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2006: crunch time for mobile firms

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Next year will be difficult for mobile companies as their traditional business model comes under threat, Arpu continues to fall and wireless VoIP starts to have an impact.

Despite the problems a clear majority, 68 per cent, are more confident about next year than this year. The research was carried out by Informa which talked to over a thousand people working for mobile operators, handset makers, equipment vendors and other mobile companies.

Informa believes the inherent contradictions of traditional mobile business models will become apparent next year. Operators subsidise handsets by as much as €400 as part of acquiring customers but churn rates are still at 30 per cent and there is continued pressure on the price of voice calls.

More than half of survey respondents expect voice call prices to fall by up to ten per cent with some 25 per cent expecting falls next year of between ten and 25 per cent. Subscriber Acquisition Costs are expected to stay at between €100 and €400.

Average Revenue Per User(Arpu) has fallen in Western Europe for the last three quarters and will continue to fall next year.

The analysts expect more growth amongst Mobile Virtual Network Operators helped by companies looking to escape the costs of subsidising handsets and in part by operators realising they can make better margins on wholesale business than retail sales.

There will be further pressure from the likes of BT, France Telecom and other old school operators trying to revive their fixed line businesses.

Voice over Internet Protocol will also start to have an impact. Informa believes some 30 per cent of mobile calls are made either from offices or home where a wireless VoIP connection could compete more cheaply.

Merger and acquisitions are likely to continue with more firms trying to gain entry to the still growing developing markets - Russia had as many new subscribers last year as the whole of Western Europe.

Attendees at the event this morning were most interested in the role of mobile content. Informa analyst Jessica Sandrin predicted more operators allowing content providers to go directly to consumers. She said the industry still needs to be truly creative about services and properly exploit the possibilities of mobile devices.

Globally Informa believes the top five growing market will account for 47 per cent of total net additions in 2006. China will grow fastest, accounting for 22 per cent of all new subscribers. India comes next with nine per cent, Russia with seven per cent, USA with six per cent and Pakistan with three per cent.

More details on Informa's annual Mobile Industry Outlook here.®

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