Cellular companies face several challenges to add the next 880 million subscribers to networks, and need to collaborate with the overall ecosystem to avoid business models becoming unsustainable.
Mobile connections have grown in leaps and bounds in the last decade - moving from a billion unique subscribers in 2003 to 3.4 billion at the end of 2013 - yet boosting subscriber bases further will be a tough ask.
This is because new users will come from emerging markets, where cellular companies face the task of rolling out networks in lower income areas, where the required infrastructure is not always readily available. In addition, operators' current business models are in danger of becoming unsustainable as revenue growth slows, and networks keep requiring investment.
The recently released GSM Association (GSMA) Mobile Economy 2014 report notes that, in 2003, just less than one in six people had subscribed to a mobile service, a figure that leapt to 3.4 billion unique subscribers by the end of 2013 - just under half the global population. Overall, there were 6.9 billion SIM connections at the end of 2013, with an average of 1.8 active SIM cards per unique subscriber.
Vital tech
Mobile has become a "cornerstone of the global economy," says the GSMA, contributing 3.6% of gross domestic product and supporting 10.5 million jobs. The industry's contribution to the global economy is expected to grow to 5.1% in the next five years, it adds.
Yet, notes the GSMA, subscriber and connection growth rates are now slowing in developed markets. It adds, however, that significant "untapped" potential remains in developing markets, which are expected to add 880 million unique subscribers by 2020.
Ovum analyst Richard Hurst says mobile growth is "a good story, but it's going to be a challenge, it's not going to be an easy walk" to add the next 880 million users. He notes operators can get there, but they need smart thinking to overcome issues facing them, such as regulatory challenges, a lack of supporting infrastructure, such as power grids, and lower income users in developing markets.
Locally, operators are facing a saturated market, increased competition, consolidation - and threats from over-the-top players.
Investment landscape
The GSMA says developed markets are seeing an accelerating technology shift, and an increasing proportion of connections are now on higher speed 3G and 4G networks. Globally, this proportion is set rise from one-third at the end of 2013 to two-thirds by 2020.
Meanwhile, the number of commercially-available long-term evolution connections is set to grow to more than 500 in 128 countries across the world over the next four years, going from covering around a fifth of the global population today to around half by 2017.
Yet, the GSMA predicts, 2G will remain the dominant technology in many lower income countries for a number of years to come, in contrast with the technology shift under way in the developed region. It expects there to be 3.2 million 2G connections in 2020, while 3G will hit 3.7 million, and 4G will be at 2.3 million.
The current connections have been made possible by a $1 trillion global investment in the last six years, an amount the GSMA predicts will climb to $1.7 trillion by 2020 because of the increasing data demand.
Yet, says the GSMA, revenue growth will not keep pace, slowing from the 5% seen in recent years to 2.9% in 2020. "Operators across the globe face an increasingly common set of challenges; in particular, rising competitive pressures and increased regulatory intervention in many markets."
This, suggests the association, raises questions over the sustainability of the current business model for the mobile operators and their ability to continue to fund the required levels of network investment. It says, for operators to benefit in the coming digital future, they will have to collaborate with regulators, industry stakeholders, and online service providers.
Share
