola, called a rival telecommunications company and informed them he was speaking via a mobile phone. It was another 34 years before the first iPhone arrived and transformed the way we use our phones today.

As the technology has improved, both in terms of devices and the networks (in some places) our usage patterns have changed. Are the providers keeping up with this in terms of the packages being offered and are they in fact under threat if they do not?

A variety of recent reports have reflected these changes. A 2016 report said that 31% of smartphone users make no traditional voice calls in a given week. This reflects the growth of consumer apps such as Facetime and Whatsapp, which reflected growth in interest of video calls, and a desire to avoid roaming charges.

Similarly, in the business sector the growth of VoIP and phone system apps allowing people to have their office landline number on their mobile has seen traffic move away from the mobile networks.

There has been a long-standing battle over whether it is better to have a mobile or landline number if you want to choose just one number to promote. It would appear the landline is winning.

The first text was sent on December 3, 1992, when British engineer Neil Papworth, 22, used his computer to send the message ‘Merry Christmas’ to a mobile phone. The number of texts sent in Britain peaked at in 2011.  Since then it has fallen by almost half and has been over-taken by instant messaging applications.

WhatsApp passed a billion active users and research found that the main reason 42% of Brits used a mobile phone was to access messaging apps. Other apps such as Snapchat have appealed to younger age groups who see SMS as old and unfashionable.

The implication for the mobile networks is that of lost revenue as SMS was always a key part of their income stream. So, with SMS declining, the loss of roaming charges in the EU, and potential that, as we negotiate trade deals elsewhere in the world post-Brexit, other regions may also drop roaming charges – the mobile networks could see their profits dropping and their future looking a little less rosy than it has been.

So, is the hope for the future of the mobile networks a growth in data usage as a result of the Internet of Things and increasing use of data-based apps? Whilst there are people with high usage due to video and music streaming, the average usage per device is still quite low. Research by Cisco showed that average monthly smartphone data traffic in the UK during 2015 was 1.2 GB.

There are over 50 million 4G connections in the UK, but the lack of coverage (the UK ranks 54th in the world) means that the applications and technologies that would drive data usage struggle to work all the time. That is where 5G, whenever we finally get it, may help the networks as it is likely to prompt surge in data usage. However, the networks face a new challenge in the growth of wifi hotspots – consumers now expect that almost every coffee shop and bar offers free wifi. It is also becoming the norm on many train and coach services. Smart users who consistently connect to wifi wherever available can, on average, reduce data usage by a third.

This creates a challenge as the mobile operators need to make a profit to fund investment – especially in the next generation of 5G networks. The UK’s mobile and data telecoms plans are already five years behind countries such as Japan and South Korea. But if users continue to communicate via apps (both messaging and voice) and use wifi wherever it is available then that can only lead to standard package prices going up to generate the revenues the operators need. Either that or the Government is going to have to fund more of the infrastructure – something that is already happening in many countries.

What does the future hold for the mobile operators? These are the challenges we believe they face, so we wait to see what happens.