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US cellcos face demons of market saturation

PwC study finds operators looking to new revenue streams like M2M, and rethinking their network designs


Published: 22 April, 2013

READ MORE: Metrics | US | LTE

The US mobile operators will soon be feeling the pain already common to their peers in parts of Europe and Asia - a saturated wireless base, and the quest for ways, beyond subscriber growth, to boost revenues.

According to a study by management consultancy PwC USA, the pace of wireless subscriber growth has started to slow as the US market reaches saturation point, and the country is reaching the point where most of the addressable market has a mobile device and service.

"The maturing mobile industry is at an inflection point with price and value conscious subscribers consuming more data services requiring continuous and significant network investments from operators," said Pierre-Alain Sur, PwC's global communications industry leader. "Carriers need to find the right balance of finding innovative ways to retain and attract subscribers, creating shareholder value, while investing significantly in their networks"

Of course, part of the game will be to lure users away from rivals, and to consolidate with other cellcos. But carriers are also looking for new revenue streams such as "multi-device data plans, machine-to-machine (M2M) subscriptions and greater customization of service plans for new revenue sources", according to PwC.

According to the survey, the average tablet connections grew nearly 43% year-on-year due to higher demand for mobility from businesses and consumers, better network connectivity and higher data demand.

Smartphone sales to postpaid customers represented 60% of new device sales, up 46% from the year-ago survey, and accounted for 70% of postpaid upgrades, up 40%. Android was the most widely used operating system with 81% of the prepaid base and 55% in postpaid.

The prepaid sector is where the effects of looming saturation are mainly seen. Prepaid services were 25% of the total base, the same as the year before, a stagnation which PwC attributes to a maturing market, mobile subscriber penetration topping 100%, an "rebounding recessionary consumer purchasing behaviors".

Unsurprisingly, the survey highlights another cellco challenge, the decline of voice, with average minutes of use (MOU) per postpaid subscriber down from 720 a month in late 2011 to 673 in the new study.

The survey indicates that, on average, 65% of carriers' cell sites were now supporting 4G technology, compared with 46% the year before, while 60% of the user base had access to 4G technologies, up from 53%.

Meanwhile, eight of the 12 responding operators have plans for, or are currently in the process of, decommissioning network assets. "Driven by the complexity and cost of maintaining multiple technologies, more carriers are preparing to decommission their older networks as more subscribers continue to upgrade more quickly to new devices," said Shara Slattery, PwC partner and managing editor of the report. "Pressured to make the most of existing spectrum, network operators and equipment vendors are considering new approaches to network deployment including focusing on small cells and finding better ways to make valuable legacy assets be available for reuse."

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